NMHC and NAA applaud congressional leaders and the Administration for negotiating in good faith and securing an agreement that addresses a number of substantial issues facing the rental housing industry, especially housing affordability.
Today’s spending deal demonstrates a significant step in the direction of making it easier to build more housing at all price points by extending key programs such as the National Flood Insurance Program (NFIP), the Terrorism Risk Insurance Act (TRIA) and the EB-5 Program. Crucially, the package also increased funding for programs such as Section 8, the HOME Investment Partnerships (HOME) and the Community Development Block Grant (CDBG). This lays the groundwork for a productive new year working with Congress and the Administration on these and the myriad other issues impacting housing affordability.
NMHC and NAA applaud congressional leaders and the Administration for negotiating in good faith and securing an agreement that addresses a number of substantial issues facing the rental housing industry, especially housing affordability.
Today’s spending deal demonstrates a significant step in the direction of making it easier to build more housing at all price points by extending key programs such as the National Flood Insurance Program (NFIP), the Terrorism Risk Insurance Act (TRIA) and the EB-5 Program. Crucially, the package also increased funding for programs such as Section 8, the HOME Investment Partnerships (HOME) and the Community Development Block Grant (CDBG). This lays the groundwork for a productive new year working with Congress and the Administration on these and the myriad other issues impacting housing affordability.
Created as an entertaining space for residents of 727 West Madison in Chicago’s West Loop neighborhood, the building’s penthouse-level Sky Lounge is being used not only for parties and other special occasions, but also for everyday socializing and remote working thanks to its comfortable seating and inspiring views.
As the industry enters a new decade, concerns about a recession and oversupply in the U.S. multifamily market seem to be in most investors’ rearview mirrors. Instead, as noted in the recent U.S. Multifamily Outlook report by Yardi Matrix, investors remain bullish on the sector as favorable demographics and the continued growth of lifestyle renters—both old and young—is motivating developers to keep pace with demand. This is certainly the case in Chicago, where healthy absorption and solid rent growth are predicted through 2020, according to Yardi.
“Chicago continues to enjoy robust job growth, especially in the tech sector where jobs are concentrated in the city’s urban core,” said Ben Creamer, principal and managing broker of Downtown Apartment Company, a full-service real estate brokerage specializing in luxury rentals in Chicago. “This perpetuates the increased demand for Class A rentals in the city, as does the large percentage of millennials and empty nesters who prefer renting to owning. With demand at an all-time high, expect to see rents continue to rise in tandem.”
Susan Tjarksen, managing director of Cushman & Wakefield’s Multifamily Capital Markets Group, says multifamily will continue to be a strong segment for investors in 2020, but that niche plays like co-living, short-term rentals and affordable housing will be the hottest deals.
“Co-living is increasingly popular, especially among young people who want to live in the best neighborhoods with the best amenities, but at a price much lower than a traditional apartment,” Tjarksen said. “As such, this niche sector has garnered tremendous interest from major national and international capital sources.
“In addition, short-term rentals will soon emerge as institutional investment-grade assets, and the data shows they are poised for continued growth,” Tjarksen continued. “We’re also going to see the continued evolution of affordable housing in Chicago as demand leads a variety of private and public partners to join forces to solve the workforce housing crisis.”
Going into 2020, experts say the following trends will drive multifamily development, leasing and property management in the year ahead.
Privately funded public amenities
In an effort to attract and retain residents, most apartment developers include a full slate of amenities in their projects—from state-of-the-art fitness centers and music rooms to demonstration kitchens and art studios. But in the upcoming decade, look for developers to incorporate—and pay for—civic amenities, too, such as community parks and plazas. Not only do these spaces serve as a backyard for multifamily residents, but also as an amenity for the public to enjoy.
For example, Related Midwest and its development partners recently enlisted noted landscape architecture firm Michael Van Valkenburgh Associates to reimagine the 5 acres of green space at Chicago’s revitalized Lathrop mixed-income development. The new park serves as an amenity for its residents and the neighborhood, embracing the Chicago River with a quarter-mile riverwalk that includes bench seating, a causeway bridge, kayak launch and native landscaping. Additional improvements included the rehabilitation of Lathrop’s iconic Great Lawn, a 2-acre green space at the heart of the community that provides a new playlot, riverfront dog park and pedestrian connection between Clybourn Avenue and the riverfront.
“We develop green space because we believe it to be a vital extension of our wellness offerings for residents and a way to benefit the communities in which we work,” said Curt Bailey, president of Related Midwest. “When we join a neighborhood, we see its residents, leaders and the city as partners, helping us better understand what the community needs. Increasingly, this means developing publicly accessible parks that strengthen the neighborhood and establish projects like Lathrop as central to the urban fabric.”
Along the South Branch of the Chicago River, Lendlease recently completed the public 2-acre Southbank Park as the centerpiece for its new mixed-use Southbank development. And across town in the Lakeshore East community, Cascade Park—a new public green space on the lakefront created by Lendlease and its partner Magellan Development Group—will anchor the firm’s two-tower development that includes Cirrus, a luxury condominium tower, and Cascade, an adjacent rental tower.
“It’s a crucial time for our global environment, so as developers, we must look to the future and how the addition of green space, along with sustainability features like native plantings, birdhouses and stormwater management, positively contribute to the overall wellness of not just our residents, but all citizens,” said Ted Weldon, executive general manager of development for Lendlease’s Chicago office. “Urban regeneration is at the heart of what we do at Lendlease and parks play a major role in creating the innovative and vibrant city spaces we are known for developing.”
But it’s not just green spaces developers are focusing on for public engagement. Design-driven real estate development firm Optima, Inc. has its eye on the public arts, too. At Optima Signature, a luxury rental tower steps from Michigan Avenue in Chicago, passersby can enjoy the bright yellow 15-foot Kiwi sculpture in the community plaza designed by architect and Optima CEO David Hovey, FAIA. And at Optima Sonoran Village, a five-building rental community in the heart of downtown Scottsdale, Ariz., residents and neighbors-alike can take in a water feature and five original sculptures by Hovey throughout the community’s landscaped courtyards.
Deconversion 2.0
Although the Chicago City Council recently adopted tougher legislation regarding the bulk sale of condominium buildings—potential buyers must now secure the approval of 85% of condo owners—some experts, like Interra Realty, which has brokered 15 deconversions in the Chicago area since 2017 and currently has two approved sales in due diligence, predict Chicago is entering “Deconversion 2.0,” despite the higher threshold for owner approval.
“As long as the deal pencils out for both the buyers and owners, deconversions will continue,” said David Goss, Interra’s co-founder and managing principal. “With the controversy swirling around deconversions, it’s easy to forget they can actually be excellent deals for unit owners, offering a premium over what they could get on the open market.”
Kyle Stengle, senior vice president of investments for the Chicago Downtown office of Marcus & Millichap and a deconversion veteran, agrees. “I anticipate deconversions will continue in 2020, even if there is a decrease in velocity,” Stengle said. “If a city building passes with the increased (85 percent) threshold, that will only reconfirm the condo building is well-suited for a deconversion and that there’s strong interest for these deals. That said, a future slowdown in deconversion transactions would be more substantial if there were other factors, such as negative shifts in the commercial real estate investment market or a decreasing supply of condo buildings that are candidates for a deconversion.”
Meanwhile, some experts are predicting 2020 will see the first wave of successfully deconverted properties change ownership once again as part of an exit strategy.
“Many of these buildings were bought with short-term intentions and were not expected to be held for the long term,” said Todd Stofflet, managing director of Cushman & Wakefield’s Midwest Multifamily Advisory Group. “The conversations we’re having now with owners are about whether and how much they should renovate. Some recent buyers are thinking, ‘If I can get through the acquisition of all the units, will there be enough value created to sell the building as is, without making any additional capital expenditures?’ They are creating a lot of value just by bringing the building back to 100 percent rental, and the appetite for value-add multifamily in premium locations is very strong.”
Gearing up for the Gen Z rush
Move over millennials. When talk turns to what’s next in rental communities, savvy apartment developers are now looking ahead to the desires of Generation Z. Having grown up with the internet, smartphones and social networks, Gen Z seeks on-demand experiences that marry technology and mobility with real-world human interactions. For developers, this means creating communities that focus on shared spaces, accessible programming and design that embodies the spirit of the neighborhoods in which they’re located.
“Gen Z relates in a digital world and they rapidly absorb and seek knowledge, leading them to crave authentic experiences and dialogue in their daily lives,” said Mary Cook, founder and president of national award-winning commercial interior design firm Mary Cook Associates (MCA). “Born between 1995 and 2015, Gen Z is currently 74 million strong and influencing our interior design work for both market-rate multifamily communities and student housing developments. As a result, we incorporate designs and spaces that are rooted in styles Gen Z can tangibly identify with and that are tailored to their locale.”
Lapis, an 1,100-bed, three-tower student housing development under construction at Florida International University, features common areas designed by MCA with Gen Z in mind. Because the university attracts a large number of students from the surrounding neighborhood, there is a strong Latin-centric culture within the student body. MCA used strategic programming, psychographics and carefully curated furnishings to create a variety of lifestyle areas that would be familiar to students. MCA even designed a Cuban coffee bar as the centerpiece for Lapis—a thoughtful addition that plays to Gen Z’s need for genuine experiences.
At Plaza Verde, a live/learn student housing community at University of California, Irvine, designed by KTGY Architecture + Planning, the building is organized around several public courtyards that are programmable for events and gatherings—ideal spaces to enjoy SoCal weather with friends and neighbors. A public plaza, multi-purpose academic space, 18 study rooms of varying configurations, coffee shop and gathering spaces create a vast social hub.
