The Benefits of a Multifamily Development Market Feasibility Study and Knowing Your Target Audience
There is absolutely no denying that a pandemic market has proven extremely turbulent. And in the world of multifamily real estate, the same rings true. Trying to make heads or tails of what is working, what is a trend, what is a temporary crisis, and how to plan for the future is no easy task. These uncertainties are leaving many investors and developers questioning how best to spend their money, when to invest, and in what market/neighborhood to do so.
Whatever the case may be, it’s hardly surprising to learn that good real estate market research can help prospective investors choose a location and/or property that’s not only practical in the here and now, but one that is capable of turning a profit for them down the line—especially in a year that may be plagued with pandemic, social unrest, fluctuating stock market conditions, and fleeting retail. It makes sense that people do their due diligence before dropping any amount of cash on a real estate deal.
Well-designed real estate market research can help corporate investors, lending professionals, developers, private buyers, sellers, and residents alike critically assess the existing value of properties as well as their potential value. However, we find even the most data-driven research is missing one critical element that can determine the ultimate success of a project:
WHO IS THE TARGET RESIDENT?
Yes, location is everything when dealing in real estate. And true, changing cultural norms and evolving demographics determine real estate demand—forcing neighborhood life cycle change and creating systems of supply and demand that expand and shrink financial margins within an area.
But! If you don’t know who your target audience is—and why they are choosing your little box of air over the fierce competition—how do you know what to build and how to differentiateyour asset?
Our research team at Arrive takes a deep dive approach to find the treasures we seek in answering that very question. Along with macro and micro area and neighborhood information, our Market Feasibility Studies and Project Marketability Studies provide a targeted focus on the following elements:
What are the current comparable properties in the neighborhood and how are they performing (rents, occupancy, concessions, offerings, what’s working and what’s not?)
What are the future comps coming to the neighborhood and how are they positioning their product to differentiate and stand out?
What does the neighborhood have to offer (retail, convenience, community, outdoor space, transportation)?
Who is living in this neighborhood and why? Who is the target demographic in the current multifamily product and why?
Who is the resident profile for each unit type? Who is your studio renter versus your two-bedroom renter?
What does your resident want (in their home, their amenity spaces, their community)?
Telling the story of this data looks beyond the numbers and the statistics. It gives an understanding of a day-in-the-life of how residents live in multifamily buildings, as well as the lessons learned from property management teams in asset operations. When we talk to residents and leasing/maintenance teams we want to know what is working and what is not.
Here are a few examples of the deeper questions we ask as part of our market research:
Resident Questions
Why did you choose this neighborhood?
Why did you choose this property?
How many properties did you look at before choosing this one?
What do you love about your home?
What do you love about your amenities?
What do you wish you had in your home?
What amenities do you wish the building had?
Do you think the price is fair for your living experience?
Is there anything you wish the community would provide for you?
If rents were to rise in the future would you still live here or choose to look for another place?
Leasing/Maintenance Team Questions
What is your most favorite unit type & why?
Is there a color scheme most preferred?
How is lease-up going?
Have you used concessions?
Have you raised or lowered rents/why?
What amenity is used most?
What do people love about their home?
Why do you feel residents choose this building over others?
Who would you consider your competition and why?
If you could add anything to the building, what would you add?
Do you have enough space in your leasing office/back-of-house?
What are the top inefficient operational elements in the building?
What property management elements do you wish the building had?
This deeper understanding of resident psychographics—married with rental rates, occupancy trends, concessions, and qualified traffic statistics—help us round out the final piece of information we find to be the most helpful for our clients:
WHAT SHOULD WE BUILD?
All roads of information should lead to a recommendation and guidance for your entire development team. One that not only mirrors the market but is harmonious with the financial goals of the developer and investors. This becomes the most critical piece of information we provide our clients and acts as a road map for all parties involved in the development process. Specifically, we provide the following information in our recommendations:
1. Unit Mix (unit type recommendation and % of the overall mix)
2. Average Square Foot
3. Proposed Asking Rents
4. Parking and Storage Recommendation
5. In-Unit Design Recommendations
6. Amenity Recommendations
7. Operational Needs for Efficiency for Cost Control
In summary, quality research can make understanding when and where to invest in real estate much easier, but to truly make your project stand out from the rest, it is critical to dive deeper and get to know your target audience. In a competitive market for multi-family living, this guidance can be the difference between a good market performing asset and an exceptional one.
Click the image below to see an example of our Market Feasibility Study. And give us a call today for more information—we’d be happy to help!
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