After years of unfettered growth, the multifamily sector, a perennial favorite of investors, is beginning to experience headwinds. Yet the long-term prognosis for apartments remains strong, experts say, based largely upon favorable demographics and changing notions of what constitutes a “home.”

According to the U.S. Multifamily Supply and Demand Forecasts by Metro report released last year by Yardi Matrix, 617,985 apartments are slated for delivery in the top 30 metros over the next five years. That’s below projected demand – a healthy 677,318 units – which has been buoyed by a variety of factors, including continued growth in the renter-age population, strong job formation, a rise in the number of renters by choice and a shift to urban lifestyles.

As a result, new units are expected to be absorbed, with steady occupancy and national rent growth of 14.5 percent forecast during the same five-year period, according to Yardi.

“The fears of overbuilding have quieted for now,” said Bentley Phillips, founder of Spaces Real Estate, a Chicago-based brokerage firm. “But in an increasingly crowded marketplace, the challenge for each building will be how best to stand out in the crowd, whether through elevated design and finishes, authentic branding or a suite of amenities that go beyond the traditional offerings.”

As new buildings go up and others near completion in 2019, experts say the following trends will drive development, leasing and property management in the year ahead.

Well Isn’t That a Special Space?

To gain attention in a crowded marketplace, amenities will continue to define new rental communities in 2019, with a focus on unique offerings that seek to reflect a building’s brand and residents’ lifestyles.

For example, at Optima Signature, a luxury rental tower in Chicago’s Streeterville neighborhood, developer Optima Inc. created 22 dedicated office suites for urban dwellers who prefer to work close to home. The suites come furnished or unfurnished and are available to both residents and non-residents of Optima Signature. As an added perk, the suites have access to select building amenities, including a state-of-the-art fitness center as well as indoor and outdoor swimming pools. “The office suites provide the easiest of commutes for our residents while also offering us a way to engage with non-residents by introducing them to everything our building offers,” said Tara Hovey, president and COO of Optima Inc. “Renters have been using conference rooms and business areas in their buildings for years, but having a dedicated office suite is next level. It definitely lends more credibility to any business – even if it’s just an elevator ride away from your home.”

As the tallest residential building in Chicago’s West Loop neighborhood, 727 West Madison, a new 45-story high-rise from co-developers Fifield Cos. and F&F Realty Corp., already stands out from the crowd. But it’s the building’s expansive top floor “Sky Lounge” that its developers expect to tower over the competition. Designed by Karen Herold of Studio K, known for the interiors of famed restaurants such as Girl and the Goat and Monteverde, the tower’s “Sky Lounge” will feature Art Deco-inspired interiors and sweeping views of the city when it opens in spring 2019, serving as a private club for the building’s residents and their guests.

And for renters who want to channel their inner rock star, Spoke Apartments, a 365-unit community in Chicago’s River West developed by a joint venture of Bond Companies and Morgan Holdings, offers not only a soundproof recording room, but also a separate live performance lounge with an electric guitar, bass guitar, drum set, keyboards and additional instruments. Also sure to stand out with renters as a memorable space is the building’s Virtual Cycling Studio with Peloton bikes. “Whether it’s the recording room or our demonstration chef’s kitchen, we designed each micro-experience space at Spoke to enable our residents to engage in their passions,” said Rob Bond, president of Bond Companies.

You Stay Classy, Suburbia

Look for city cores to lose their monopoly on the luxury apartment market as developers and renters alike turn toward the suburbs for alternative high-end rental opportunities in the coming year.

“Suburbs with vibrant downtowns and ample retail and entertainment opportunities, along with easy access to multiple transit options, are appealing to a whole new generation of renters by choice,” said Tony Rossi Sr., president of M&R Development and chairman of RMK Management. “We’re experiencing a wave of empty nesters who sold their homes and want to downsize in style, yet remain in their suburb. There’s also more traction among maturing millennials decamping from urban centers to try out suburbs with good schools before they commit to raising a family. They’ve been living in Class A apartments downtown and expect the same level of amenities, finishes and service in a suburban rental.”

