How to Pick a Niche in Commercial Real Estate
One 2019 housing survey found 80% of respondents reporting that renting was a better fit for their current lifestyle when compared to buying a home. As more and more individuals choose to continue renting, renter demographics are also shifting. In fact, recent renter growth is largely in the high-income category.
In order to meet the evolving needs of renters, commercial property and apartment owners should consider optimizing their services and amenities to cater to a specific type of renter. Read on to discover our tips for how to pick a niche in the commercial real estate industry.
Popular Commercial Real Estate Niches in 2020
College Students & Recent Graduates
If you have a building for rent near a college or university, you’ll probably have students and recent graduates inquiring to be your tenants. Take advantage of recent apartment industry trends for younger renters, and you could be very successful in this niche. Read some of our tips:
College students and recent grads aren’t looking for all the amenities and services you might have when trying to appeal to other demographics. Often clean, cheap and close to nightlife are the top priorities for young renters. You won’t need to worry about upgrading and updating your units to meet the high expectations of renters looking for luxury features.
Explore Co-Living Opportunities
Students and recent graduates are often interested in alternative housing concepts such as co-living. In a co-living situation, tenants rent a private room with a bathroom, but they share communal spaces like a kitchen and living room — much like a college dormitory.
Co-living appeals to students and recent graduates because it offers built-in socialization opportunities while still providing private space. Because the space you’re renting is smaller, rent is considerably less expensive than traditional solo-living options in bigger cities. Oftentimes, co-living apartments also offer flexible leases, which appeals to young adults who prioritize travel and the ability to move to new places to pursue new opportunities.
This young demographic may not need all the bells and whistles of luxury living, but they do value technology and connectivity. Offering reliable, high-speed internet is a big perk for students and recent graduates. Allowing online rent payments is a must for young tenants, and offering a reliable way to submit maintenance requests.
Working professionals look for different features and amenities when they’re searching for an apartment to rent. Accessibility and community-based activities aren’t as important as the proximity to live events, restaurants and shopping. Many people who work downtown also prefer to live downtown, so an apartment located near office buildings can successfully attract the working professionals demographic. Here are some things to consider if you’re interested in the working professionals apartment niche:
Proximity to Major Employers
If your rental property is located near a hospital, office park or major employer, you may attract more renters in the working professionals demographic. Many people want to live close to where they work and spend time.
Increased Convenience for Renters
Pay attention to the needs of your target demographic, and focus on services and amenities that meet those needs. Working professionals are busy, and they often appreciate things that make life easy and convenient. Get creative! Offer a dog washing station or laundry concierge. A small investment in a few extra amenities can give you a big ROI in a roundabout way — tenants will often pay premium rental costs in order to receive a luxury living experience.
Seniors: A Growing Demographic in the Apartment Industry
There is a growing rental market for people in the baby boomer generation — many people over 60 are interested in downsizing but don’t yet need facility care. In fact, between 2007 and 2017, rental demand for adults age 60+ grew 43%!
In order to successfully cater to the senior demographic, it’s important to remember the features and amenities that matter most to them, including:
Although renters in this niche don’t need all the conveniences and care they might find in an assisted living facility, it’s still nice to consider creating a comfortable experience customized for tenants. Consider all aspects of accessibility, such as ramps, open floor plans to accommodate wheelchairs, grab bars in the bathrooms and other features and fixtures that make life easier for older people and their family members.
Loneliness disproportionately impacts older individuals. If your commercial real estate niche caters to older tenants, consider how you can encourage interaction among residents, such as using a clubhouse space or meeting room to host social gatherings and parties. Community-based activities and events are an important perk for any commercial rental property designed to provide high quality of life for older residents.
Location & Proximity to Necessities
Older renters likely want a quiet, safe neighborhood. This demographic is not as interested in being close to attractions and nightlife, but they may appreciate living close to necessities such as grocery stores, pharmacies, parks and more. Convenience for essential errands is a great perk if you want your property to appeal to adults over 60.
How to Pick a Niche in Commercial Real Estate
There is no right or wrong when it comes to choosing a niche in commercial real estate, and it’s never too late to try to cater to a niche that makes sense for a building you already own. Consider the pros and cons of different locations, study demographics and get to know your potential tenants’ needs and desires.
For help learning how to pick a niche in commercial real estate, reach out to our team. The Katalyst Team is always staying on top of the latest apartment industry trends, and we’re eager to help you find success buying rental properties. Contact us today, and view our recent listings.