Rental market pushing service, ‘community’

Except for a few pockets of ultra-luxury condo action—New York, San Francisco, and parts of Florida, Hawaii, and metro Washington, D.C.—today’s multifamily story is all about rentals. “The apartment sector has been a darling for investors over the past two years,” notes the Urban Land Institute in its recent Real Estate Consensus Forecast. Vacancy rates are at an enticing 5.0%, and rental rates should be up 5.0% this year, although ULI does forecast some slippage next year, to 4.0%.

“Investors continue to view apartments as a preferred asset class in today’s environment,” says Dale Connor, Lend Lease’s Managing Director, Project Management & Construction, Americas. He sees developers playing catch-up to meet the growing demand for apartments, especially in the top five rental markets: New York City, Washington, D.C., Boston, Chicago, and Los Angeles.

SCROLL DOWN FOR GIANTS 300 MULTIFAMILY FIRM RANKINGS

Savvy market-rate developers are looking for locations around universities, innovation incubators, and teaching hospitals, says Ray Kimsey, AIA, LEED AP, President of Atlanta-based Niles Bolton Associates. Land that was once set aside for retail or office development is being looked at for multifamily, especially if served by urban transit.

“If you look at the hottest neighborhoods around Washington, D.C., Pittsburgh, or Baltimore, they all have an influx of Gen-Y people graduating and wanting to stay in that environment,” he says. Kimsey says there’s even a movement toward walk-up, garden-style apartments in some suburbs and second- and third-tier cities.

The use of urban infill sites is adding to the popularity of podium-style multifamily construction, says Mathew Dougherty, PE, Vice President with McShane Construction, Rosemont, Ill. “The podium ‘stacks’ uses vertically within the existing floor plate, thereby allowing a mixed format of ground-floor retail, parking floors, and residential floor plates,” he says.

According to John Lahey, AIA, Managing Principal at Chicago-based Solomon Cordwell Buenz Associates, the rental market is being shaped by two factors: service and community.

“Service” refers to the heightened demand for amenities: party rooms, surround-sound movie theaters, fully equipped fitness centers, mega-size video screens in common areas, computer golf games that let you play any course in the world, I-GO car rentals—even “restaurant days,” where a local restaurant comes in and sells takeout dinners one night a week.

There are even amenities for canine occupants. “People love their dogs,” says Lahey, so dog walks, dog parks, dog washing bays, and dog walking and grooming services are becoming de rigueur in many large (>400 units) complexes. “People want their lives to be easier,” he says. “They want to be taken care of.”

Tenants are demanding more green amenities, says Kimsey. “Expectations about energy conservation and sustainable features are now viewed as a basic right by many tenants,” he says. “If they lived in a LEED-certified residence hall in college they want a LEED apartment”—but not if it costs more than market rate.

“Community” refers to the renter’s need for connection, says Lahey. In past decades, apartment dwellers put a premium on privacy. Less so today. “A lot of people who move back into the city, they’re not confirmed urban dwellers, and they want to meet people,” he says. “The Starbucks in your building becomes the meeting place to get integrated into the larger community.” McShane’s Dougherty says wifi connectivity has become a given in new and renovated rental projects.

“The design must be hot,” says Kimsey. The units themselves may be “smaller, tighter,” but that means they must be more elegant and efficient, with open layouts and near-condo-like finishes. McShane’s Dougherty says granite countertops, stainless steel appliances, upgraded bathrooms, and high-quality flooring are expected, even in suburban garden apartments. Developers are increasingly concerned about sound attenuation, he says, so insulation choices, assembly details, and materials selection are crucial.

Looking ahead, SCB’s Lahey says that, unlike the condo market, apartment development needs to be left to the pros—firms like AMLI, Avalon Bay, Equity Residential, Forest City, The Habitat Company. “They have the track record, and they really do know what they’re doing,” he says.

“The money is out there,” says Kimsey, but it’s split between smaller projects being funded by S&Ls and smaller banks, and big projects attracting institutional and private-equity investors. Holding back the pent-up demand: anemic job creation, which limits new household formation.