Rossi cited The Residences of Wilmette, a new M&R community of 75 well-appointed apartments in downtown Wilmette, one of Chicago’s most-coveted North Shore suburbs, as one building that’s filling the void for well-heeled renters outside of the city. The community boasts condominium-quality finishes and family-sized units with up to three bedrooms, as well as an amenity package featuring everything from a landscaped terrace with seating, grills and a fire pit to a spa area with chromotherapy technology.

Located just outside Chicago’s city limits, in Lincolnwood, Ill., is District 1860, a proposed mixed-use development with 300 luxury apartments, 80,000 square feet of retail and a 220-key hotel. Developer Tucker Development plans to offer an elevated rental experience not found in Lincolnwood or nearby suburbs. “District 1860 is a perfect example of how downtown-inspired design is traveling to the suburbs,” said Richard Tucker, CEO of Tucker Development. “This is a prime location in a close-in suburb that’s hasn’t seen a Class A rental building in years, so we expect significant pent-up demand. And when comparing its amenities and finishes to those of similar buildings in downtown Chicago, the relative value of District 1860 will present a unique opportunity to renters.”

Suburban projects are also taking a page from their city counterparts by tapping high-profile designers. Architecture and interior design firm Morgante Wilson Architects, which designed the interiors for the recently opened 727 West Madison in Chicago’s West Loop, was also tapped to design and program the amenity spaces at The Atworth at Mellody Farm, a new 200-unit rental community in Vernon Hills, Ill., a northwest suburb of Chicago. Refined building amenities range from a resort-style swimming pool area with cabanas and bocce ball court, to a yoga/spin studio with FitnessOnDemand technology, to a tasting room with bar area, table seating and individual storage lockers for personal wine and spirits. “It’s very eye-opening for renters who are transitioning from a single-family home to an apartment to see these types of intimate community spaces,” said Elissa Morgante, the firm’s co-principal. “They show that you don’t have to sacrifice exceptional design when you downsize. Their address may be changing, but their lifestyle doesn’t have to.”

There’s an App for That

Most urban dwellers use mobile devices for, well, just about everything. As the multifamily market becomes more competitive, developers are offering high-tech services to appeal to renters and make their buildings stand out. “From hotel-style housekeeping and in-home meal delivery to more standard offerings like automated systems for packages and dry cleaning, today’s multifamily resident values the convenience afforded by seamless ‘door-to-door’ services scheduled online or using an app,” said Ericka Rios, co-founder and director of leasing for Downtown Apartment Company.

Tapping into technology that takes service offerings to the next level, Related Companies has partnered with Hello Alfred, a tech and hospitality platform, to create a branded version of the service called Life Simplified. In Chicago, residents of Related Midwest’s newest developments, including the Robert A.M. Stern Architects-designed One Bennett Park, can utilize the app for tasks such as move-in coordination, grocery ordering, pantry and fridge stocking, dry cleaning and laundry pick-up, closet organization, baby-proofing and event planning. Supplementing service provided by the building’s 24-hour staff, the app enables residents to have an “Alfred” at their disposal to make life easier. “Service has become the differentiator in today’s luxury rental market, so we are constantly evaluating ways we can elevate the residential experience using platforms like Hello Alfred that marry technology with the personalized, white-glove service for which Related is known,” said Curt Bailey, president of Related Midwest.

Optima Inc., the developer of Optima Signature, a 490-unit luxury rental development in Chicago’s Streeterville neighborhood, connects with tech-savvy dwellers via the Mobile Doorman app. The digital concierge service allows residents to pay rent, make service requests and access a community “bulletin board.” Separately, a recently launched service called Pear Chef allows residents to handpick chefs who come to the building to prepare fresh meals, personalized wine and cocktail pairings, and curated snacks. “Our communities, including Optima Signature, strive to exceed the expectations of our residents by delivering services and retail amenities designed to make their lives easier,” said Tara Hovey, president and COO of Optima Inc.

Of course, with expansive fitness centers front and center in the newest buildings, developers like Lendlease are also incorporating health and wellness offerings into their tech packages. Elevated Living, a custom-branded mobile app available to residents of The Cooper at Southbank, Lendlease’s 452-unit apartment tower in Chicago’s South Loop, allows users to track the development’s fitness-related activities, including group exercise classes, as well as on-site consultations with personal trainers, massage therapists and dieticians – most at no extra cost. “Many of our residents have busy schedules, but they still manage to fit exercise into their daily routine because we bring the health club experience to them,” said Tom Weeks, executive general manager of development at Lendlease.