“As architects, we are challenged to design spaces that will enhance the living experience—whether it’s a spot for a local art exhibit, coworking or get-togethers, all will contribute to the success of the building with Gen Z residents who crave a strong sense of community,” said Benjamin Kasdan, AIA, associate principal in the Tyson, Va., office of KTGY.
“In a word, Gen Z is connected,” said Ben Creamer, principal and managing broker of Downtown Apartment Company. “They want to connect to their homes via an app that can control everything from their door locks to maintenance requests. They want to connect with their neighbors through organized social activities and shared spaces. And they want to connect to their work from tech-savvy coworking spaces in their apartment buildings.”
According to Bentley Phillips, founder of Spaces Real Estate, a full-service real estate brokerage specializing in residential leasing, two of the most important components for prospective Gen Z residents are proximity to work or conventional transit, and a fulfilling social life both outside their building and within.
“Typically, this cohort is willing to take less space for a prime location and to avoid a long commute,” said Phillips. “For example, 1553 N. Wells, in the heart of Chicago’s Old Town neighborhood, has been very popular among Gen Z. Why? Because it has a Walk Score of 98. Residents have quick access to transit with bustling nightlife, trendy restaurants and shopping right outside their doorstep. And the building will activate its amenity spaces throughout the week with events like cooking classes or social events.”
Gen Z’s digital prowess also requires a smart approach to marketing. “We’re seeing renters across all age groups making leasing decisions earlier in our marketing funnel, using digitally available property information, but that trend is strongest among Gen Z,” said James Love, vice president of marketing and brand with Draper and Kramer, Incorporated. “Younger renters often come into our leasing centers ready to sign, almost sight-unseen. Because of that preference for a less hands-on experience with our leasing center, we are fully rounding out mobile leasing collateral for all properties.”
Future-proofing amenities
From must-have technology to popular pet perks, the 2020 Apartment Resident Preferences Report released by the National Multifamily Housing Council and Kingsley Associates provides an extensive look at what apartment residents want and need in their home today. But what about tomorrow? What amenities will renters be looking for in the future?
With two very different generations—millennials and baby boomers—dominating the rental market and Gen Z emerging, future-proofing assets with flexible amenities is a smart play in 2020, according to Steve Fifield, CEO at Fifield Cos. For example, at Logan Apartments, a 220-unit apartment building in Chicago’s Logan Square neighborhood, Fifield Cos. and Terraco Real Estate designed the community’s amenity spaces to be flexible enough so they could meet the needs of today’s millennials, but also the different demands of tomorrow’s Gen Z renters, whether that means increasing coworking space or modifying fitness areas.
Flexible space is also evident at 727 West Madison, a 45-story luxury apartment tower in Chicago co-developed by Fifield Cos. and F&F Realty Ltd.
“A developer can guess how amenity space will be used, but sometimes residents surprise you,” said Fifield. “727 West Madison is the tallest building west of the Loop, so we dedicated part of the penthouse level to the Sky Lounge, a sophisticated entertaining showpiece and private bar that gives residents unprecedented views. While residents use the space as we expected, on an almost daily basis residents also use it as a coworking space, even though we have dedicated coworking spaces elsewhere in the building.”
In agreement that the ever-blurring line between work and home will continue to influence multifamily amenities in 2020 is the interiors group at Morgante Wilson Architects, which has designed and programmed amenity spaces at various Chicago high-end suburban and downtown rental properties, including 727 West Madison.
“Public spaces in new buildings will serve two purposes: a social hub for relaxing, as well as a place that can accommodate someone who wants to get a little work done,” said Elissa Morgante, co-founder of Morgante Wilson Architects. “We’re creating comfortable and cozy, semi-private spaces that offer mini-destinations within the amenity floor, like a big comfortable banquette seating area that’s as well-suited for reading or having an intimate conversation as it is for checking in with the office on email or taking a conference call.”
Offering services and amenities that make the lives of busy residents easier and less stressful is a big focus for Optima, Inc. in 2020. Residents at Optima’s Arizona rental communities can now access “Optimized Service,” an innovative in-home concierge program that is a game changer in the Scottsdale, Ariz., market. Through the new program, Optima’s on-site teams provide many complimentary in-home services, including dry-cleaning pickup and closet delivery, plant watering, thermostat adjustments and in-unit package delivery.
“Our property management team is focused on providing exceptional service that exceeds our residents’ needs,” said David Hovey Jr., AIA, president of Optima, Inc. “Residents at our communities are provided with more than the tangible amenities we design for our developments; they’re also given access to the highest level of service available in the market.”
What’s old is new again: Market-rate acquisitions
With the cost of construction materials and labor still rising, multifamily acquisitions are looking more attractive than ever in 2020 compared to new builds in many markets around the country.
One national firm prioritizing market-rate acquisitions as part of its strategic direction heading into the new decade is Draper and Kramer, Incorporated. The company’s most recent transactions involve recently constructed Class A apartment communities situated in the urban core and growth-oriented suburbs of Chicago and Dallas.
“In each case, the property was new enough to have many of the luxury features and finishes renters are looking for, but also offered the ability to update amenities, as needed, in order to maintain the property’s competitiveness over the long run,” said Blas Puzon, chief investment officer of Draper and Kramer. “Acquisitions like these are an important complement to our development activity in 2020, particularly as we look to bolster our footprint in markets where we see potential for long-term growth.”
Also having an eye on market-rate acquisitions for the upcoming year is The Habitat Company, a leading U.S. multifamily developer and property manager. “After several years of construction cost increases outstripping rent growth, the returns available on acquisitions have narrowed the gap with new development,” said Matt Fiascone, president of The Habitat Company. “Factor in the added ‘hidden costs’ of entitlement, such as taxes, inclusionary zoning requirements and other fees and risks associated with new development, and the result is positive for a strategy that favors acquisitions.”
Golden years and greener pastures
They may be approaching their golden years, but there’s no slowdown in sight for today’s busy and wellness-focused baby boomers. As such, developers are becoming more mindful of designing communities that respond to the demands of more youthful, health-conscious seniors.
Active, independent adults were certainly in mind when developer F&F Realty, Ltd. recently converted a vacant hotel in Chicago’s northwest suburbs into The Grand at Twin Lakes, a 118-unit independent living community. Resort-style senior living is the community’s driving philosophy, which is supported by upscale design, best-in-class wellness amenities and a diverse range of on-site activities and programming.
“With 39 percent of the building dedicated to amenity spaces that cater to interests, hobbies and entertainment, The Grand is not the type of senior community where residents have to sit around,” said Dave Pokorny, director of operations for F&F Realty’s Grand Lifestyles portfolio, which owns and operates The Grand. “Residents have access to a movie theater, two libraries, game rooms, a salon, lobby bar, courtyard and garden. The building is also adjacent to the Twin Lakes Golf Course & Recreation Area, offering seniors opportunities to fish, golf, explore the outdoors and be part of the larger neighborhood through park events and programming.”
Developer CA Senior Living, a division of CA Ventures, is also predicting that active seniors will prefer to live in highly amenitized luxury buildings going forward. The firm is developing Anthology of King of Prussia, an 11-story, 192-unit senior living community in King of Prussia, Pa., approximately 17 miles northwest of Philadelphia. The community, featuring two sky decks among its 20,000 square feet of amenities, is the first senior living option with independent living, assisted living and memory care in The Village at Valley Forge, a 122-acre mixed-use lifestyle village.
“This project offers residents all the amenities of a high-rise luxury condominium with hospitality-level service, plus on-site care if and when they need it,” said Ben Burke, president of CA Senior Living. “In addition, the location provides walkability to retail, specialty dining, entertainment and medical offices, immersing residents in a neighborhood where everything they want and need is just around the corner.”
Similarly, HSA Commercial Real Estate has proposed a senior apartment mid-rise for The Mayfair Collection, its walkable, mixed-use development located in the Milwaukee suburb of Wauwatosa. The 69-acre Mayfair Collection is anchored by Whole Foods and Nordstrom Rack, offers 400,000 square feet of shopping, an eclectic mix of local restaurants, a Hilton Homewood Suites and almost 300 luxury apartments.
“With proximity to upscale retail offerings and a hotel for visiting families, The Mayfair Collection is an ideal location for seniors who want to stay connected and maintain active lifestyles,” said Tim Blum, executive vice president and managing director of retail for HSA Commercial. “We are proposing a full continuum of care for this senior community, making it possible for seniors to age in place in a vibrant neighborhood.”
Created as an entertaining space for residents of 727 West Madison in Chicago’s West Loop neighborhood, the building’s penthouse-level Sky Lounge is being used not only for parties and other special occasions, but also for everyday socializing and remote working thanks to its comfortable seating and inspiring views.
As the industry enters a new decade, concerns about a recession and oversupply in the U.S. multifamily market seem to be in most investors’ rearview mirrors. Instead, as noted in the recent U.S. Multifamily Outlook report by Yardi Matrix, investors remain bullish on the sector as favorable demographics and the continued growth of lifestyle renters—both old and young—is motivating developers to keep pace with demand. This is certainly the case in Chicago, where healthy absorption and solid rent growth are predicted through 2020, according to Yardi.
