Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.
With their exterior access and outdoor common areas, garden-style apartments may hold greater appeal for virus-wary renters.
It’s imperative to pivot toward asset classes that will endure and thrive in the post-COVID marketplace. Moreover, it’s essential to lean toward where there are opportunities to create the most value.
Buyers should take a hard look at buying vintage multifamily. There’s going to be a significant shift towards these garden-style communities as they offer more opportunities for social distancing with open space, lower density, and outdoor access…as well as greater air circulation compared to high-rises with closed hallways and elevators.
What is a “garden-style” apartment?
A garden-style community is one that features exterior access, landscaped grounds and common outdoor areas for tenants.
The structures are generally limited to four stories and feature single-story units with several to a floor.
These multifamily properties typically don’t have elevators, and each unit has an entrance off a breezeway or the exterior of the building.
The potential is real
Many class-B and class-C communities that were built decades ago represent perfect value-add potential. These assets typically have some deferred maintenance, need interior and exterior updates, and lack modern amenities.
Additionally, these communities are often close to both professional and manufacturing jobs, schools, retail, and other drivers of value.
The rental rates for these apartments are also generally lower than for class-A urban properties, which is crucial given the high unemployment rates and uncertainty in the job markets.
Many young professionals, particularly millennials, are sticking with renting to avoid the risk of foreclosure in the uncertain economic future due to the pandemic.
By improving amenities and bringing interiors up to class-A standards, investors are able to create hip, appealing spaces at a lower price point.
Aside from economic considerations, garden-style makes sense from a health perspective. Recovery post-pandemic for landlords of all classes is contingent on meeting users’ needs and expectations with respect to best health practices.
As many jobs move away from the central business district, residents are finding high-quality, lower-priced living options that are close to work. This helps users avoid the necessity of public transportation—a health concern for many.
And since we’re all sensibly wary of elevators and indoor common areas, vintage multifamily eliminates these issues and provides an overall more pleasant living experience in a natural setting. Suburban communities in particular offer many class-B and -C properties with excellent natural views backing up to forest and/or creek.
I predict multifamily is going to be the most valuable asset class over the next 10 years.
We see resilience in apartments in general, and specifically in garden-style class-B and -C communities that don’t have the occupancy density of high rises and offer more open space and fresh air.
Renovating and operating these assets creates enormous value for tenants and owners.
Garden-style may be the wave of the future.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@soldbybeachwood.com