The multifamily housing market enjoys security in the current climate due to the high demand for apartment properties in northeast real estate. Over the last few years, adaptive reuse and transit-oriented development have been two crucial real estate market trends influencing the Northeast real estate market. Investors have had opportunities to acquire Class-A apartments with higher rent with little or no maintenance issues.
Northeast real estate trends
1. Transit-Oriented Development
What is the meaning of transit-oriented development (TOD)?
Transit-oriented development is the process of planning space that is:
- Within walkable distance of public transport
- Convenient, safe, and easy for transportation for the public.
- Where the public will be leaving their cars at home and creating mixed-use communities centered around train and bus systems
Many cities in the Northeast are trying to eliminate parking, and you can expect to see more of this as the years come around cities nationwide.
Why is transit-oriented development important? What is the importance of TOD?
By transit-oriented development:
- There will be less traffic by removing parking
- The public will save on gas
- Cities will be greener
- More efficient transportation within the city
Per The Real Deal, “The city of Boston is eliminating minimum parking requirements for some affordable housing developments in a move the mayor there says will make it easier for developers to build below-market housing in the mass-transit-rich, affordable-homes-poor metropolis.”
Boston is becoming more like New York City
- With fewer parking lots
- More room for development
- Encouraging different forms of public transportation
- Closing exits
The Positives of Transit-Oriented Development
- Easier commute within city limits
- Reduced time travel
- Connects neighborhoods and is an investment in infrastructure, which reduces cost for car-dependent individuals and local governments
Resulting in fewer accidents and fatalities and reduced private and government spending on healthcare costs while improving public health as they walk, bike, or ride to work and entertainment outlets.
The Negatives of Transit-Oriented Development
- More difficult to commute from outside the city
- Limited parking for those who must travel
- Possible transit-induced gentrification
- Increased building density as competition develops for small undeveloped or under-developed parcels of land
2. Adaptive Reuse Architecture
“Adaptive reuse is the practice of repurposing old structures for entirely new purposes. They accomplish this while preserving the building’s historic elements. It’s an interesting practice, and it’s also environmentally beneficial.” Northeast Private Client Group®
According to Think Currituck, in the United States, there are more than “300 billion square feet of buildings that are already built, with opportunities for adaptive reuse ranging from 100 or 1,000 square feet to hundreds of thousands” of square feet in useable space.
Northeast real estate focuses on historical buildings and lands by having grants or funding programs for social and economic use budgets. The clean-up costs and back taxes scare off developers, and most cannot afford to renovate the sites independently. Abandoned buildings harm areas around them by affecting the value of the nearby properties and the location of the building.
Bringing innovative public-private partnerships to New Haven, CT
Cities like New Haven, CT, have invested in public-private partnerships to further Northeast real estate development through adaptive reuse architecture. Benefits of this model include:
- Increase tax revenues
- Raise property values
- Improve environmental health
- Create a restored sense of hope
Finding the right balance of preserving the suitable materials for historic buildings will help projects financially. The cost will depend on the state and how much of it is reusable to convert an existing building into a multifamily property. Keep in mind, when an owner is converting an existing building, keeping as many distinctive features as possible will help retain the historic character and characterize the structure, making the property more valuable.
Converting office buildings into apartments
Conversions are quickly becoming a trend in the Northeast real estate and show no sign of slowing down.
Record materials costs
- Developers are trying to think of ways to make building multifamily housing more affordable.
Converting Class-C and Class-D office spaces to apartments will help the developers cut costs and time.
Northeast real estate trends are converting office buildings into apartments rather than building new multifamily housing to make it more cost-effective. It is an excellent time for multifamily housing development within Connecticut. There is so much opportunity with low vacancy and high rent growth. With this high demand and compressed inventory, there is no doubt it is a solid investment.
Adaptive reuse of industrial buildings is a great investment. By refurbishing the existing building, you may salvage or remodel existing spaces and may result in cost savings.