“Chicago continues to enjoy robust job growth, especially in the tech sector where jobs are concentrated in the city’s urban core,” said Ben Creamer, principal and managing broker of Downtown Apartment Company, a full-service real estate brokerage specializing in luxury rentals in Chicago. “This perpetuates the increased demand for Class A rentals in the city, as does the large percentage of millennials and empty nesters who prefer renting to owning. With demand at an all-time high, expect to see rents continue to rise in tandem.”
Susan Tjarksen, managing director of Cushman & Wakefield’s Multifamily Capital Markets Group, says multifamily will continue to be a strong segment for investors in 2020, but that niche plays like co-living, short-term rentals and affordable housing will be the hottest deals.
“Co-living is increasingly popular, especially among young people who want to live in the best neighborhoods with the best amenities, but at a price much lower than a traditional apartment,” Tjarksen said. “As such, this niche sector has garnered tremendous interest from major national and international capital sources.
“In addition, short-term rentals will soon emerge as institutional investment-grade assets, and the data shows they are poised for continued growth,” Tjarksen continued. “We’re also going to see the continued evolution of affordable housing in Chicago as demand leads a variety of private and public partners to join forces to solve the workforce housing crisis.”
Going into 2020, experts say the following trends will drive multifamily development, leasing and property management in the year ahead.
Privately funded public amenities
In an effort to attract and retain residents, most apartment developers include a full slate of amenities in their projects—from state-of-the-art fitness centers and music rooms to demonstration kitchens and art studios. But in the upcoming decade, look for developers to incorporate—and pay for—civic amenities, too, such as community parks and plazas. Not only do these spaces serve as a backyard for multifamily residents, but also as an amenity for the public to enjoy.
For example, Related Midwest and its development partners recently enlisted noted landscape architecture firm Michael Van Valkenburgh Associates to reimagine the 5 acres of green space at Chicago’s revitalized Lathrop mixed-income development. The new park serves as an amenity for its residents and the neighborhood, embracing the Chicago River with a quarter-mile riverwalk that includes bench seating, a causeway bridge, kayak launch and native landscaping. Additional improvements included the rehabilitation of Lathrop’s iconic Great Lawn, a 2-acre green space at the heart of the community that provides a new playlot, riverfront dog park and pedestrian connection between Clybourn Avenue and the riverfront.
“We develop green space because we believe it to be a vital extension of our wellness offerings for residents and a way to benefit the communities in which we work,” said Curt Bailey, president of Related Midwest. “When we join a neighborhood, we see its residents, leaders and the city as partners, helping us better understand what the community needs. Increasingly, this means developing publicly accessible parks that strengthen the neighborhood and establish projects like Lathrop as central to the urban fabric.”
Along the South Branch of the Chicago River, Lendlease recently completed the public 2-acre Southbank Park as the centerpiece for its new mixed-use Southbank development. And across town in the Lakeshore East community, Cascade Park—a new public green space on the lakefront created by Lendlease and its partner Magellan Development Group—will anchor the firm’s two-tower development that includes Cirrus, a luxury condominium tower, and Cascade, an adjacent rental tower.
“It’s a crucial time for our global environment, so as developers, we must look to the future and how the addition of green space, along with sustainability features like native plantings, birdhouses and stormwater management, positively contribute to the overall wellness of not just our residents, but all citizens,” said Ted Weldon, executive general manager of development for Lendlease’s Chicago office. “Urban regeneration is at the heart of what we do at Lendlease and parks play a major role in creating the innovative and vibrant city spaces we are known for developing.”
But it’s not just green spaces developers are focusing on for public engagement. Design-driven real estate development firm Optima, Inc. has its eye on the public arts, too. At Optima Signature, a luxury rental tower steps from Michigan Avenue in Chicago, passersby can enjoy the bright yellow 15-foot Kiwi sculpture in the community plaza designed by architect and Optima CEO David Hovey, FAIA. And at Optima Sonoran Village, a five-building rental community in the heart of downtown Scottsdale, Ariz., residents and neighbors-alike can take in a water feature and five original sculptures by Hovey throughout the community’s landscaped courtyards.
Deconversion 2.0
Although the Chicago City Council recently adopted tougher legislation regarding the bulk sale of condominium buildings—potential buyers must now secure the approval of 85% of condo owners—some experts, like Interra Realty, which has brokered 15 deconversions in the Chicago area since 2017 and currently has two approved sales in due diligence, predict Chicago is entering “Deconversion 2.0,” despite the higher threshold for owner approval.
“As long as the deal pencils out for both the buyers and owners, deconversions will continue,” said David Goss, Interra’s co-founder and managing principal. “With the controversy swirling around deconversions, it’s easy to forget they can actually be excellent deals for unit owners, offering a premium over what they could get on the open market.”
Kyle Stengle, senior vice president of investments for the Chicago Downtown office of Marcus & Millichap and a deconversion veteran, agrees. “I anticipate deconversions will continue in 2020, even if there is a decrease in velocity,” Stengle said. “If a city building passes with the increased (85 percent) threshold, that will only reconfirm the condo building is well-suited for a deconversion and that there’s strong interest for these deals. That said, a future slowdown in deconversion transactions would be more substantial if there were other factors, such as negative shifts in the commercial real estate investment market or a decreasing supply of condo buildings that are candidates for a deconversion.”
Meanwhile, some experts are predicting 2020 will see the first wave of successfully deconverted properties change ownership once again as part of an exit strategy.
“Many of these buildings were bought with short-term intentions and were not expected to be held for the long term,” said Todd Stofflet, managing director of Cushman & Wakefield’s Midwest Multifamily Advisory Group. “The conversations we’re having now with owners are about whether and how much they should renovate. Some recent buyers are thinking, ‘If I can get through the acquisition of all the units, will there be enough value created to sell the building as is, without making any additional capital expenditures?’ They are creating a lot of value just by bringing the building back to 100 percent rental, and the appetite for value-add multifamily in premium locations is very strong.”
Gearing up for the Gen Z rush
Move over millennials. When talk turns to what’s next in rental communities, savvy apartment developers are now looking ahead to the desires of Generation Z. Having grown up with the internet, smartphones and social networks, Gen Z seeks on-demand experiences that marry technology and mobility with real-world human interactions. For developers, this means creating communities that focus on shared spaces, accessible programming and design that embodies the spirit of the neighborhoods in which they’re located.
“Gen Z relates in a digital world and they rapidly absorb and seek knowledge, leading them to crave authentic experiences and dialogue in their daily lives,” said Mary Cook, founder and president of national award-winning commercial interior design firm Mary Cook Associates (MCA). “Born between 1995 and 2015, Gen Z is currently 74 million strong and influencing our interior design work for both market-rate multifamily communities and student housing developments. As a result, we incorporate designs and spaces that are rooted in styles Gen Z can tangibly identify with and that are tailored to their locale.”
Lapis, an 1,100-bed, three-tower student housing development under construction at Florida International University, features common areas designed by MCA with Gen Z in mind. Because the university attracts a large number of students from the surrounding neighborhood, there is a strong Latin-centric culture within the student body. MCA used strategic programming, psychographics and carefully curated furnishings to create a variety of lifestyle areas that would be familiar to students. MCA even designed a Cuban coffee bar as the centerpiece for Lapis—a thoughtful addition that plays to Gen Z’s need for genuine experiences.
At Plaza Verde, a live/learn student housing community at University of California, Irvine, designed by KTGY Architecture + Planning, the building is organized around several public courtyards that are programmable for events and gatherings—ideal spaces to enjoy SoCal weather with friends and neighbors. A public plaza, multi-purpose academic space, 18 study rooms of varying configurations, coffee shop and gathering spaces create a vast social hub.
“As architects, we are challenged to design spaces that will enhance the living experience—whether it’s a spot for a local art exhibit, coworking or get-togethers, all will contribute to the success of the building with Gen Z residents who crave a strong sense of community,” said Benjamin Kasdan, AIA, associate principal in the Tyson, Va., office of KTGY.
“In a word, Gen Z is connected,” said Ben Creamer, principal and managing broker of Downtown Apartment Company. “They want to connect to their homes via an app that can control everything from their door locks to maintenance requests. They want to connect with their neighbors through organized social activities and shared spaces. And they want to connect to their work from tech-savvy coworking spaces in their apartment buildings.”
According to Bentley Phillips, founder of Spaces Real Estate, a full-service real estate brokerage specializing in residential leasing, two of the most important components for prospective Gen Z residents are proximity to work or conventional transit, and a fulfilling social life both outside their building and within.
“Typically, this cohort is willing to take less space for a prime location and to avoid a long commute,” said Phillips. “For example, 1553 N. Wells, in the heart of Chicago’s Old Town neighborhood, has been very popular among Gen Z. Why? Because it has a Walk Score of 98. Residents have quick access to transit with bustling nightlife, trendy restaurants and shopping right outside their doorstep. And the building will activate its amenity spaces throughout the week with events like cooking classes or social events.”
Gen Z’s digital prowess also requires a smart approach to marketing. “We’re seeing renters across all age groups making leasing decisions earlier in our marketing funnel, using digitally available property information, but that trend is strongest among Gen Z,” said James Love, vice president of marketing and brand with Draper and Kramer, Incorporated. “Younger renters often come into our leasing centers ready to sign, almost sight-unseen. Because of that preference for a less hands-on experience with our leasing center, we are fully rounding out mobile leasing collateral for all properties.”
Future-proofing amenities
From must-have technology to popular pet perks, the 2020 Apartment Resident Preferences Report released by the National Multifamily Housing Council and Kingsley Associates provides an extensive look at what apartment residents want and need in their home today. But what about tomorrow? What amenities will renters be looking for in the future?