In Chicago’s Gold Coast neighborhood, developer Draper and Kramer, Incorporated, is building 61 Banks Street, a 58-unit boutique rental community. When completed, the lakefront building will offer valet parking service that allows residents and their guests to request their car through an app, reducing wait times. Draper and Kramer also plans to offer an app that residents can use to control apartment features, such as door locks, and coordinate services like dry-cleaning pickup and delivery. “We’re striving to offer the highest level of convenience for our residents, using technology to streamline even routine tasks like pulling up to the building and unlocking their front door,” said Kelli Stuart, Draper and Kramer’s property manager for 61 Banks Street.

A ‘Mixed’ Approach to Affordable Housing

Nationally, there’s an affordable housing shortage of more than 7.2 million units for extremely low income (ELI) renter households, defined as having incomes at or below the poverty level or 30 percent of their area median income, according to research from the National Low Income Housing Coalition. Developers are looking to fill the void, but with financial hurdles including rising land and construction costs, today’s deals are more challenging than ever. So, what’s to be done? For some, the answer lies in larger, mixed-income and sometimes mixed-use projects.

On Chicago’s West Side, developer The Habitat Company is planning a $200 million mixed-use development called Ogden Commons that will include hundreds of affordable homes alongside 120,000 square feet of office and retail space. Most of the office space will be occupied by two of Habitat’s partners, Mount Sinai Hospital and Cinespace Chicago Film Studios, where TV shows such as “Chicago Fire” and “Empire” are filmed. The project replaces land that, until the early 2000s, housed public housing communities owned by the Chicago Housing Authority, another partner in the Ogden Commons project. Up to 70 percent of the new residential units will be set aside as affordable housing. “By including the affordable units in a larger, mixed-use project, we were able to remain focused on providing quality housing for those at the lower end of the income scale,” said Matt Fiascone, president of Chicago-based Habitat.

Developer Evergreen Real Estate Group charted a similar course when partnering with the Chicago Housing Authority on two “co-located” housing developments that will place affordable senior rental units atop new Chicago Public Library branches. Each of the projects, located in Chicago’s West Ridge and Irving Park neighborhoods, will offer 30 units of public housing and 14 affordable apartments. Elsewhere, Evergreen is building a mixed-use development on the former Blommer Ice Cream Factory site in Milwaukee. When completed, the $13.9 million project will consist of 64 mixed-income housing units, plus street-level retail space. “Regardless of market, we strive to come up with innovative housing solutions that integrate affordable residences into the urban fabric and utilize all available resources, including tax credit financing, to make these projects financially feasible,” said David Block, director of development for Chicago-based Evergreen.

Senior Moment

Senior housing developers are looking ahead to the long-forecast “silver tsunami,” with seniors, defined as age 65 and older, projected to outnumber below-18 youth for the first time in 2035, according to the U.S. Census Bureau. As competition grows, developers and operators are offering different levels of amenities and services to appeal to the broadest possible audience while keeping housing attainable for cost-conscious seniors.

“Attainability is considered through all stages of the underwriting and development process,” said Justin Dickinson, vice president of investments for CA Ventures, whose senior living division, CA Senior Living, owns and operates a national portfolio comprising 23 communities. “But the definition of what’s attainable varies from market to market, and sometimes from project to project. We’re preparing to break ground on senior communities in Mayfield Heights, Ohio, and Novi, Mich., and while our overall approach and service standards are the same, pricing for each project is tailored to its respective market. The cost is influenced by everything from the number and type of units to amenities and services offered to residents, many of whom are mindful of housing expenses.”

At Pathway to Living, a Chicago-based developer and operator of senior housing communities, the housing offerings span various price points, including communities under its Azpira Place brand, which offers the same award-winning VIVA! programming found at all Pathway communities. “By selecting the right locations, aggressively managing development costs and combining key back-office functions, our Azpira Place brand can provide high-quality residences and on-site amenities at a more moderate price,” said Maria Oliva, chief operating officer at Pathway to Living.

