We are witnessing the rise of the apartment.
Cultural winds are shifting away from owning a home in the suburbs and towards renting a loft in a city center. The ethos of valuing experiences over things has been so embraced by the younger generations that it seems to have permeated up the generational ladder. The mass migration out of rural areas and into urban ones is creating a society that is more interconnected than ever. Soon, two-thirds of the world’s population will live in city centers, likely in large apartment buildings.
These trends have created a rush to build and develop our cities in order to give them the ability to absorb the inflow. In 2017 around 350,000 new units were built in the U.S., a 20% increase from the previous year. Analysts predict that this growth rate will need to be sustained until 2030 to keep up with demand.
When neighborhoods are redesigned for higher density some buildings will inevitably create more value than others. Figuring out what renters want from their living spaces will be the difference between which buildings see ROI on their amenity spend and which are left with empty gyms and pools.
To help us understand how the space someone occupies is becoming a larger part of their daily lives we talked with Marcela Sapone, co-founder of Hello Alfred. Hello Alfred employs a team of “Alfreds” that can do anything from house cleaning to grocery runs to Amazon returns.
Marcela’s company is being used in thousands of apartment units to help renters connect to services including a partnership with Related Company, New York City’s largest luxury apartment owner with over 7,000 units. Residents will receive Alfred’s in-home service as well as additional custom services aimed at enhancing the resident experience such as entertainment planning (think rooftop barbecue or intimate dinner party); living space enhancements (think furniture set-up, or baby-proofing); and special events with neighborhood cultural and dining venues.
Here are some of the overarching themes that help explain how urban culture is changing and how that affects our relationship to the built environment we occupy.
Time is the new currency
“We are seeing people care more about where they live, who they are spending their time with and what they are spending their time on,” Marcela said. This is an important aspect to remember not only when thinking about millennials but to understanding a larger cultural change happening across every generation. The stereotypical impatience that younger generations are negatively associated with is actually a reassessment of their personal values. Money and things are renewable resources, time is not.
The reluctance to pay for goods that were seen as obligatory previously (cars, bikes, fashion and most importantly houses) has given way to increased spending on time-saving services like meal prep (Blue Apron), personal shopping (Stitchfix) and chores (TaskRabbit). This represents an opportunity for landlords to offer services that were typically not seen as being in the purview of real estate companies. Tishman-Speyer is leading the charge on this front with their new app, Zo, that connects its buildings tenants with local service companies.
The newfound reverence for time isn’t just about adding a few more free minutes every day to watch Netflix. It is also about freedom. Renting rather than owning things like cars, bikes, apparel and accessories gives a sense of freedom to utilize time more efficiently. Even if they don’t take advantage of the freedom that their unburdened lifestyle affords, many young professionals want to know that they have the ability to pursue their dreams, wherever that may be.
The authenticity premium
Another great shift in culture that is happening is the increased importance of a unique, authentic experience. A great example of this is the decreasing sales of chain restaurants like Chili’s and BJ’s even as Americans are eating out more than ever. The root cause of this these franchised struggles is that there is an increasing desire for authenticity. Those $7 avocado toasts that seem so exorbitant are most likely demanding that premium price by being sold in cool cafes with artisanally roasted coffee and the work of local artists for sale on the walls.
Creating an authentic product has been a thorn in the side of traditional marketers for some time. Authenticity is hard to scale. Piling more and more money into marketing spend creates little return. Creating authenticity does not happen with more money, it only happens with more thought.
“On average, ten to fifteen percent of the residents in any building will spend one day at the on-site gym,” Marcela noted. “Rather than throwing money into gym upgrades, hire a SoulCycle instructor and make sure they know everyone’s name. Then have people’s favorite Vitamin Water ready for them when they walk out. Only then have you created a unique experience that will keep people coming back.”
Loyalty comes from trust
Younger generations are less likely to be distracted by the smoke-and-mirrors of traditional branding. They are wary of celebrity endorsements, their celebrities are largely YouTube, Instagram and Snapchat personalities that look and sound much more like a real people than plastic smiled Hollywood actors. Self-promotion is viewed negatively, they prefer that brands deliver their value rather than talk about it. Modern technology has both inundated us with advertising and given us the means and fortitude to block it out.
Marcela pointed out how a decrease in loyalty is affecting real estate occupancy. “Ten years ago occupancy in major cities was close to eighty-percent and renewal rates around to ninety. Today we are looking at rates of seventy-percent occupancy with closer to forty percent renewals.”
One of the ways that buildings can create trust is to prove that they care about more than just their profitability. Show the residents that you have their best interest in mind. Show them about your energy saving efforts, your community partnerships, and your ethical decisions. The trend of transparency and social responsibility is playing out in consumer goods at the moment. Brands like Everlane are going as far as showing their manufacturing process and operating margins as a way of building trust.
“Modern renters want to feel like the place they live is unique, that it is connected to the local neighborhood,” Marcela said. “While I do recommend a coffee shop, I might not get a popular brand like Starbucks, I would get a local purveyor of coffee that is very exclusive and cool.”
Amenities are a commodity, experiences are not
The main take away from Marcela’s presentation was that it doesn’t pay to fight in the war for amenities. No matter how much money is spent on an apartment’s amenities, if other buildings have comparable offerings, they do not affect a purchase decision. Experiences, on the other hand, cannot be replicated. Creating an experience is only valuable if it resonates with your customer. Doing this requires a deep understanding of who your residents are, not just demographically, but psychographically as well.
Technology can help create an experience but it will not replace the effort of knowing your tenants’ needs. Marcela’s parting words should be taken to heart as the fundamental maxim for cultivating a relationship with the new generation of apartment dwellers: “Differentiate yourself through the entire living experience. Find the right combination of service and technology for your specific residents.” According to Marcela, today’s renter is ready for a new era of experiential living. The question is: are buildings ready to deliver?