With two very different generations—millennials and baby boomers—dominating the rental market and Gen Z emerging, future-proofing assets with flexible amenities is a smart play in 2020, according to Steve Fifield, CEO at Fifield Cos. For example, at Logan Apartments, a 220-unit apartment building in Chicago’s Logan Square neighborhood, Fifield Cos. and Terraco Real Estate designed the community’s amenity spaces to be flexible enough so they could meet the needs of today’s millennials, but also the different demands of tomorrow’s Gen Z renters, whether that means increasing coworking space or modifying fitness areas.
Flexible space is also evident at 727 West Madison, a 45-story luxury apartment tower in Chicago co-developed by Fifield Cos. and F&F Realty Ltd.
“A developer can guess how amenity space will be used, but sometimes residents surprise you,” said Fifield. “727 West Madison is the tallest building west of the Loop, so we dedicated part of the penthouse level to the Sky Lounge, a sophisticated entertaining showpiece and private bar that gives residents unprecedented views. While residents use the space as we expected, on an almost daily basis residents also use it as a coworking space, even though we have dedicated coworking spaces elsewhere in the building.”
In agreement that the ever-blurring line between work and home will continue to influence multifamily amenities in 2020 is the interiors group at Morgante Wilson Architects, which has designed and programmed amenity spaces at various Chicago high-end suburban and downtown rental properties, including 727 West Madison.
“Public spaces in new buildings will serve two purposes: a social hub for relaxing, as well as a place that can accommodate someone who wants to get a little work done,” said Elissa Morgante, co-founder of Morgante Wilson Architects. “We’re creating comfortable and cozy, semi-private spaces that offer mini-destinations within the amenity floor, like a big comfortable banquette seating area that’s as well-suited for reading or having an intimate conversation as it is for checking in with the office on email or taking a conference call.”
Offering services and amenities that make the lives of busy residents easier and less stressful is a big focus for Optima, Inc. in 2020. Residents at Optima’s Arizona rental communities can now access “Optimized Service,” an innovative in-home concierge program that is a game changer in the Scottsdale, Ariz., market. Through the new program, Optima’s on-site teams provide many complimentary in-home services, including dry-cleaning pickup and closet delivery, plant watering, thermostat adjustments and in-unit package delivery.
“Our property management team is focused on providing exceptional service that exceeds our residents’ needs,” said David Hovey Jr., AIA, president of Optima, Inc. “Residents at our communities are provided with more than the tangible amenities we design for our developments; they’re also given access to the highest level of service available in the market.”
What’s old is new again: Market-rate acquisitions
With the cost of construction materials and labor still rising, multifamily acquisitions are looking more attractive than ever in 2020 compared to new builds in many markets around the country.
One national firm prioritizing market-rate acquisitions as part of its strategic direction heading into the new decade is Draper and Kramer, Incorporated. The company’s most recent transactions involve recently constructed Class A apartment communities situated in the urban core and growth-oriented suburbs of Chicago and Dallas.
“In each case, the property was new enough to have many of the luxury features and finishes renters are looking for, but also offered the ability to update amenities, as needed, in order to maintain the property’s competitiveness over the long run,” said Blas Puzon, chief investment officer of Draper and Kramer. “Acquisitions like these are an important complement to our development activity in 2020, particularly as we look to bolster our footprint in markets where we see potential for long-term growth.”
Also having an eye on market-rate acquisitions for the upcoming year is The Habitat Company, a leading U.S. multifamily developer and property manager. “After several years of construction cost increases outstripping rent growth, the returns available on acquisitions have narrowed the gap with new development,” said Matt Fiascone, president of The Habitat Company. “Factor in the added ‘hidden costs’ of entitlement, such as taxes, inclusionary zoning requirements and other fees and risks associated with new development, and the result is positive for a strategy that favors acquisitions.”
Golden years and greener pastures
They may be approaching their golden years, but there’s no slowdown in sight for today’s busy and wellness-focused baby boomers. As such, developers are becoming more mindful of designing communities that respond to the demands of more youthful, health-conscious seniors.
Active, independent adults were certainly in mind when developer F&F Realty, Ltd. recently converted a vacant hotel in Chicago’s northwest suburbs into The Grand at Twin Lakes, a 118-unit independent living community. Resort-style senior living is the community’s driving philosophy, which is supported by upscale design, best-in-class wellness amenities and a diverse range of on-site activities and programming.
“With 39 percent of the building dedicated to amenity spaces that cater to interests, hobbies and entertainment, The Grand is not the type of senior community where residents have to sit around,” said Dave Pokorny, director of operations for F&F Realty’s Grand Lifestyles portfolio, which owns and operates The Grand. “Residents have access to a movie theater, two libraries, game rooms, a salon, lobby bar, courtyard and garden. The building is also adjacent to the Twin Lakes Golf Course & Recreation Area, offering seniors opportunities to fish, golf, explore the outdoors and be part of the larger neighborhood through park events and programming.”
Developer CA Senior Living, a division of CA Ventures, is also predicting that active seniors will prefer to live in highly amenitized luxury buildings going forward. The firm is developing Anthology of King of Prussia, an 11-story, 192-unit senior living community in King of Prussia, Pa., approximately 17 miles northwest of Philadelphia. The community, featuring two sky decks among its 20,000 square feet of amenities, is the first senior living option with independent living, assisted living and memory care in The Village at Valley Forge, a 122-acre mixed-use lifestyle village.
“This project offers residents all the amenities of a high-rise luxury condominium with hospitality-level service, plus on-site care if and when they need it,” said Ben Burke, president of CA Senior Living. “In addition, the location provides walkability to retail, specialty dining, entertainment and medical offices, immersing residents in a neighborhood where everything they want and need is just around the corner.”
Similarly, HSA Commercial Real Estate has proposed a senior apartment mid-rise for The Mayfair Collection, its walkable, mixed-use development located in the Milwaukee suburb of Wauwatosa. The 69-acre Mayfair Collection is anchored by Whole Foods and Nordstrom Rack, offers 400,000 square feet of shopping, an eclectic mix of local restaurants, a Hilton Homewood Suites and almost 300 luxury apartments.
“With proximity to upscale retail offerings and a hotel for visiting families, The Mayfair Collection is an ideal location for seniors who want to stay connected and maintain active lifestyles,” said Tim Blum, executive vice president and managing director of retail for HSA Commercial. “We are proposing a full continuum of care for this senior community, making it possible for seniors to age in place in a vibrant neighborhood.”
Webster defines it as “the property of being in accord with fact or reality.” Truth is a beautiful, most reliable thing.
The truth of Christmas and the holidays is sometimes muffled by the hustle and bustle and stuff—but it’s always there. Truth is just like that. Sometimes soft spoken. Sometimes profound. Always present and most definitely the final word.
How is this related to the rental housing business? Completely related. Immutable truths are that upon which we base our successful businesses, a fact not always acknowledged by mere mortals. Holding vigorously to truth—from the engineering of our buildings to the operations of our businesses to the metrics of our campaigns—determines our level of success.
Here’s one more truth: land ownership. It’s a founding axiom of our businesses born of ancient civilization, and eventually making its way to William Bradford, the second governor of Plymouth in about 1622. The colonies experienced a miraculous pivot when they abandoned a community model for individual land ownership and rights. (Happy Thanksgiving and welcome to the greatest of all experiments in ancient principles of truth.)
Consider those countries that grant their citizens rights to own real property, and as importantly, actively protect those rights. In the U.S., we the citizens are empowered to sell, mortgage or rent our property for our own benefit.
Consider all the “facts or reality” of the promise of such property rights and their almost magnetic attraction to the human soul. They draw thousands of immigrants into the U.S., legally or otherwise, every day. Certainly not all newcomers will become property owners, but a country that respects the ancient, even spiritual, rights of land ownership is a culture based on deep-rooted truth, an enduring and greatly desired value in today’s world.
The closer the proximity of truth to an enterprise, the closer it will be to commercial success. And while it is true that most unprofitable businesses fail, successful operations give owners and managers significant meaning and purpose in life entirely separate from their fiscal return. It’s that giving or providing value to others that builds our businesses, but also gives us the gratification of serving others.
That my friends, is the power of truth.
Merry Christmas. Happy Chanukah. May the new year bring truth and success to your service to our communities. You are greatly appreciated and valued.
Programmed by humans, algorithms begin with a logic tree specifying every facet of the code’s behavior from content prioritization to blacklisting. With Google’s near monopoly, what hangs in the balance is the global economy, billions of dollars in ad revenue for Google, rental housing operators cost of operations—and the shaping of the country’s very thought and culture.
90+ percent of all online searches worldwide are through Google
How Google works (kind of)
Google indexes content while also programming for misspellings, wording idiosyncrasies and more. Google then places the most relevant information at the top of its search results page/section in accordance with undisclosed criteria.
Google’s search results favor large companies, and both its high-revenue advertisers and internal mono chromatic culture as reported in the Wall Street Journal.
What makes a match?
Google says hundreds of factors go into search results including the location of searched words on a webpage, page links, location of searched words, creation date of a page—while removing pages Google deems as scams, deceitful or including hate speech.
“Geopolitical competition and government regulations are poised to remake the digital economy,” according to recent research by consulting firm A.T. Kearney. “The global technological landscape is currently being reconstructed, subjecting the once-free and unfettered transfer of data across borders to new and greater digital walls.” This stems from the view that Big Tech is facilitating false information, monopolizing markets, honing in self-serving technology, as well as the growing concerns surrounding personal data.
