Building homes for people is the core of multifamily real estate development. A home – both as a place where one lives permanently and as somewhere one feels safe, respected, and cared for – is a basic human need. Having a home that you love is a big part of feeling loved and connecting with your community.
But how many multifamily residents really love their homes? When you consider the large amount of turnover each year at your average community, it becomes clear that many do not. Couple that with countless negative reviews from dissatisfied residents who are eager to move as soon as their lease is up, and it’s likely that most multifamily tenants are not happy with their living situation.
The fact that so many residents would rather experience the stress, expense and inconvenience of moving than stay in their current home has to be one of the greatest indictments of modern multifamily real estate development.
It’s time for a more people-focused approach to multifamily real estate, one that creates a stronger connection between building occupants and the place they call home.
Positioning Your Multifamily Development for Better Occupant Retention
According to a recent study by the Census Bureau and HUD, one in five American households live in a multifamily rental property. In 2020, there were 128.45 million households in the United States, meaning nearly 26 million households make up the multifamily market.
There’s no question that the multifamily market is sizable and profitable. However, multifamily developments face the challenge of effectively positioning themselves in a way that makes them unique. They’re looking for the competitive advantage they need to stand out in such a large market.
Start by asking yourself where your multifamily development sits in the hearts and minds of your current and future tenants.
Select a Multifamily Market Segment
Positioning your development is key to successful differentiation among the many competing options for apartment living. But, before determining your development’s position in the market, it is important to select a market segment that you want to target.
When it comes to selecting a market segment, most developers don’t get specific enough. For example, “multifamily tenants” is not a market segment. That’s the entire market. “Young professionals” or “low income” won’t cut it either. A target multifamily market segment should be specific enough to make your development appear different from other options. Such as, “environmentally conscious urbanites” or “recently graduated tech workers.” It could represent a niche in the market that offers an opportunity due to a lack of competition, like “retirees who favor a walkable neighborhood.”
Don’t feel hesitant about going all-in when targeting a specific market segment. Your market segment may alienate some potential occupants who would “never want to live there,” but in turn, you’ll build something that actually feels like home to the right people. Your multi-family development can’t (and shouldn’t be) all things to all people. A differentiated property still attracts some undiscerning tenants who may not feel as strongly about where they live at the moment. Yet, it builds a core of long-term residents who bring stability and strength to your community.
Select a Multifamily Positioning Strategy
The most common positioning strategy for multifamily developments is based on competition. Because real estate is inherently long-term and illiquid as an investment, it carries a relatively high cost for experimentation. So, smaller developers with less capital look to bigger successful companies that have a large market share as a reference. They try and convert some of their tenants by offering a similar product with similar features at the same price point.
New multifamily developments mirror the existing ones, seeking to offer the same amenities, unit square footages, and pricing in order to present a model they are confident “works.” Pretty soon all of the neighboring apartments are so similar nowhere really feels like home. They become replaceable and tenants are quick to come and go. In this scenario, a decision between your development and a larger competitor’s is arbitrary and more a matter of chance. It’s less of a strategy and more like crossing your fingers and hoping they sign your lease instead.
Using competition as a reference point is a solid strategy for many brands. Even so, it has become a chronic issue for multifamily real estate because it’s nearly the only positioning strategy in use. Consider the strategy of using the competition as a reference point for differentiation instead. And do something different or unique to set your project apart.
This can be accomplished with product characteristics or benefits that other properties don’t have. Just make sure they are well-researched and connected to your target market segment, not just different for the sake of being different. Get out and experience what the current community has to offer and see what is missing. Talk to consumers about what they want, why they want it, and how their apartment building could be better. Using the examples previously mentioned, maybe it’s an urban farm on the rooftop for the environmentally conscious tenants, or floor plans that remain functional and accessible as a person ages.
Make Your Multifamily Development Matter
Your development can’t be all things to all people. Trying to only leads to becoming nothing to no one. Don’t let your next multifamily project be just another replaceable apartment building. How do you avoid this and appeal to the right market segment? Here are a few points to consider.