With affordability in mind, some developers and operators are evaluating opportunities to either update existing communities or explore adaptive reuse projects that convert underutilized buildings in desirable locations into new senior residences. “We’ve been busy in recent years with ‘refresh and remodel’ projects for senior communities as owners update their facilities to stay current with new options coming on the market,” said Chuck Taylor, director of operations for Lemont, Ill.-based Englewood Construction. “But many times, it’s just about having the right location. We’ve been in talks with a client looking to repurpose an existing convent into a senior community. They liked its location in a close-in suburb of Chicago, where vacant land for new-construction is harder to come by, and the layout of the existing facility lends itself to this new use.”

Some senior housing projects combine renovation with new construction. At Martin Avenue Apartments, a senior housing community in Naperville, Ill., Evergreen Real Estate Group is upgrading the existing 122 units while adding a five-story wing with 68 new residences. All 190 apartments will be reserved for low-income seniors and disabled individuals who meet federal income requirements. “With any project, we look for ways to maximize the potential of the underlying real estate, whether it be through improvements, expansions or, in this case, both,” said Kevin Beard, director of acquisitions for Evergreen. “This strategy allows us to better serve low-income seniors by delivering not only more units, but also a higher-quality residential experience than they might otherwise have.”

The Genuine Article

With so much new product entering the market in 2019, one approach apartment developers are taking to differentiate their buildings is to tap skilled designers and architects to incorporate hand-crafted and custom features not typically found in rental properties. “Commercial interiors can be very homogenized, but we’re seeing our clients recognize the value of working with a design group well-versed in a broad range of materials and with the resources to incorporate one-of-a-kind elements,” said Elissa Morgante, co-principal of architecture and interior design firm Morgante Wilson Architects.

At 727 West Madison, a luxury rental high-rise by Fifield Cos. and F&F Realty in Chicago’s West Loop, Morgante Wilson handpicked a top artisan to hand-trowel a Venetian plaster design on wallpaper to be installed in amenity spaces. The firm also worked with a noted carpet manufacturer to produce corridor runners in a custom design inspired by the abstract, hand-knotted silk rugs that Morgante Wilson frequently sources for private homes.

And at One Bennett Park, each detail for the exterior and interiors of the 70-story masonry tower – the first Chicago building designed by Robert A.M. Stern Architects (RAMSA) – was selected with purpose, using bespoke materials sourced from all over the world. The signature motifs used for the ornamental metalwork, lighting, floors and ceilings were created by Stern and his team at RAMSA. “People are quick to notice the warmth of the stone façade and the beauty of the intricate metalwork,” said Ann Thompson, senior vice president of architecture and design at Related Midwest, the tower’s developer. “Quality craftsmanship, custom design and a rich material palette help create a legacy residence that stands the test of time.”

In much of its recent work, commercial interior design firm Mary Cook Associates (MCA) has been using the history of a property to drive design inspiration. At Riverworks, a new rental community in Phoenixville, Penn., MCA paid homage to the iron mill that formerly resided on the property by using a historic image of the mill as a wall mural to help define the billiard area in one of the community’s common spaces. Additionally, MCA custom-designed a heavy-gauge steel plate for the gaming area’s ceiling trusses, fireplace face and wainscoting to remind residents of the property’s unique history.

Similarly, with LOGAN, a mixed-use development in Chicago’s Logan Square that is scheduled to open in late 2019, Fifield Cos. asked architect Antunovich Associates and interior designer Brianne Bishop Design to consider the history of both the site – formerly home to an indoor flea market known as the Mega Mall – and its surrounding neighborhood.

“For LOGAN, we’ve considered the vernacular architecture through a brick façade and dark window frames, and we’ve imagined interiors that celebrate the neighborhood’s diversity and its identity as a haven for creatives,” said Lindsey Senn, vice president of Fifield Cos. “For example, we’ve commissioned textiles from a neighborhood-based artist whose wall coverings reflect cultural narratives from around the globe, and we’re incorporating a historical mural wall into the co-working space. We’ve also selected artists to recycle old building materials from the Mega Mall into furniture for some of LOGAN’s common spaces, and we sourced photography of the famous graffiti that covered that building’s walls for years.”

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