Of human hands
No matter how large or small the task to be programmed, developers determine each parameter of the executable program in devising a specific outcome.
Changes to Google’s search algorithms are not fully disclosed though businesses have lived and died by them. The number of annual changes made to Google’s algorithm has grown from around 500 (2010) to roughly 3,200 algorithm changes in (2018).
Quantum supremacy: in the beginning
Google AI’s quantum computer, Sycamore, is said to have reached “quantum supremacy” on Oct. 23 by completing in minutes a math problem that would take today’s supercomputer 10,000 years (Nature magazine). IBM, owner of the world’s fastest two supercomputers said that it would take its supercomputer, Summit, two-and-a-half days. Still, it will be many years before quantum computing has worked through its high rate of errors and is useful or profitable.
The tip of the search
The Federal Trade Commission is running antitrust investigations into Facebook, Alphabet/Google, and Amazon. The FTC will assess whether these firms harmed market competition by way of their mergers and acquisitions as part of “a campaign of exclusionary conduct that includes exclusionary behavior,” said FTC chairman Joseph Simons.
3.8 million online searches made on Google every minute
$9 billion EU fines against Google (last three years) for anticompetitive practices
$12 billion Google paid in 2019 to remain Safari’s default browser
1 of every 7 Google searches are first-time content searches
Google operates in healthcare, phones, laptops, drones, AI, quantum computing, advertising and search.
In auto-complete, Google’s feature that predicts search terms as the user types a query, google filters out controversial subjects
Perched 80 feet above the street in Honolulu, Hawaii, an ocean-view glass-bottomed pool cantilevers 15 feet over the pedestrian walkway at the entrance to the 318-unit Anaha, a finalist in Pillars’ best condominium category.
The national obsession with counting steps in the pursuit of physical fitness has spawned a plethora of pedometers in the marketplace and a trend toward pedestrian-oriented neighborhoods in the multifamily world.
But some are much more pedestrian-friendly than others, according to Walk Score, a website that rates the walkability of almost everywhere the United States, with points awarded from one to 100, based on proximity to amenities, population and intersection density and road metrics like block length.
A number of the finalist communities in the competition that honors superior achievement in multifamily development boast walk scores between 90 and 100, earning them the title of Walker’s Paradise, communities where residents do not need a car to accomplish daily errands.
The 97-unit, seven-story Vici Apartments in San Diego, Calif., a finalist in Pillars’ best mixed-use and best midrise communities categories includes 17,720 sq. ft. of retail and dining venues on the first and second floors.
Vici Apartments
The 97-unit Vici Apartments in the Little Italy neighborhood of San Diego, Calif., a finalist in Pillars’ best mixed-use and best midrise categories, boasts a nearly perfect walk score of 98, with pedestrian access to numerous dining and retail venues.
Developed by San Diego’s H.G. Fenton Company and built on a bit more than half an acre by general contractor Ledcor Group of Irvine, Calif., the seven-story rental community that was designed by Orange, Calif.-based AO Architects, includes 17,720 sq. ft. of retail and restaurants and a food hall on the first and second floors.
The 11,000 sq. ft. H.G. Fenton-developed Piazza della Famiglia, a central gathering place located between Vici Apartments and the seven-story H.G. Fenton-developed Amo Apartments, features a public courtyard with a fountain and retail and the Little Italy Mercato Farmers’ Market every Saturday.
For those who prefer to dine al fresco at home, Vici features a rooftop kitchen with a pizza oven, beer on tap, a hibachi grill and a BBQ.
The apartment community that includes studio, one- and two-bedroom apartments that range from 554 sq. ft. to 1,136 sq. ft. is a four-minute walk from County Center/Little Italy, a commuter stop near San Diego’s government buildings, a ten-minute walk to the Sante Fe Depot, 15 minutes to the Civic Center and an 18-minute stroll to Seaport Village, a shopping and dining complex adjacent to San Diego Bay.
Apartment interiors, designed by San Diego-based Robin Wilson Interior Design, include Bosch stainless steel appliances, full-size washers and dryers, quartz countertops, wood-style flooring, and private terraces with operable glass wall systems.
The 444-unit 465 North Park in Chicago, Ill., that is a finalist in Pillars’ best high-rise category includes a public park that currently is being redeveloped and features a tuned sloshing damper to mitigate wind-induced motion at the community.
465 North Park
Residents of the 444-unit 465 North Park in Chicago, Ill., a finalist in Pillars’ Best High-Rise category, are a three-minute walk from the local Target discount store and right across the street from a Whole Foods Market.
The 48-story skyscraper that was co-developed by Chicago-based Jupiter Realty Company and MetLife Investment Management’s Chicago branch, with a curving elliptical design by Chicago architect Pappageorge Haymes Partners, encompasses a stepped tower atop a five-story podium and warrants a walk score of 96 and a transit score of 100, earning it the title of both walker’s and rider’s paradise.
The developer also is in process of redeveloping a 1.6-acre, 30-year-old public park just to the west of the apartment community that is close to numerous entertainment and dining venues and public transportation opportunities, including water taxi stops and Divvy stations for the city’s bike sharing program.
The market-rate apartment community that was built by Chicago-based Power Construction Company LLC includes units ranging from 523 sq. ft. studios to 2,137 sq. ft. penthouses and townhomes that range from 1,287 sq. ft. to 1,921 sq. ft. with interior design by Chicago-based Solomon Cordwell Buenz.
Multiple retail spaces are located on the ground floor with apartments on the second through fifth floors and seventh through 48th floors, penthouses on the top two floors and two-story townhomes on floors four and five.
To help 465 North Park stand out in the Windy City’s crowded skyline, the tower is capped by a glowing crown that changes colors in accordance with holidays and special events and conceals the first tuned sloshing damper, which mitigates wind-induced motion, to be installed in a residential high-rise building in Chicago.
The apartment community that recently earned LEED Gold certification features an acre of amenity space spread over different levels that include a swimming pool, a demonstration kitchen and dining room, a business center and a clubroom with billiards and fireplaces.
Perched 80 feet above the street in Honolulu, Hawaii, an ocean-view glass-bottomed pool cantilevers 15 feet over the pedestrian walkway at the entrance to the 318-unit Anaha, a finalist in Pillars’ best condominium category.
Anaha
Solomon Cordwell Buenz also designed the 318-unit Anaha condo community in Honolulu, Hi, in partnership with Honolulu-based Benjamin Woo Architects. Developed by the Dallas, Texas-based Howard Hughes Corporation the finalist in Pillars’ best condominium category is yet another walker’s paradise with a walkability score of 94.
The 40-story community that was built by Hawaii’s Albert C. Kobayashi, Inc., is the second of two Howard Hughes luxury towers to rise in the master-planned Ward Village, which was awarded LEED Platinum certification for exhibiting the highest standards of sustainable neighborhood design, promoting pedestrian orientation, bike friendliness and easy access to public transit.
The glass-clad Anaha, which means “reflection of light” in Hawaiian, is a five-minute walk from the Ala Moana Shopping Center that is home to more than 290 restaurants and shops amidst a backdrop of lush tropical landscaping and koi ponds.
The 857,000 sq. ft. tower features a variety of retail and dining venues at the podium level, including one of local chef Peter Merriman’s signature restaurants that provide fresh, local and seasonal cuisine, and Hawaii’s flagship Whole Foods Market is right across the street.
The studio, one-, two-, and three-bedroom condos rise above 17,000 sq. ft. of retail space at the ground level. A recreation deck on the seventh floor includes an ocean view pool, dog park, tennis court and sand volleyball court.
The unit interiors, designed by international design firm Woods Bagot, feature hardwood flooring in living rooms and kitchens and wool carpet in the bedrooms, freestanding tubs in master bathrooms, wine refrigerators and polished-quartz composite countertops.
The 326-unit F1RST Residences, a finalist in Pillars’ best mixed-use category, is located just a mile from Washington, D.C.’s Capitol Hill and includes a rooftop dog park and stadium seating with unencumbered views of the adjacent baseball park.
F1RST Residences
It’s a very short walk for residents of the 326-unit F1RST Residences to Nationals Park ball field that is located adjacent to the mixed-use community that includes 30,000 sq. ft. of retail space.
The apartment community that boasts a walk score of 93 also is a quarter-mile from the Anacostia Riverwalk Trail in the lively new Capitol Riverfront neighborhood of Washington, D.C., a mile from Capitol Hill and a three-minute walk from the Navy Yard Metro Station.
The finalist in Pillars’ best mixed-use category was developed by Grosvenor Americas, which has offices in Canada, Washington, D.C., and San Francisco, in partnership with Washington, D.C.-based McCaffery Interests, Inc., with design by Hickok Cole Architects and interior design by Hickok Cole Lifestyle, also of Washington, D.C.
The community that was built by Bethesda, Md.-based Clark Construction includes a 170-key, extended-stay Residence Inn by Marriott and fitness studios, fast-casual eateries and a full-service restaurant in the ground-floor retail space.
Eighteen dining venues that offer an international selection of cuisine are within a six- to eight-minute stroll and a Harris Teeter grocery store is an 11-minute walk from the apartment community that features rooftop dog park and stadium seating with unencumbered views of Nationals Park.
The studio, one- and two-bedroom apartments that range in size from 477 sq. ft. to 1,497 sq. ft. feature floor-to-ceiling windows with views of the riverfront and D.C. monuments and include engineered wood flooring, kitchen islands, stainless steel appliances, in-unit Bosch washers and dryers, porcelain tile in the bathrooms and subway tile backsplashes in the kitchens.
