2023 was a whirlwind year for multifamily housing trends. High demand for housing resulted in the highest rental inventory for years. And tenants are demanding more and more amenities than in the past. But with a softer market outlook, concerns over the economy’s future, and serious roadblocks for homeownership, multifamily housing in 2024 will look a bit different.
According to all estimates, 2024 will be a landmark year for multifamily housing. Although the market has cooled considerably since the beginning of 2023, this coming year will see a higher inventory than ever.
But with higher inventory comes more competition for renters. Vacancy rates are set to increase slightly (5.7% versus 5.3%), and rental rates will stabilize for the most part. That means the demands of renters will greatly influence how new multifamily properties are designed and managed.
With a shift in demographics to both older and younger generations, property managers are looking at more flexible leasing contracts. Shorter minimum occupancy terms could become more common as properties consider tourism, business travel, relocation needs, and digital nomad lifestyles as part of their business models. The increased flexibility in rental agreements can help fill gaps in occupancy and reduce vacancy rates.
Subletting may become more commonplace in the next year as well, as many residents look for ways to improve their finances. Vacation rentals through Airbnb now include apartment complexes with specific criteria, and many tenants hope to take advantage of this potential. For property managers, this could mean better residency rates since tenants can simultaneously recuperate expenses for their vacations by arranging subleases.
Another potential financial opportunity for renters is renting EV charging stations included in their rental agreement. Although the demand for EV charging stations is still sparse, that demand will likely increase in the next several years. When tenants don’t use these stations or are out of town, the financial incentive they could provide will probably be seen as an additional benefit to renting.
As the market slows this coming year, the competition for renters will increase. Amenities are a key part of attracting tenants to multifamily properties. Renters are looking for premium amenities more and more, and past amenities like simple fitness rooms or pools are now expected within most new facilities. Lounges, smart fitness centers, and on-site shops are gaining traction in today’s market, and that is unlikely to change for the foreseeable future.
The increased demands of renters will meet an increasing demand for better technology to manage properties. From keyless entry systems to all-in-one apps to manage payments, maintenance requests, and common space reservations, renters want an experience that makes their lives more convenient on a daily basis.
For property managers, multifamily trends are pushing toward property management software to integrate the accounting, management, and convenience demands into a single system. These systems should improve daily operations merely in terms of ease of communication, but they can also integrate artificial intelligence to address tenant requests in real-time and provide more data-driven decision-making for management.
The current housing market is brutal. The low inventory of single-family homes has pushed housing prices sky-high, and now the high interest rates have made it nearly impossible for many hopeful homeowners to enter the market. And with little indication of interest rates dropping or home prices correcting soon, many young professionals and families are seeking alternatives to homeownership. Multifamily trends in 2024 will reflect this shift.
As single-family homes become less and less attainable, renters are looking for long-term rental options that provide stability. Along with more flexible short-term options, property managers are likely to offer extended leasing opportunities to fill the gap for hopeful homeowners looking for an alternative to owning their own homes.
Long-term renters look for different types of rental properties than short-term renters. Instead of convenient and flexible housing, long-term renters want a place that provides more opportunities to build relationships with other tenants. In the past, this multifamily trend has only seen traction in younger demographics. Today, with more families looking at renting, many multifamily developments are investing in community spaces that encourage connection. Some property managers are even taking a more active approach to creating events that foster community within their complexes.
The community focus renters are looking for goes further than just social events and mixers. Many renters are looking for an intentional, all-in-one design in their properties. Including retail, commercial, and dining establishments is becoming more common. This “village” model makes it easy for renters to get everything they need without ever hopping into their cars.
The shift to long-term residency also shifts the value of sustainable design and environmentally conscious programs within multifamily complexes. Recycling services, energy-efficient appliances, renewable energy sources, and smart thermostats will see higher demand than in years past. As such, mechanical design will see higher expectations for efficiency and functionality in these areas.
When many employees moved their offices into their living spaces in 2020, some thought it would be a short-lived trend. Today, we’re seeing a different reality: hybrid and work-from-home models are likely sticking around for most people. For multifamily trends in 2024, these models will see more attention in how spaces are built, both within rental units and around the complexes people live in.
The increase in community amenities and spaces is driven in part by the need for flexible working spaces. Having quiet lobbies and lounges with power outlets, charging stations, and solid WiFi signals will be a big benefit for renters who are working from home.
Many employees experienced social disconnection during the pandemic, leaving them isolated. While the work-from-home model is here to stay, sitting in a home office all day long is not ideal. We’ve already seen multifamily trends move towards more coworking spaces, but now those spaces are becoming more intentional in their design. Print stations, coffee bars, and comfortable desks and chairs will make these spaces more inviting to hybrid and WFH employees.
The frantic adaptation of work-from-home models typically meant simply creating makeshift spaces within units for laptops. Now that WFH models are becoming the norm, these makeshift spaces no longer cut it. Property developers are designing dedicated spaces for home offices within rental units to accommodate renter demands and expectations.
In the past, many multifamily developments were location-dependent. Traditional business centers acted as anchors for large housing complexes since they would often meet employee needs for short commutes. But as more flexibility in working arrangements persists into 2024, multifamily complexes have more freedom to choose locations far from business and industrial developments. And with more village-oriented complexes in demand, the dependence on commercial areas is less pressing than before.
The cool market conditions are slowing origination rates for multifamily lending, but even existing properties are seeking ways to meet multifamily trends in 2024. MEP systems are at the heart of these updates. Mechanical engineers will need to meet these demands in new and innovative ways.
With more amenities comes more complexity in mechanical systems. Community spaces will be more than just a few chairs and a kitchenette, and with the need for smart access systems and connectivity, mechanical engineers will need to plan out more involved designs to meet these needs.
In-unit efficiency is in demand, but appliances are just the start. HVAC systems will need to be more conscientious of energy use and costs, and property managers will likely look toward solar power or other renewable energy systems. Even water supply systems could change, using gray water for non-potable purposes to reduce waste.
Renters in WFH and hybrid models want the ability to move from one part of the complex to another without struggle. In response, property managers want a more mobile-friendly infrastructure. Tech-driven access systems, keyless entry, and complex-wide connectivity will see higher demand, and MEP design will need to meet that demand.
The changing demographics of tenants will drive demand for better accessibility, specifically for older generations. More extensive wheelchair accessibility and more convenient entry systems will require a higher level of detail in planning and construction, both in-unit and throughout the complex.
Having an expert mechanical engineer on your team will be critical to developing a complex that meets the demands of multifamily trends in 2024. With years of experience in developing multifamily and multi-purpose projects, Innovative Engineering Solutions can provide the mechanical systems your project needs, whether it’s retrofitting, refurbishment, or new construction. Contact us today to learn how IES can help you meet your tenants’ needs.