The multifamily sector is growing rapidly. In Q2 2022, investment in multifamily reached $86.3B, a 42.4% year-over-year increase, as investors’ and developers’ interest in the sector increased.
As the market grows, however, developers are going to have to get used to greater competition from other multifamily operators. Coupled with the increasing turbulent economic conditions, attracting and retaining tenants will be even more critical.
The way to do so is to learn from another sector that has grown rapidly in recent years: student housing.
“Generation Z is far more sophisticated in what it expects than millennials, and the student housing sector has morphed to service that,” PeakMade Real Estate Vice President of Sales and Marketing Ashly Poyer said. “They know who they are, what their values are and they won’t compromise. That change has been sharp. And now, that generation is coming for multifamily.”
PeakMade Real Estate has 11 years of experience operating student housing and has now moved into multifamily. By combining this experience in student housing with regular focus groups with students, the team has generated valuable insights that can help drive change in multifamily.
“As we begin to see a new demographic of young professionals enter the multifamily space, the whole sector needs to find ways to differentiate its approach,” PeakMade Real Estate Director of Client Services Chris Warner said. “Combining our experience with focus groups has helped us identify ways to create a real competitive advantage.”
PeakMade Real Estate has identified five key points where multifamily can learn from the student housing sector.
Know Your Impact On The World
“Generation Z wants to feel empowered as a consumer,” Poyer said. “That shift has elevated what student housing provides.”
Students want to know what an operator’s recycling program looks like and whether the operator is using green utilities. This awareness of impact on the world extends to society — how does an operator deal with diversity and use of pronouns?
“That’s what’s coming to multifamily,” Poyer said. “Currently, multifamily is driven by price, while student housing is driven by price but also impact on the world. Generation Z factors this into decisions, so multifamily needs to take this on board.”
Reputation Is Everything
Five years ago, PeakMade spent considerable time developing relationships with universities to reach students, because their recommendations meant a lot, Poyer said. Today, that is much less important.
“Now, students validate their housing shortlist through other organic sources, such as student groups on Reddit or Facebook,” she said. “They trust peers far more than advertisements. Multifamily isn’t focused enough on this.”
One way to create a good reputation is to create “Instagrammable moments” that residents want to share with their friends, Poyer said. Operators should be delivering curated events, for example, that people want to share.
Delivering excellent customer service is also far more important than it used to be. PeakMade asked a student focus group what an appealing financial incentive would be to recommend their housing to a friend, for example, $300. The answer was that no amount of money was enough to make up for a subpar experience.
“Multifamily operators rely on internet listing services and digital advertising, believing they can buy their way out of a bad reputation,” Poyer said. “As Generation Z grows up, that won’t be the case. Multifamily operators need to take an active approach to reputation building, to retain and attract residents.”
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Consider Parking And Bathrooms
Multifamily developers rarely have enough parking for the needs of Gen Z, Poyer said. Nor do they have enough bathrooms.
“Generation Z is used to living with several roommates and they want to continue doing so,” she said. “This isn’t a traditional living style, so developers need to consider how to create homes that cater for multiple residents. Homes need to have a bathroom for each bedroom as well as enough parking. This will boost the overall experience.”
Widen Residents’ Viewpoints
For all Gen Z’s tech savviness, this can put them at a disadvantage, Poyer said. They’re so used to living in the digital world — sharing experiences on Instagram, for example — that they are nervous of leaving the bubble created by student housing. This is where multifamily can step in.
“Multifamily developers can put effort into building communities, including beyond the gates of the development,” she said. “If you work in partnership with the wider world, with events, for example, you can take Generation Z away from the tech to see the benefit of the neighborhood you’re creating. Anything you can do to make human-to-human contact less intimidating will help grow your reputation.”
Use Focus Groups
PeakMade has learned a huge amount from its regular cycle of focus groups, Poyer said. As Gen Z moves through the world, it’s important for multifamily operators to do the same thing.
“Hearing from a diverse cross section of your customer base directly helps to validate strategies and pivot in a new direction where needed,” Poyer said. “This can be as minor as the customer service process when a work order is completed or what is an acceptable level of rental growth. Groups challenge us all to look outside our own teams for an answer and find better ways to meet tenants’ needs.”