The 72-unit Laurel Cherry Creek, a finalist in Pillars’ best condominium category, features ground-floor retail and restaurants and views of the Denver skyline, Pike’s Peak and the Rocky Mountains and a stainless-steel lined saltwater pool on the roof.
Laurel Cherry Creek
Located in pedestrian-friendly Cherry Creek North, a 16-block outdoor shopping and dining district in Denver, Colo., the 72-unit Laurel Cherry Creek, a finalist in Pillars’ best condominium category, is within walking distance of more than 600 businesses, including boutiques, spas and salons and galleries and eateries that range from sidewalk cafes to fine dining.
The upscale Cherry Creek Mall is located just two blocks away with more than a million sq. ft. of high-end retail and the University of Colorado Urgent Care is 1.5 blocks from the condominium community.
Developed by Denver-based PaulsCorp, LLC, designed by Denver architecture firm Johnson Nathan Strohe and built by Colorado-based Haselden Construction with interior design by Denver-based Kimberly Timmons Interiors, the 12-story high-rise community that soars above ground-floor restaurant and retail space, enjoys views of the Denver skyline, Pike’s Peak and the Rocky Mountains.
The community that boasts a walk score of 93 is within a five- to seven-minute walk from the Filmore Plaza, The Shops at North Creek and a nearby strip center.
The one-, two- and three-bedroom condos and penthouses that range from 934 sq. ft. to more than 4,700 sq. ft. are equipped with gourmet kitchens and free-standing soaking tubs and feature private balconies or terraces with glass railings, eight-foot walnut entry doors, gas fireplaces, wide-plank engineered flooring in all the living areas, wool loop carpet in the bedrooms and multi-panel sliding glass or folding glass doors.
Community amenities include a rooftop entertainment deck with a stainless-steel lined saltwater pool and a pool deck that is shaded by a walnut pergola, a summer kitchen with a pizza oven, and a lobby that is adorned by rich walnut woods and brass accents, Carrera marble flooring and a glittering chandelier.
The three towers that house 1,131-units at Waterline Square in New York City, a finalist in Pillars’ best high-rise and best mixed-use categories, are connected by the 10,000-sq. ft. Waterline Club that features an array of amenities, including a skate park, tennis court, rock-climbing wall.
Waterline Square
A team of three world-renowned architects designed the 2.2-million sq. ft. tri-tower mixed-use Waterline Square that is a finalist in both the best high-rise and best mixed-use categories of the Pillars competition.
The 1,131-unit New York City condominium and rental community that encircles a 2.6-acre park designed by Mathews was developed by GID Development Group, which has nine regional offices across the country, and built by New York City-based AECOM Tishman on one of the last remaining Hudson River waterfront sites in Manhattan.
Big Apple-based Hill West Architects collaborated with the three architects, who designed the individual towers that make up the community that merits a “very walkable” score of 88, according to Walk Score.
The 37-story One Waterline Square, which houses 56 condominiums above 216 rental units and is distinguished by an undulating glass and metal façade was designed by Richard Meier & Partners, a Pritzker Prize-winning firm with offices in New York City and Los Angeles, Calif., and features interiors designed by New York City-based Champalimaud Design.
Two Waterline Square, designed by New York City-based Kohn Pedersen Fox Associates is the largest of the trio, home to 645 condos and apartments. The 397-foot-tall tower that tops out at 38 stories is the tallest of the three towers and features interior design by Yabu Pushelberg, which maintains offices in New York City and Toronto.
Designed by Rafael Viñoly Architects, the 34-story Three Waterline Square is the smallest of the three buildings, housing 47 condos and 167 rentals. Unit interiors were designed by New York City-based Groves & Co. with marble and wood accents that reflect a contemporary theme.
Two and Three Waterline Square include culinary venues by world-renowned Cipriani and New York City-based Empellón, respectively, and the towers share an amenity program at the Waterline Club that connects all three buildings. Designed by New York City-based Rockwell Group, the 100,000 sq. ft. space features an impressive array of amenities that include an indoor half-pipe skate park and a regulation-size tennis court, a rock-climbing wall, golf simulator, full-court basketball, and a saltwater lap pool.
The 435-unit, 29-story Modera Midtown in Atlanta, Ga., a finalist in Pillars’ best high-rise category, is both walkable and transit oriented and includes more than 12,000 sq. ft. of retail and restaurant space on the ground floor.
Modera Midtown
The 435-unit, 29-story Modera Midtown, a finalist in Pillars’ best high-rise category, is located in Atlanta, Ga.’s art and technology district. The walkable, transit-oriented community is just steps away from a Whole Foods Market, one block from a MARTA rail station and within walking distance of numerous restaurants and shops.
Developed and built by Boca Raton, Fla.-based Mill Creek Residential Trust and designed by Bethesda, Md.-based SK+I Architecture, the mixed-use community with a walkability score of 88, includes more than 12,000 sq. ft. of retail and chef-driven restaurant space on the street-facing sides of the ground floor.
Located in Atlanta’s second largest business district, that is home to Fox Theatre, High Museum of Art, Opera Nightclub, Whiskey Park and Atlantic Station, the community that includes studio, one-, two- and three-bedroom and penthouse floor plans that range from 564 sq. ft. to 1,458 sq. ft. features a sky lounge, three rooftop terraces, two of which include pools, and an 1/8-mile running track that is elevated 100 feet above street level and wraps the building.
The units’ interiors, designed by Carlyn and Company of Great Falls, Va., include under-cabinet and toe-kick lighting, stainless steel appliances and gas cooktops, in-home washers and dryers, and Murphy beds in select studios.
A wavy-roof amenity building that references the nearby ocean is adjacent to a 5,000 sq. ft. swimming pool at the 516-unit The Residences at Pacific City, a finalist in Pillars’ best low-rise category. The community is made up of six buildings arranged in a semi-circle facing the ocean.
The Residences at Pacific City
The 516-unit The Residences at Pacific City that is a finalist in Pillars’ best low-rise category is nestled amidst a thriving retail and dining scene, steps away from the sand and surf in Huntington Beach, Calif.
Developed by Highlands Ranch, Colo.-based UDR, Inc., with architectural design by Irvine, Calif.-based MVE+Partners and built by Bernards, also based in Irvine, the community that rates a walkability score of 78 is made up of six residential buildings that encircle three amenity buildings and an adjacent pool deck and is fronted by a two-acre public park.
All six of the buildings have courtyards that are connected thematically by a sundial concept that allows for activity levels to flow from one courtyard to the next, throughout the day. This transition is aided by their physical connection points, glass-railed overhead walkways, as well as a boardwalk that runs through the property, providing connection points to the public realm and linking residents to the beach.
A curvy-roofed amenity building, intended to convey the feel of an ocean wave, sits next to a 5,000-sq.-ft. pool with an island in the center that is outfitted with a 17-foot diagonal screen for movies and sporting events that lowers into a vault when not in use.
The apartments that are arranged in a semi-circle that faces the ocean and Huntington Beach Pier include one-, two- and three-bedroom units that range from 657 sq. ft. to 1,761 sq. ft. with interiors designed by Oakland, Calif.-based Mister Important Design that feature oversized windows, glass sliders, balconies, private patios and rooftop decks.
Apartment amenities include hardwood floors, quartz countertops and stainless steel appliances.
Winners will be announced on Jan. 21, 2020, during the NAHB International Builders’ Show in Las Vegas.
The coupling of big data with artificial intelligence (AI) and the internet of things (IoT) has power to disrupt the traditional way of basing real estate decisions on experience, past performance and intuition.
The machine learning component of AI enables multifamily owners and operators to more accurately and quickly pinpoint future risks and opportunities and gain insight into the trends driving performance in markets and at individual properties.
“It’s an evolution. Collected data is beginning to drive artificial intelligence engines. Whereas before, software would capture data for retrospective analysis—things that had happened in the past—the aggregation of massive amounts of data are being used to predict what will be, or should be,” said Jeff Adler, VP of Yardi Systems’ Matrix Products.
“The purpose of using AI is to speed up the analysis timeframe, reduce the repetitive mundane tasks required to make decisions and tease out relationships that would be hard to see when humans are looking at the data. That’s where big data takes a step beyond what traditional analysts have always done, what I have always done, and that is the future of predictive analytics,” he said.
An example is Yardi’s RENT Café, where AI engines deployed across the platform filter and distribute interactions with prospective apartment renters that come into the software via phone, text or email.
Based on how they are read by AI, interactions are either automated or go into a text library or to a chat box—the latter, a function of AI that provides real-time, detailed answers to apartment prospects’ questions, instead of scripted responses. Other examples of data useful in optimizing the resident acquisition process include turn list data and marketing budget data.
Another area in which data is organized, put through an AI engine and converted to recommended outcomes is real estate investment analysis. Yet another is predictive maintenance, where data generated by smart appliances installed in the building can alert management to impending malfunctions and even generate service requests to repair or replace the failing part.
“This is an emerging area and today we are focused on wrapping our arms around data that we have inside the various Yardi products and services. Big data is a five- to seven-year journey and the pieces will be deployed in different practical solutions over time,” said Adler.
Leading the charge
The process of utilizing advanced analytics across a portfolio entails collecting enough data to build accurate algorithms and manually scrubbing the data before it can be used. The datasets of any one owner of an individual property tend not to be large enough to draw generalizable outcomes, so any particular owner has a hard time amassing the amount of information sufficient to make predictive analysis work, said Adler.
