Developers are adding private movie rooms and poker lounges to attract ‘echo boomers.
A multibillion-dollar apartment-construction boom is under way in which developers are pulling out all the stops to cater to the new generation of renters who grew up in McMansions and vacationed with their parents at fancy resorts.
The garden-style apartments of yesteryear are out. To appeal to “echo boomers,” roughly defined as people born in the 1980s and early 1990s, the new urban apartment buildings offer smaller living quarters and grand common areas where renters can entertain and socialize.
At the Savoye, an apartment complex near Dallas that caters to younger renters, the amenities include a resort-style pool surrounded by high-end lounge chairs lined up under oversized umbrellas. There are stainless-steel barbecue grills and an outdoor table with water streaming down the middle and ending in a waterfall. There’s also a posh poker lounge, a private movie room and a banquet room.
Echo boomers “want large communal spaces where they can gather with their friends and neighbors,” says Jerry Davis, a senior vice president at Denver-based UDR Inc., which developed the 392-unit Savoye last year and is working on a second phase of the complex, which will have 347 units. In addition, UDR is building four other communities for echo boomers across the country.
There are about 80 million echo boomers, says Marcus & Millichap, a real-estate investment brokerage firm. By 2020, the 18-to-34-year-old age group, considered the prime renting age, will grow by an additional 5 million.
Developers are betting that instead of rushing to buy a condo, this group would rent for several years.
The Census Bureau says the homeownership rate for people under 35 was 37.9% in the first quarter of this year, down from 38.9% in the first quarter of 2010 and 43.3% in 2005’s first quarter.
The Brooklyner in New York, owned by Chicago-based Equity Residential, offers a rooftop sun deck with sweeping city views and a lounge featuring a pool table and Skee-ball. The Monterey by Windsor, a 371-unit building owned by Windsor Communities in Dallas’ trendy West Village area, boasts an outdoor fireplace, kitchen and large flat-screen television in a space large enough to entertain 50 people.
Demand up, supply lags
During the housing boom, waves of renters left apartments to become homeowners, including many young people. When the boom turned to bust, some homeowners became renters again.
But developers had a hard time finding financing to construct new buildings to meet the growing demand. In the first quarter, some 6,000 new units hit the market, the lowest quarterly figure since research firm Reis Inc. began publishing quarterly data in 1999.
As a result, occupancy and rent levels have been rising. Just 6.2% of apartment units were vacant in the first quarter of this year, down from 8% a year earlier, Reis says. The first quarter’s effective rent for one-bedroom apartments, or what’s paid after special offers, came in at $983, up from $960 a year earlier.
Now that the credit freeze is thawing, builders are ramping up construction. But with more than 225,000 new apartments expected by 2013 — more than double the number delivered in 2010 — it isn’t clear whether developers are bringing on too much supply in areas such as Houston, Atlanta and Austin, Texas, especially on the high end.
Too much competition could force landlords to chop rents. These pricey pads are also highly sensitive to the economy: If layoffs increase or job creation stalls, existing and potential tenants could downgrade to cheaper units.