Even with low mortgage rates, many potential buyers have become skittish about purchasing a home, says Lend Lease’s Connor. SCB’s Lahey cites mobility as another factor in rental’s favor, especially with the younger generation.

“People will like living closer in, and units will get bigger, something decent in size, and they’ll be willing to pay for it,” he says. “They’ll see a home as a place in which to live, not necessarily as an investment.” +

TOP 25 MULTIFAMILY SECTOR ARCHITECTURE FIRMS

Rank	Company	2011 Multifamily Sector Revenue ($)
1	IBI Group	38,489,114
2	Niles Bolton Associates	13,772,650
3	Solomon Cordwell Buenz	12,000,000
4	RTKL Associates	11,397,556
5	WDG Architecture	9,817,297
6	Perkins Eastman	9,100,000
7	HOK	8,715,422
8	Perkins+Will	7,193,120
9	ZGF Architects	6,225,112
10	Cooper Carry	5,708,482
11	Kohn Pedersen Fox Associates	5,280,000
12	Ziegler Cooper Architects	4,853,598
13	Harley Ellis Devereaux	4,800,000
14	PGAL	4,607,900
15	OZ Architecture	4,104,475
16	GBBN Architects	3,700,000
17	Smallwood, Reynolds, Stewart, Stewart & Associates	3,605,928
18	VOA Associates	3,367,000
19	Carrier Johnson + CULTURE	3,324,072
20	Skidmore, Owings & Merrill	3,074,000
21	Gensler	2,800,000
22	Rule Joy Trammell + Rubio	2,600,000
23	FXFOWLE Architects	2,399,900
24	HKS	2,398,926
25	Mithun	1,906,000

TOP 25 MULTIFAMILY SECTOR ENGINEERING FIRMS

Rank	Company	2011 Multifamily Sector Revenue ($)
1	STV	119,671,000
2	AECOM Technology Corp.	36,000,000
3	Parsons Brinckerhoff	32,800,000
4	URS Corp.	28,500,000
5	Michael Baker Jr., Inc.	23,620,000
6	WSP USA	17,200,000
7	Jacobs	16,000,000
8	Atkins North America	15,368,901
9	Wiss, Janney, Elstner Associates	14,372,000
10	KPFF Consulting Engineers	12,000,000
11	Simpson Gumpertz & Heger	9,740,000
12	Thornton Tomasetti	7,610,000
13	Stantec	6,345,000
14	Clark Nexsen	5,308,534
15	Arup	4,600,161
16	Coffman Engineers	4,000,000
17	Magnusson Klemencic Associates	3,556,559
18	Rolf Jensen & Associates	2,600,000
19	Aon Fire Protection Engineering	2,250,000
20	Smith Seckman Reid	2,227,000
21	Paulus, Sokolowski and Sartor	1,800,000
22	Science Applications International Corp.	1,530,000
23	Lilker Associates Consulting Engineers	1,500,000
24	French & Parrello Associates	1,396,720
25	AKF Group	1,300,000

TOP 25 MULTIFAMILY SECTOR CONSTRUCTION FIRMS

Rank	Company	2011 Multifamily Sector Revenue ($)
1	Lend Lease	734,160,150
2	Clark Group	612,803,196
3	Balfour Beatty US	441,602,518
4	Walsh Group, The	342,877,063
5	Whiting-Turner Contracting Co., The	283,477,065
6	Turner Corp., The	223,410,000
7	Swinerton	186,340,000
8	Harkins Builders	180,000,000
9	McShane Co., The	175,000,000
10	Yates Co., The	173,900,000
11	PCL Construction Enterprises	159,105,415
12	Bernards	144,000,000
13	Paric Corp.	138,000,000
14	Hensel Phelps Construction Co.	137,700,000
15	Weis Builders	131,960,000
16	CORE Construction	125,513,227
17	Suffolk Construction	111,885,268
18	Power Construction	106,000,000
19	Weitz Company., The	82,000,000
20	Austin Industries	77,074,905
21	Brasfield & Gorrie	67,682,938
22	Absher Construction	61,807,647
23	James McHugh Construction	54,624,665
24	Bette Co., The	54,000,000
25	Choate Construction Co.	51,875,781