26 May 2020
A world of social distancing has focused minds more than ever on connectivity. Innovation in the structure and operation of multifamily assets has a critical role to play in forging a new concept of community in dislocating times.
The economic reality of COVID-19 is that renting in Australia will no longer be a temporary solution as individuals save up money for their first starter homes. Instead, it will become a permanent housing choice for many individuals who want the freedom and affordability that renting can provide.
There will be a myriad of legal issues – spanning real estate, structured title, technology, privacy, competition and planning – but each can be navigated. As is always the case, legal issues should not be a barrier to meeting a clear public need.
In this article, we outline our predictions for how multifamily assets will evolve in a post COVID-19 world to facilitate the creation of a new long-term rental product.
According to the most recent national census, nearly one third of Australians now rent. Only one in five of Australia’s 6.79 million millennials owned their own home in 2014, well below the national average of 69.3%. Overall, Australia has seen a 380 bps decline in home ownership as a percentage of the total population.
The cost of rent as a percentage of median household income is 17.4% compared with mortgage repayments of 28.9%. Current economic circumstances means that renting will become a more viable option than ownership, while tenants will be keen to ensure security of tenure.
The existing residential market is owned by small and disparate operators who, without scale and platform, cannot offer security of tenure to residents and consistent and institutionalised management teams.
Improving resident satisfaction to maintain high occupancy rates is a critical element of institutional multifamily management to ensure residents remain as tenants for longer. Institutional investment in multifamily will provide security of tenure for residents, who can sign medium to long term contracts without the fear of break of the lease.
In these uncertain times, multifamily will provide security.
The ‘working from home’ mandate has blurred the separation of the office and home. While working from home has provided many benefits (including reduction in commute times and increased family time) it has impacted on collaboration in the workplace and increased desire for a distinction of where home and work begin and end (particularly in open plan living).
The evolution of the workplace enables multifamily to bridge (or indeed increase) the gap between living and working while providing opportunities for collaboration between organisations as well as intra-organisations.
Communal workspaces that provide dedicated workspaces, complete with silent areas, meeting rooms and full conference technology means that a resident’s apartment can be better utilised (without doubling up of offices in each apartment) while at the same time providing an opportunity to interact with others.
Community is the new amenity and authentic social connections are critical to its success. Apartment blocks and the residents within it can be an extended family bubble.
Concierge services that manage resident events can link residents and foster connections. Common areas of multifamily complexes can be re-imagined as writing and recording rooms available to residents and enable other residents to watch others perform.
Providing services – such as hairdressing, beauty and chef services – within apartment blocks will enable residents to access these services from within their bubble.
Small gyms with limited and infrequently used equipment were already in decline before social distancing. Dedicated and flexible studio spaces (including those outdoor) for yoga, barre, reformer pilates and TRX with personal trainers maximise space and encourage residents in pursuit of an active life.
In addition to roof top gardens with sails (to enable outdoor activity in inclement weather), properties can implement community gardens which allow residents to grow their own food, enjoy the outdoors and improve their sense of wellness by connecting with nature.
Features like these let renters build a real sense of community with each other and unwind from the stresses and strains of modern life.
The importance of pets to mental health means that it will not be enough to just tolerate cats and dogs – multifamily will need to cater for pets by offering amenities that make caring for them easier.
Dog parks are the most obvious option. Other avenues include adding dog jungle gyms and other toys to make the space more entertaining for pets, and providing benches and seating areas to give owners a place to relax. Onsite pet grooming and veterinary services will support this further.
Communities will be able to partner with delivery services to offer residents the option to dine in from a range of local restaurants. Residential lockers in designated delivery areas (including outside the building) will enable deliveries of meals, groceries and parcels while limiting contact.
Dedicated cold rooms will allow for deliveries of groceries.
This on demand contactless delivery will be enhanced by a personal digital human assistant as the ‘concierge’. A digital system which is fully integrated into the building will let a delivery driver drop off a parcel for a resident who’s not home by unlocking and opening the doors to a secure parcel drop-off zone, and for grocery delivery will unlock the cold storage room and can then send a personalised text message to the resident to tell them the package has arrived.
Digital technology advancements will be necessary to meet the needs of residents and will go well beyond high-speed secure internet with increased bandwidth for gaming, streaming and video calls. Residents will look to mobile apps like Hello Alfred (a concierge service), Baroo (dog walking service) and Dwello (payment of rent) as a given.
Artificial intelligence and other advanced technologies enable the creation of platforms for multifamily operators to focus on the resident experience. Smart home features have broad applications for the apartment industry, from creating operational efficiencies to offering high-tech amenities.
Artificial intelligence continues to make big leaps including with identity verification. For multifamily, facial recognition can be used to verify guests or service personal coming on and going off the property.
With billions of devices now IoT-enabled, more will start happening with smart spaces. This technology has more potential than just turning on lights, locking doors and opening blinds with the touch of a smartphone. Access control in multifamily is fast becoming the next space, enabling residents to book (and pay for) amenity and services.
The potential disaggregation of office space to a suburban scatter model will refocus the location of multifamily from the CBD to urban fringe areas which will attract young, upwardly mobile renters and pedestrian commuters and reduce the burden on public transport and infrastructure.
The innovations above will enable the home to once again be a place of sanctuary.
Innovations such as vibrant green walls – both in common areas and in apartments – and floor screens that create the effect of a window and natural light will mimic the feeling of being in a park while providing privacy.
The current open plan design of apartments will be remodelled to identify areas for ‘alone time’ including juliette balconies and quiet zones.
The COVID-19 crisis has made home both a sanctuary and claustrophobic – the question is how to balance the inherent tension between a desire to distance while interacting meaningfully.
Institutional investment in multifamily has the ability to balance this tension and facilitate the creation of a new long-term rental product. This will increase living options for Australians and encourage a more efficient and professionally managed rental sector through know-how, technology and innovation transfer.
Multifamily as an institutional asset class in Australia will meaningfully expand the bubble of existence for residents and provide distance and connectivity.
This article is part of our insight series COVID-19: Navigating the implications for business in Australia and beyond. To get notified by email when new COVID-19 insights are released, please subscribe for updates here.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.