For every kind of commercial real estate asset, there is a profile. And while it wouldn’t be fair to say that tenants are exactly the same, we can take some broad-brush strokes. We’ll take a look at the Class A multifamily typical tenant profile in today’s blog.
Multifamily Tenants v. Commercial Tenants
Apartment tenants are very different generally than commercial tenants. Typically, commercial tenants are companies. Either they work for profit or not, but do business with the public. Examples of commercial tenants could look something like this:
- A business occupying an office building
- A retail store leasing a single-tenant building
- A hotel chain leasing a hospitality property
- A church congregation renting a building long-term
In addition, you could see a sole proprietor renting space for their business venture.
But most noteworthy is that renters are not individuals or families. Therefore, we can make a clear distinction between tenants found in multifamily properties and tenants found in commercial real estate.
Class A Multifamily Typical Tenant Profile: Income
Now that we’ve distinguished between tenants, let’s focus on the Class A multifamily typical tenant profile. We’ve talked a lot about the differences in multifamily asset classes. If you are unfamiliar with the characteristics of a Class A multifamily, you can learn about them here, before reading on.
First please note that we will talk in generic language about the tenant base. There can be exceptions to what we say here and shouldn’t be taken as an absolute.
One of the bigger buckets Class A tenants fall into is job type. The Class A multifamily typical tenant profile is one of gray collar workers. While “gray collar” is a loose term, we are saying that tenants are made up of both white collar workers and blue collar workers. And because white collar workers generally are paid at higher rates, we can say that incomes of the Class A tenants are higher than elsewhere.
Class A Multifamily Typical Tenant Profile: Demographics
While we can’t generalize about the overall tenant’s age bracket, we can make a couple of other inferences. First, a Class A tenant likely has the financial wherewithal to move on to home ownership. I’ll grant you that there may be other reasons why they haven’t made that move, but their income puts them in contention.
Furthermore, we can say that Class A tenants have a couple of options for moving on after their rental period with your property. Unless they fall out of their income earning bracket, home ownership is a logical next step. Alternatively, moving on to another apartment complex with greater amenities or financial incentives could be the next step.
Finally, we can speak somewhat to the stage of mobility our Class A renters face. Renters that haven’t chosen to settle down with a home purchase, but instead choose to rent in the Class A space may have additional reasoning. We can point to reduced responsibility as a benefit to apartment renters. And this reduced responsibility could mean that tenants have a need for that benefit, no matter what stage of life they are in. This benefit could be applicable to millennials to baby boomers alike.
In conclusion, we have a rough draft of the Class A multifamily typical tenant profile. Much of what we know revolves around their financial resources and less around their stage of life. We know that Class A tenants come to the assets for the benefits they provide and not necessarily for financial considerations. We also know that Class A tenants move on when there is something better on the horizon, or their needs change. These are powerful pieces of information and they can have a direct impact on your commercial multifamily investment.
Tags: Baby Boomers, Class A apartments, commercial multifamily, home ownership, income, lifestyle, millennials