Have you noticed that over the past few years, the majority of the new apartment construction in the market you live in and the market you invest in have been luxury apartment buildings? Massive, thousand unit plus low, mid, and high-rise buildings with all the bells and whistles?
The data supports this observation as well.
In 2017, 79% of all new apartment construction in the US were luxury rentals (defined as class B+ or higher). This number increased to 87% in the first six months of 2018. In fact, 100% of new apartment construction was luxury rentals in many cities with big apartments across the US.
Here are the top 10 cities in the US with the largest total percentage of new apartment construction being luxury rentals from January 1, 2017 to June 30th, 2018:
10. Fort Worth, Texas
Flickr
% New Construction Luxury Apartment Buildings 2017: 100%
% New Construction Luxury Apartment Buildings 2018: 100%
Total Share of Luxury Apartment Buildings: 31%
9. Denver, Colorado
Visit Denver
% New Construction Luxury Apartment Buildings 2017: 88%
% New Construction Luxury Apartment Buildings 2018: 93%
Total Share of Luxury Apartment Buildings: 32%
8. San Antonio, Texas
Shutter Stock
% New Construction Luxury Apartment Buildings 2017: 85%
% New Construction Luxury Apartment Buildings 2018: 96%
Total Share of Luxury Apartment Buildings: 33%
7. Nashville, Tennessee
LVST Global
% New Construction Luxury Apartment Buildings 2017: 95%
% New Construction Luxury Apartment Buildings 2018: 92%
Total Share of Luxury Apartment Buildings: 34%
6. Dallas, Texas
Southern Illinoisan
% New Construction Luxury Apartment Buildings 2017: 100%
% New Construction Luxury Apartment Buildings 2018: 100%
Total Share of Luxury Apartment Buildings: 35%
5. Houston, Texas
Wallpaper Up
% New Construction Luxury Apartment Buildings 2017: 98%
% New Construction Luxury Apartment Buildings 2018: 100%
Total Share of Luxury Apartment Buildings: 36%
4. Boston, Massachusetts
Silversea
% New Construction Luxury Apartment Buildings 2017: 100%
% New Construction Luxury Apartment Buildings 2018: 100%
Total Share of Luxury Apartment Buildings: 37%
3. Las Vegas, Nevada
Las Vegas Review Journal
% New Construction Luxury Apartment Buildings 2017: 100%
% New Construction Luxury Apartment Buildings 2018: 80%
Total Share of Luxury Apartment Buildings: 38%
2. Austin, Texas
TripSavvy
% New Construction Luxury Apartment Buildings 2017: 65%
% New Construction Luxury Apartment Buildings 2018: 88%
Total Share of Luxury Apartment Buildings: 45%
1. Charlotte, North Carolina
TripSavvy
% New Construction Luxury Apartment Buildings 2017: 87%
% New Construction Luxury Apartment Buildings 2018: 100%
Total Share of Luxury Apartment Buildings: 50%
The benefit of purchasing multifamily in an area with a large percentage of luxury apartment buildings is your ability to market your buildings as “luxury experience without the luxury cost.”
If you cannot invest in these thousand unit luxury apartment buildings with nearly every amenity imaginable, purchase a smaller multifamily instead. Upgrade the interiors to luxury status and then offer the same types of amenities by partnering with local businesses. For example, partner with a local fitness center, offering a discounted membership fee to your residents. Apply the same concept for all the amenities offered at your competition.
This will allow you to attract the luxury resident demographic because you will offer rental rates lower than the new luxury construction in the area while still allowing your residents to live in a luxury unit and have access to all the luxury amenities they desire.
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