“Pent-up demand, years of under-production due to restrictive zoning, “dinosaurs” available for conversion, demographic changes, low-interest rates, and an influx of new residents. These factors have built interest in multifamily projects; to a level I have not seen in several years.” Will It Be The Roaring Twenties For Multi-Family In Connecticut? – Real Estate and Construction – United States (mondaq.com)
The Office market contends with its highest vacancy rate
Many companies working from home got rid of their office to save on costs or are looking for smaller office spaces for their hybrid coworkers. Since hybrid work is here to stay, the future of offices is still unknown; but we expect to see:
- Investors expect to see occupancy and rent growth stabilize this year.
- More people are going back to work full time.
- Office space rent staying affordable.
3. Making multifamily housing more affordable
A multifamily property is any residential property that contains more than one housing unit within one building or several buildings. Such as an apartment complex, duplex, or townhome.
Trends in the northeast real estate market with multifamily properties are that they can be part of a mixed-use where it sits above an office or retail business in city areas. This combination can create more income for the buyer, be affordable for the tenant, and raise the property value.
Since multifamily properties are in demand, having a goal to fill all your vacancies is essential to the buyer. Location and keeping up with maintenance are crucial. Making the building pleasant to live in at an affordable price will encourage tenants the longer they stay.
“The recent surge in inflation is starting to affect the construction of multifamily housing in Massachusetts, forcing some developers to put projects on hold or revamp their financial assumptions amid skyrocketing materials and labor costs.” Multifamily Development Feels the Inflation Pinch – Banker & Tradesman (bankerandtradesman.com)
Developments in New England are taking longer
With the recent challenges in the supply channels, Northeast real estate is no exception.
- Material prices are still going up
- Getting all the materials like tile, wood framing, sheetrock, and appliances takes longer
- Triples pre-covid costs
- Short staffing
Is it worth investing in new construction?
New construction opportunities in the east side of Providence and some of the nicer suburbs are emerging. Due to the shortage of housing, development is often a good option. Any time more units become available, offers come flying in, and quick closings benefit the market.” Northeast Private Client Group®
Investors investing in new construction will have fewer maintenance costs, better appreciation, higher tenant quality, and longer duration tenancies.
Class A Apartments
Investors need to focus on the location to make Northeast real estate more profitable in Class A apartments. By having apartments located in urban centers within major cities with access to public transportation, tenants see the value and pay above-average rent. Class A apartments are the highest-quality buildings in their market area.
Among the many benefits of holding multifamily Class A apartments are:
- You have fewer headaches
- Little to no maintenance issues
- Class A apartments are in desirable areas and the city
- High-income earning tenants
- Provides you with security knowing you are putting your capital into it
- Professionally managed
Depending on your investment strategy, your investment may pay off by owning a newer building by not having to dump money into updating it.
With people working closer to their job and transit, we see investors prioritizing these areas making Class A apartments in the Northeast real estate New England region.
With more people working from home after covid or working in hybrid situations, tenants appreciate shorter commutes and prioritize work-life balance.
Renters working from home are upgrading from a one-bedroom to a two-bedroom to ensure they have a place to work. The demand for more extensive and higher-end units has made increasing the sales price of multifamily apartments possible.
The best way to navigate the market is to build a relationship with a broker who will provide a buyer with opportunities to locate value-add projects that will generate wealth on their investment.
Multifamily is hot this year and will continue to grow.
Single-family home prices doubled
- Caused more renters to continue renting
- Fewer homebuyers
- Resulting in an increased demand for apartment rentals
The higher the demand, drives the rent and value up for investors. You may want to jump on this opportunity as the market continues to appreciate.
Transit-oriented development and adaptive reuse Northeast real estate market trends will continue to shape the multifamily real estate market; you may be able to benefit by identifying undervalued properties near mass transit to add to your portfolio.
With fewer parking lots for more building space, more cities will have less traffic by using public transportation, such as trains and buses, and will have more people walking to their jobs. Class A apartments are desirable and save the headaches with maintenance.
Northeast real estate investors will be converting office buildings into Class C; and Class D office spaces to apartments quicker than conserving historic buildings since the codes and regulations will be more cost-effective.
If you are looking to invest in a multifamily property, location is critical, do your due diligence, and be ready to spend more than the asking price. With hybrid and working from home being here to stay, apartments are in demand. Investing in one may be a more stable investment, as many offices are downsizing.
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