An Emotional Attachment
People naturally want to be connected to the places they live. The first connection they form is an emotional attachment. When it comes to making purchases, customers buy based on emotion and then use logic to justify their decision. It’s no different with multifamily living. The first connection you need to form is that initial emotional connection that draws them to your property.
You want your potential tenants to feel at home the moment they first visit your property – virtually or in person. The brand, the amenities, even the smallest details should speak to the lifestyle they want to have. If they can imagine themselves enjoying their lives play out in the spaces you provide, it will be an easy sell.
Memories and Familiarity
People also feel connected to a place once they have familiarity with their physical surroundings. We create personal cognitive maps, identifying the features and memories that help us navigate our homes and neighborhoods. The longer we spend in one place, the more detail we remember. Our memories become linked to the place, making it more difficult to leave behind.
For your tenants to become familiar and sentimental about their apartment community, they need to spend as much time in it as possible. Too many multifamily communities fail to direct people to the key features on the property. Branded signage showing where to go for the clubhouse, gym, or rooftop deck is conspicuously absent at almost every property. If your tenants aren’t constantly reminded that they have access to these amenities, they won’t find it convenient to use them.
Your property should be one where tenants want to host friends and family, because it’s something to be proud of. Ensure the amenities you’re providing are actually getting use, because regular amenity use leads to a deeper connection with the community.
Comfort and Friends
Beyond the familiarity with physical surroundings is the the comfort of having neighbors as friends. We form deeper connections with other people than we do with places. People looking for a specific lifestyle will be more likely to have things in common and build these bonds with their neighbors. So providing opportunities for people to connect with one another in a multifamily community is paramount.
When talking with residents of 4th West Apartments, we were surprised to learn that the networking opportunities were the greatest benefit they gained from their access to the popular rooftop Skylounge. An exciting mix of game-changing amenities draw people to use the space, but the social connections that people make with each other are what stand out in their minds.
A Sense of Identity
A sense of attachment to a home can become strong enough to make it part of one’s identity. You’ve probably heard people speak of themselves as either a Mac/PC person or a Coke/Pepsi person. These are brands that have successfully integrated themselves into the identity of their customers. They have distinctly positioned themselves from their competitors in the hearts and minds of countless people.
In order for your tenants to consider your development as part of their identity, two things must happen. First, your development must be distinct enough that when someone says they live there, that statement has meaning. You can learn a lot about a person by finding out they are a “Mac person.” But what can you learn about a person when you find out they live in “Lofts at [insert address here]” if it’s just another cookie cutter mid-rise?
Second, the identity of your development must coincide with the identity your tenants want to have. Apple has positioned itself as the creative brand, attractive to those who “think different.” People who see themselves as creative or innovators connect strongly with the brand. By making your development distinct in a way that people in the marketplace want, you can build the same kind of loyalty for which Apple is well known.
Is your development for environmentalists? Tech geeks? Downsizing baby boomers? With a clearly defined market segment you can tailor your marketing to people who care for the earth, want the latest gadgets, or are still getting used to having less space.
Make Your Property a Standout: Where to Start
Ideally, your market segment and positioning strategy will be based on research and hard data. Be prepared to invest in the level of consumer research that is typically done with expensive products before they enter the marketplace. Don’t just rely on general demographic data and salary info. It’s worth going deep into what tenants actually want in order to provide the experiences that will resonate most with them.
Wherever you are in the development process or the journey to build your experience, you can begin by seeking to understand who will be inhabiting the spaces you are creating and how to make them feel like home. Narrow your positioning to the point that you can identify distinct user personas and design your project around their needs and wants.
The more granular you get, the better you can tailor your features and amenities to a specific group. That way you’ll be sure to have a unique property with homes that can’t be found anywhere else.
As more multifamily developments begin to reflect the diverse range of human personalities and preferences, tenants will form stronger connections with their apartment homes. Their high level of satisfaction will bring stability to the neighborhood and to your bottom line.