With mortgage rates on the rise, and the younger generations not purchasing single-family housing, multi-family housing continues to be a good investment for developers. According to the National Association of Realtors, the United States is building about 50% more multi-family units than the pre COVID historical average, and developments are still not keeping up with demand. When doing site selection for these developments, what is important to consider?
Of course, you can’t have occupied units if you don’t have people to fill them. Knowing where younger, usually childless adults currently live—and want to live—can inform your site selection. New jobs flooding an area could mean that new households will be moving into the area, and likely, they will rent in their new city. Of course, college towns are also popular places for developers to invest in new units. Income levels will likely determine what type of building you construct, and the finishes inside the building. Like it is for most site selection projects, demographic data still reigns supreme.
Where do they want to live? Amenities are incredibly important to renters. Being close to public transportation, grocery stores, shopping and restaurants are all important to tenants when choosing which building to live in. Knowing the area, and what is around the potential site, will greatly benefit the developer. Investing in good business data would be imperative to the success of the building. What commercial real estate developments are nearby the site you are considering? Are additional developments planned? Are there gaps in the market that you could add to your project by making it mixed use with retail on the first floor?
The maps below show the Los Angeles fixed rail Metro lines with 2023A block population density from our upcoming 2023A release. The detailed map shows the westside line. As we discussed, public transportation is a draw for renters, and there is room for redevelopment of higher density multi-family along the rail line.
Los Angeles, Map created with Maptitude
Los Angeles, Map created with Maptitude
One of the most important factors will be crime rates, both for protection of the building while construction is occurring, but also as a draw for potential tenants. Of course, low crime rates are ideal, but in cities where many multi-family housing units are constructed, crime may be unavoidable. Knowing crime rates, and the types of crime that occur in the area, can help developers come up with a plan on how to mitigate potential safety concerns. If you know that car theft is an issue in the area you are looking at, perhaps adding a gated garage would be a worthwhile investment to make tenants feel more comfortable.
Overall, demographic data is critical to multi-family unit site selection, including basic demographic data like age and income, but also business data and crime data.
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