How will COVID-19 affect multifamily housing? That’s the question on every landlord’s mind.
While 89 percent of households paid all or some of their rent this past April—representing only a 4 percent drop from April 2019, per National Multifamily Housing Council statistics—the developers, owners and operators we work with have serious concerns about rent payments in May and beyond.
Who can blame them? Thanks to shelter-in-place provisions and stop-work orders, the economy is in freefall. At this writing, the U.S. has lost almost 27 million jobs thanks to the coronavirus—an unemployment rate that exceeds 20 percent. Though renters are staying put for now, even high-income tenants may not have the means to stay in their apartments and pay rent for long.
Will they move in with family or friends? Or will remarkably low interest rates prompt higher income renters to buy homes? Empty units mean owners and operators may not be able to cover operating costs and mortgage payments.
This scenario is already playing out in the apartment market; rents are falling nationally and expected to continue declining in tourism and service focused cities, CoStar told NBC in April. Owners and operators are likely to have a hard time filling their properties for the next year or even longer as the economy recovers. Adding fuel to the proverbial fire, luxury buildings and those in dense urban centers will struggle too, as residents migrate to cities’ outskirts or suburbs, CoStar said.
For the next few years, perhaps the most vulnerable “homeowners” of all will be owners and operators with units to fill. The competition to attract residents will make a project’s interior design—from its floor plans, fixtures and finishes to its model home merchandising, amenities and community spaces—more important than ever. As commercial interior designers, we believe these five design strategies can help owners and operators recession-proof their properties and portfolios.
5 Design Strategies to Recession-Proof Properties
Make sure projects’ design programs match their markets
Every demographic group has very specific wants and needs; sometimes they overlap but often they don’t. Concurrently, every area has fundamentals that influence its housing stock, such as its geography, climate, economy and populace. Matching a project to its demographic target market and the fundamentals of its locale goes a long way to ensuring success.
To do so, it’s critical to know the style preferences, special features and amenities that will help the project achieve full occupancy—and use this knowledge to design highly functional, authentic, and, perhaps most significantly, unique buildings. A sound strategy in any economy is to design projects that differentiate themselves from the competition, play to an area’s fundamentals and appeal to several generations at the same time. We start with psychographics that measure potential renters’ attitudes and interests rather than relying only on demographic criteria.
Make value a priority, even for affordable properties
Given the realities of the impending economic recovery, renters who can afford Class A and even Class B or C units will expect high value for their dollars. Properties will have to offer features that improve quality of life, such as high-quality materials like real stone and wood; striking yet durable fixtures and finishes that are also antimicrobial and antibacterial; and inspiring and novel amenities—all features that add up to what we call “affordable luxury.”
Good design is not about spending the most money; it’s about being smart, strategic and inventive to create residences that are good-looking, healthy, functional, resilient, sustainable, safe and priced right. It will also be critical to pair these features with impeccable customer service and community programming.
Use Design as a Selling Point
Style is not only generational but also individual. And it takes commercial interior designers with expertise, acumen and frankly talent to deliver projects that not only are cross-generational but also embrace the one common characteristic all cohorts crave: authenticity. The design of a project must reflect integrity at every level, with features and design elements that are relevant, unique, compelling and yet also suitable for multiple generations.
A convincing approach takes commercial interior designers who know how to use analytics and psychographics; have a solid design process; and have built a broad, proven and cost-effective network of resources—especially now that we may have issues getting products from abroad. When designers outsource procurement, it often limits resources and yields projects with strong similarities to each other—a minus in today’s marketplace.
Optimize for Health & Wellness
Designing homes, spaces and communities that allow people to live better is the ultimate goal of any project—from model home interiors to community areas to amenities. Every aspect of a project’s design must use healthy, renewable, recyclable and low-waste building materials and systems that won’t compromise residents’ health—and are traceable. Transparency is the new normal. At the same time, design must focus on how a structure or development is optimized to foster connectivity, community and diversity as well as serve its residents now and in the future.
Design Mutable Amenities
With margins tighter than ever, no space can go to waste in a development. This makes it imperative to design amenity spaces that can appeal to all target markets; be programmed with a variety of activities in response to residents’ wants and needs; and be adapted with ease to new resident needs or trends as they arise. Unused amenities are not an indication of an unsuccessful project—they represent a waste of resources.
Another tool that’s no longer an option is an investment in real time technologies that can track residents’ activities and use analytics to adjust or improve these spaces regularly.
Mary Cook is the founder & principal of Mary Cook Associates, a full-service commercial interior design firm that focuses on the homebuilding and hospitality industries.