For that reason, established software providers who have the ability to amass huge swaths of data from a multitude of sources are leading the analytics charge in the multifamily space.
The ideas behind data mining for predictive analytics were introduced to the apartment industry in 2001 with the revenue management systems that use algorithms to set rents for individual units, making previous methods of setting rents a thing of the past. These systems may be standard today, but they took almost a decade after introduction to catch on.
Similarly, big data has been slow to take hold in the industry where owners still rely on instinct, experience and human touch to glean a course of action from retrospective data.
And, with a number of start-up tech firms entering the market with AI products, many operators are still on the sidelines waiting to see which of them fall by the wayside and which remain standing.
“I think the future of AI and analytics primarily will be driven by the software platforms that have access to huge amounts of data. There’s a bunch of little companies that are trying to do the analytics, but they do not have the underlying plumbing, and I think most of those solutions will eventually go out of business,” said Adler.
Meanwhile, many industry professionals still compile market survey and comparison data the old way.
“We still have our onsite team members complete their own market surveys and regularly shop comps in person and over the phone in similar methods to what has always been done,” said Diane Norbury, senior VP of multifamily operations at Pillar Properties.
“While data providers have become increasingly more valuable in terms of their breadth, scope and frequency of compiling data in a more useful way, there is, in my opinion, no replacement for the daily touch points that our teams have as ‘boots on the ground.’ This allows them to remain in touch with what is happening in the marketplace in a way that can’t be fully captured by third-party sources.
“That said, data providers allow us to validate what we hear and see or dig into areas that previously were difficult for us to reach, providing a much more complete picture. From there, users quickly ask more educated questions and have the tools to develop more valuable strategies for their own operations,” she added
However slow big data is to catch on in multifamily, it’s power is too great for industry professionals to ignore. “AI is not going away. It is going to be something that is very important,” said Adler.
Norbury concurs, saying, “As data scientists continue to find ways to cull this data, scrape it and present it in meaningful ways, it will naturally develop into more reliable and valuable sources for our industry—especially as more users begin to rely upon it for daily decision-making.”
Ownership issues
But surrounding big data are ethical and privacy issues that also cannot be ignored. Data anonymization is the use of one or more techniques that make it more difficult to identify a particular individual or property in stored data. Most privacy protections rely on informed consent for the disclosure and use of individuals’ private data, but because big data is a resource that can be used over and over again and often in ways not originally conceived of at the time the data was collected, erosion of anonymity can occur.
Regulations like the General Data Protection Regulation, a 2016 law on data protection and privacy for all individual citizens of the European Union and European Economic Area, and a recent data privacy law passed in California that is expected to be the first of many in the U.S., set up strict conditions for gaining consent from individuals and place the burden on the data provider to prove that an individual agreed to a certain action.
“It’s very important to us that anything that is individually identifiable remains the property and ownership of our clients and that is a very important core value of ours as we draw on aggregated and anonymized data to create solutions that add value to all of our clients.
“Based upon our relationship with clients and a choice we made, we have created an agreement by which we have the ability to aggregate and anonymize information to create benchmarks and actionable predictions for our clients, but not expose the data individually,” Adler said.
He explains there are substantial costs associated with data cleansing, providing appropriate security for the data and eliminating the inconsistencies that can happen when humans enter data. Data is cleaned monthly at Yardi by an autonomous team of experts who report to no Yardi product line and are the only humans with eyes on the underlying information.
“These are significant efforts by very skilled people who have to know a tremendous amount of information and knowledge about how all of the systems function together,” said Adler.
The data is extracted from clients’ data bases and placed into a centralized database to be normalized and cleansed and to ensure a consistent timeframe. Once assembled, a set of security routines must be run if the information is requested for extraction. Only then can the data be reported out on at a competitive property level or market or submarket or segmentation, but even then, the data must meet certain criteria. A built-in anonymization and aggregation routine requires at least five properties from two or more owners on the return set.
“The way it works in Matrix is you identify a comp set of 15, 20 or 30 properties and then you call out for the data to be returned. As long as there are five or more properties, you will return the results. I won’t and can’t know which five, six, seven or eight of the 15 or 20 came back. That’s the anonymization,” said Adler.
Making it better
Adler said “AI is really a misnomer for a set of technologies, like neural networks and language processing, that interact with each other to create better predictive and proscriptive analysis by applying large sets of data to a problem and running iterations sufficiently frequently to be able to create output and a feedback loop where the machine learns from each of them—with the idea that the more transaction data, the better the machine is able to make predictions over time.
“We’ve taken baby steps—the first was ‘Wouldn’t it be great if we could predict in advance if a property had enough demand to meet financial goals?’ And we said, “What do you need to make that kind of decision?’ You need to know what renewal rates are by floorplan, what the notices to vacate are and what they are likely to be, how much demand is coming or expected to come and put those things together and see if there is a gap. There is a set of algorithms that need to run to get to the point where I can say, ‘I think you have a gap.’ If you run that algorithm enough and back test it, you can say with some confidence there is a prediction of a gap. Now, what do you do with that? There are only three levers one can pull—change the price, change your advertisement activity, or change your resident qualification standards. In the absence of machine learning, and this is what I did as COO of a company, we made those decisions based upon the best information we had at the time and our gut understanding of the relationship between each one of those three levers.
“So, finally we ask, ‘Wouldn’t it be great if a machine could make some of those decisions? Could they make decisions more quickly and better than a human being?’ The first thing we did to derive answers was to exclude the resident quality standards, which were a bit more complex than we could handle and decide if we should increase price or modify advertising. Invariably, what tends to be the case is that as long as you are in a large urban market where there is a lot of demand and your property is a very small percentage of the total stock of housing in that market, it is less expensive to modify your advertising to get more leads to achieve your desired objective. So, we now have that chugging along inside of one of our services.
“We are very early on a five- to seven-year AI journey We are not trying to reinvent the wheel. We are harnessing some of the relationships in our aggregate dataset to make everyday problem solving a little better for our clients,” said Adler.
Benchmarking boost
Pillar Properties is an early adopter of Yardi’s Elevate-branded, AI-enabled intelligence services designed for C-suite and other operational execs. Norbury gives testament to the predictive analytic and benchmarking prowess of AI-enabled software.
“Having benchmark data now allows outliers or concerns to make themselves more readily apparent, so decision making and changes in strategy can be done quickly, with less damage to operational performance when righting a course,”
“Also, it can highlight issues relating to specific areas of a business for more accurate adjustments, rather than applying a shotgun approach and perhaps missing the overall mark. We’ve found that by using benchmarking data, we can quickly assess if a troubled asset has issues with pricing, marketing, expense management or perhaps team members—whereas before it wasn’t always that evident. It has also made our onsite teams much more educated and independent to make successful decisions,” said Norbury.
Benchmarking data also helped Pillar Properties pinpoint the reasons for lagging performance in certain buildings. “For example, we found that one of our communities wasn’t reaching our rent growth goals and was having difficulty with occupancy as well, despite a strong competing sub-market that had high occupancy and rent growth. From the data, we found that historically this asset always outperformed its competitors in rents and rent growth and significantly slowed now that it was aging and there was new product online. We were no longer able to push rents, as we were already at the top of the submarket,” said Norbury.
After a sensitivity analysis extrapolated from the data showed that significantly dropping rents at the property would result in the occupancy level needed to meet or beat cash flow goals and still remain competitive, Pillar Properties changed focus from rent growth to occupancy and recalibrated its budgets.
“We’ve also been able to use benchmarking data to see when our competitors will have expirations and availability in certain floor plans and get ahead of strategizing our own vacancy and marketing plans—we never had tools like this before, and that’s extremely powerful.
“The multifamily and real estate industries are finally catching up with the rest of the world in successfully aggregating and digesting information in a valuable way that can improve efficiencies, operations and overall success. The more participation, the more refined the tools will become for everyone,” said Norbury.
At 2019 IBS, panelists take part in one of the more than 130 educational sessions offered that year. For 2020, in addition to a multifamily track, tracks are available on design and community planning, project management, business management, industry trends and emerging issues and others. Photo credit: Nick Hagen Photography
Multifamily professionals who are interested in keeping up with the latest trends in the industry are undoubtedly familiar with NAA’s Apartmentalize and NMHC’s OPTECH shows. However, they may not be aware of another event that is worthy of their attention, particularly if they work in the development side of the industry. That event is NAHB’s International Builders’ Show (IBS).
From Jan. 21-23, the 2020 IBS will bring together more than 1,400 top manufacturers and suppliers from around the globe in 600,000 net square feet of exhibit space at the Las Vegas Convention Center. As the largest annual, light-construction trade show in the world, the show highlights the latest and most in-demand products and services, and brings together nearly 70,000 show attendees from across the residential construction industry. In addition to showcasing great new products, the show will feature a new project management track, and will also reveal cutting-edge information and trends in more than 150 education sessions throughout the week.
Education Track for Multifamily Pros
Many of the IBS education and information sessions are targeted specifically at the multifamily market segment, including numerous education sessions available directly through the Multifamily Central—the hub for all things multifamily during IBS. Popular sessions include:
Controlling Multifamily Construction Costs—Completing a project on time and on budget is critical to a successful multifamily development. Presenter Tom Tomaszewski of The Annex Group will share his insight on how to control construction costs while constructing multifamily projects, including information on the latest building technologies and tools.
