‘Big niches’ can offer big returns for multifamily investors

Niche markets will offer increasing rewards for multifamily investors over the next decade, according to Leanne Lachman, principal at Atlanta-based Lend Lease Real Estate Investments Inc. and author of a recent report entitled “A Nation of Niches: Real Estate’s Demand Demographics.”

“As our population becomes more fractionalized, market demand segments get smaller and smaller, which creates great opportunity for locally knowledgeable owners and developers,” Lachman told several hundred multifamily professionals gathered for the National Multi Housing Council’s annual meeting, held Jan. 15-17 in La Quinta, Calif.

National firms that traditionally focus on large projects should change their business models and incorporate more joint ventures to take advantage this trend, she adds, because “targeting unique segments of the market is going to be increasingly rewarding the years ahead.”

Two groups who hold particular potential for the multifamily industry are the echo boomers – the children of the baby boomers who are in their early 20’s – and immigrants. Both groups of people are important components of rental demand, according to Lachman.

At 72.7 million, echo boomers, also known as Generation Y, are the second-largest generation behind their baby boomer parents, which measured 73.8 million in the 2000 Census. The oldest of the echo boomers are just beginning to graduate from college and are landing their first jobs – entering their prime rental years.

And as more and more echo boomers make the transition from college to the working world, this generation will wield significant spending power due to its sheer size, Lachman notes. “Growth in young adult households will be high for the next 20 years,” she notes. “This is the single morst important demographic for the multifamily industry.”

Immigrants will also generate significant demand for multifamily properties over the next decade, according to Lachman. “Half of America’s projected growth over the next 27 years is attributable to immigrants and their American-born children,” she explains.

Case in point: 82% of immigrants who entered the United States in the last five years are renters, according to Census data, while 69% of those who have resided in the U.S. between five and 10 years are renters.

So where are all of these renters heading? All 50 states registered population growth in the 1990s, according to the 2000 Census, but the pace was far from uniform. California, Texas and Florida are perpetual population magnets, according to Lachman, attracting 25% of the United States’ total population growth. The Southeast -- including Georgia, Virginia and North Carolina -- and the West, especially Colorado and Arizona, also are gaining residents from immigration and migration from colder parts of the country.

“There are serious niche markets in many metro areas,” Lachman concludes. “Targeting the smaller, but profitable niches is going to require intense local knowledge and maneuverability, together with capital and financial strength from larger firms.”

TAGS: News
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.