Multifamily Modular vs. Site-Built: One Design Plan for Comparing Both Options— Modular has been popular topic as a potential solution for quicker development of multifamily properties. But how you know when it’s right for you to tackle your first multifamily project? Learn how to develop a single bid set of plans so you can get pricing and schedules for both site-built and modular from presenter Troy Tiddens of Neudesignarch.
This year also brings new multifamily sessions, such as:
Gen Z: End of the Alphabet and Beginning of an Era—During the next decade, Gen Z will grow from 8 million to over 55 million in the workplace, apartments and homes. This represents a huge opportunity and a challenge. Discover what Gen Z wants in their home, what they are willing to pay for and their approach to money and spending to help connect and engage with this growing demographic.
Tips on Entering the LIHTC/Affordable Housing Sector—Affordable housing projects can be a great investment for multifamily developers, as long as you’re aware of the many federal and state rules you must comply with in developing and managing such properties. Presenter Sean Kelly of Leon Weiner & Associates addresses both the opportunities and obstacles for entering the world of affordable housing and using the Low-Income Housing Tax Credit (LIHTC).
Developing a Mixed-Income Apartment Community: A Case Study—Mixed-income apartment communities can add layers of complexities through financing, investors, syndicators and more. Learn firsthand from presenter Chris Parker at GIV Development about the tips and best practices he utilized to help create Project One, a 112-unit, net-zero project with 70 percent affordable units in Salt Lake City.
The show boasts myriad general building sessions devoted to trending topics for home builders as well, including:
Best in Show: The Latest Trends in Housing from the Consumer Electronics Show—Technology is a key design area of interest for Gen Z and millennials, and the Consumer Electronics Show (CES) offers a unique perspective into upcoming trends. Panelists will share the latest trends fresh off the 2020 CES floor and how they will impact the home building industry.
Protect Your Assets: 10 Best Practices to Manage Risk & Reduce Liability in 2020— Save time and money by incorporating these best practices for risk management into your business operations. Attendees will learn to identify key contract provisions to help reduce liability and alternatives for dispute resolution, as well as updates from recent court cases to understand the latest issues leading to disputes.
Separate registration is also available for in-depth education prior to the show through master workshops which will be held Monday, Jan. 20.
Attendees at 2019 IBS in Las Vegas, Nevada view some of the more than 1400 exhibits of the latest products for the light construction industry. Photo credit: Nick Hagen Photography
Hot Spots at IBS
In addition to informative educational seminars, IBS also offers a host of other opportunities to learn and network with industry professionals. A full registration also includes access to:
Education on the show floor through construction demos at the High-Performance Building Zone, as well as an insider-look at the products and techniques discussed in the zone through the Builder Performance Lab
Opportunities to make new business connections, including IBS Centrals dedicated to topics such as multifamily housing, as well as 55+ housing, custom building, design, remodeling and sales
Networking opportunities included dedicated receptions and mixers in the Multifamily Central in addition to events such as the IBS Young Pro Party and IBS House Party.
Recognizing the Best
The Multifamily Pillars of the Industry Awards luncheon on Tuesday, Jan. 21, at 12-2 p.m. will also honor the best in the multifamily housing industry, including top developments, affordable housing projects, firms, marketing efforts and industry professionals. Tickets to this event are available through buildershow.com.
As part of the seventh annual Design and Construction Week®, IBS attendees will also have exhibit floor access to the National Kitchen & Bath Association’s Kitchen & Bath Industry Show. This co-location offers attendees the opportunity to explore a combined total of 2,000 exhibitors covering more than 1 million square feet of exhibit space at the Las Vegas Convention Center. Design and Construction Week will kick off Tuesday, Jan. 21, with keynote Earvin “Magic” Johnson.
“It’s our goal for the NAHB International Builders’ Show to be the event of the year for our members and industry professionals,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “Nowhere else will you find top-level education sessions, a variety of networking opportunities, special events and an exhibit hall full of innovative products all in one place. This is truly an event you can’t miss.”
To register or to obtain more information, visit buildershow.com.
“Economists generally expect [the United States] will experience a downturn… over the course of 2020 or early 2021,” says Sam Chandan, a trained economist, an associate dean of New York University’s Schack Institute of Real Estate, and a host of the Real Estate Hour on SiriusXM Radio. Chandan presented his “2020 Economic Forecast” at a ULI New York event in November.
But Chandan expects a recession, when it comes, to be relatively brief. “Any recession in modern economic history has been relatively short-lived compared to the period of growth to follow,” he said.
Given the length of the current economic expansion, Chandan is among those who are already focused on where opportunities to invest in real estate might appear after it is over. Data and in-depth analysis will help investors make the best decisions. And collaboration and cooperation will help lawmakers and local officials create the best policies to encourage growth.
Chandan himself is not predicting a recession in the near term. “No economist wants to go on record as saying that the downturn will be in 2020,” he says. “If it isn’t… then they will be remembered for that.”
Instead, Chandan is taking a close look at forecasts made by other economists. In October 2019, nearly 50 economists surveyed by the Wall Street Journal revised their estimates of how much the U.S. economy is likely to grow in 2020 to 1.6 percent. That is not a recession, though it is down from their average forecast of 2.0 percent growth the year before, according to the Journal’s Economic Forecasting Survey.
That is exactly what economists would do if they believed that a recession was likely: Forecast growth that did not stop but instead slowed significantly below the capacity of the economy. “They are hedging their reputational bets, saying: ‘You know what? I think the downturn is going to be in 2020. I just don’t want to go on record as saying so,’” says Chandan.
Bond investors also are sending a clear signal that a recession might be coming, Chandan says. For several months now, investors have been willing to buy long-term government bonds at a lower yield they get from short-term government bonds. These bond investors are effectively betting that Federal Reserve officials will soon be forced to announce more interest rate cuts to support a faltering economy.
Economists and investors have wondered for years how much longer the United States can expand. As of November, it had been growing consistently for 125 months—since the end of the Great Recession in 2009. “This is the longest expansion in modern U.S. economic history,” says Chandan. “In theory, the expansion could continue.” However, clues like the inverted yield curve and forecasting survey point to a slowdown.
Investors look for opportunities
If the U.S. economy does fall into recession in 2020, it is unlikely to shrink for more than a few months before beginning to grow again for several years, judging from the recent past, says Chandan.
Real estate investments are also likely to be less damaged by the next downturn than in past cycles. “Real estate doesn’t appear to be the sector where we are taking risks that won’t pay off,” says Chandan. “By and large, we have been fairly reserved in our development activity, in our investment activity.”
That said, Chandan does worry about some loans made to apartment properties. “Commercial real estate has been much more reserved in the expansion of its debt with the exception of multifamily,” he says. Lenders had $1.4 billion in loans outstanding to apartment properties. That’s twice the volume of apartment loans outstanding just before the financial crisis, he says.
In the rush to make those loans, some lenders may have lent too much. The average apartment borrower carried $13.95 of debt for every $1 of net operating income in the second quarter of 2019, up from an average of less than $10 of debt in 2010, according to Chandan.
“Not all of that debt is going to have been structured in a way that is going to survive maturing in a downturn,” says Chandan.
Real estate investors who have not overextended themselves are likely to survive a recession without much damage. “Those who are positioned defensively… are positioned to succeed when growth does return to the market,” says Chandan.
These investors will also have new tools to find opportunities in a recovery. That includes extremely granular data that is less fragmented that in the past—and a new generation of analysts and associates who can mine that data so that investors can make better decisions, says Chandan.
That will help companies navigate the changing demand for real estate. “The way in which we want to use space is changing on a more fundamental level than we have seen in economic history,” says Chandan. “Obvious examples include the way we choose to shop.”
Investors will also need strong data to navigate slower economic growth over the long term. The United States used to grow at a rate of roughly 3 percent a year, or even more than 4 percent during expansions. During the last decade, however, the usual rate of growth has hung closer to 2 percent.
“Over the last 10 or 20 years, the rate at which our economy grows has slowed,” says Chandan. The United States has chronically failed to invest enough money on infrastructure in the United States. “That ultimately exerts significant drags on how productive we can be as individual economic agents,” he says.
The growing inefficiency of the labor market has also made it tougher for people to get back to work, becoming a drag on the economy. “The necessary skills that make you relevant have never changed more rapidly,” says Chandan. “We have more jobs open and available today than we have ever had. The difficulty firms report is they cannot find the people with the right skills to fill those positions.”
Chandan also sees a mismatch in the housing markets: “The bulk of development that we have seen has been that class A, urban, high-rise building that is well amenitized and is in the top decile of the asking-rent distribution, if not even higher.”
That creates a glut of housing for upper-income people, and an expensive shortage for everyone else. “There have been eight years in a row where the median American renter has seen his or her rent increase faster than his or her income,” he says. “If teachers, firemen, policemen, and other people who serve community do not have the opportunity to reside within the communities that they serve, then the long-term economic outcomes that we see for the city are impaired.”
The solutions to these problems will require cooperation and collaboration, he says. For example, the cities best positioned to grow have the ability to invest in regional transportation infrastructure that helps people get from where they live to job opportunities—and paves the way for dense, new, relatively affordable transit-oriented developments that relieve stress on the housing markets.
In localities where stakeholders fail to cooperate, and housing costs continue to rise, the pressure will also rise on lawmakers to pass rigid, new rent-control laws.
“No one is winning with some of the outcomes that we are seeing and how we are going about trying to solve the housing affordability crisis,” says Chandan.
Author Bendix Anderson for Urban Land Institute
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