Those Who Rent for Days, Weeks or Months Want Ease of Technology, Convenience and Lease Flexibility
By Richard Lawson CoStar News June 29, 2022 | 7:28 P.M.
The shift to remote work during the pandemic has created what apartment industry executives say is the latest transformative force in rental living: the digital nomad. The renter who ventures off for a few days or weeks through a combination of work and vacation, or someone who moves to a new location for a few months at a time, is typically in the first decades of a career and seeking the ease of technology, convenience and leasing flexibility, they say. And apartment companies are trying to figure out the most profitable way to cater to them.
Bill Smith, founder of flexible apartment living startup Landing, said digital nomads make up about 20% of the workforce now, and “that’s a huge market.”
The digital nomad trend had been growing before the pandemic but accelerated over the past two years, first out of necessity with remote work and later because employees relished the flexibility, executives said at the National Apartment Association's Apartmentalize conference last week. Numerous companies have instituted hybrid models to please employees by giving them the option of working from home a couple of days a week.
There were 15.5 million American nomads last year, more than double from 2019, according to data from MBO Partners, a company specializing in placing independent contractors. The number of U.S. nomads is expected to reach 23.5 million this year, according to data presented by Kate Good, principal for multifamily development and operations at Houston-based Hunington Properties.
Millennials, those born between 1981 and 1996, made up most of the digital nomad population at 44% in 2021, MBO Partners data showed. Generation Z, those born between 1997 and 2012, represented 21% of nomads, while Generation X, those born between 1965 and 1980, was at 23%. Millennial and Gen Z nomads increased from 2020 to 2021, while Gen X nomads stabilized, according to the data.
Apartment owners see those demographics dovetailing with Yelp’s decision this month to shift fully to remote work, and say these renters working from home need to be top of mind when designing, building and renovating properties. The San Francisco-based crowdsourced review app company's more than 4,000 employees can add to the nomadic culture with Yelp's announcement that it would close its offices in New York, Chicago and Washington after learning that nearly all its workers sought to continue working remotely.
Jeremy Stoppelman, Yelp’s co-founder and CEO, has a dim view of hybrid work. He wrote on Twitter in May that it forces employees to live near offices in high-cost areas, doesn’t eliminate the commute and constrains hiring by geography. Fully remote work creates the need for more residential space, he said. And apartment executives say that attitude is providing more potential tenants.
Catering to Nomads
Good said these digital nomads were key to leasing up The Vic at Interpose, a 168-unit Houston apartment property containing micro-units that Hunington developed and opened last year near downtown. The 129 studio units average 487 square feet, while the 20 one-bedroom units average just over 500 square feet. Most of the units have balconies.
Some digital nomads want more space inside their apartments for working comfort, while others will do with less as long as they have high-speed Wi-Fi and plenty of amenities.
Technology is a key element for digital nomads, notably high-speed Wi-Fi access. Hunington struck a bulk internet service deal with DISH Fiber to supply all the units at the complex with personal Wi-Fi networks that is included as part of a renter's monthly amenity fee.
Landing's Smith said “most communities don’t bulk buy” internet service.
But apartment owners are beginning to shift to bulk buying internet service so renters can wander around the property and connect to the internet from the pool or another common area. A prime example is a 37-story, 422-unit luxury tower that Toll Brothers is building in downtown San Diego. The Lindley will have Wi-Fi throughout the tower, including the 22,000 square feet of amenity space.
Charles Elliott, president of Toll Brothers Apartment Living, said millennials and Gen Zers probably will make up a large percentage of renters in the tower, noting that 45% of renters in its other properties fall into those age groups.
Easier Wi-Fi access dovetails with a renter desire for more coworking space on-site, according to apartment company executives. Interior designer Diana Mosher said during one session at Apartmentalize that there’s a desire for small meeting space as well, noting that apartment owners could draw inspiration from office design.
Podcasting studios at apartment buildings are another big desire among digital nomads, Hunington's Good said.
Lease Terms
There are challenges and limits to how much apartment owners can cater to digital nomads. Flexibility in lease terms presents one of the biggest hurdles for apartment owners. Good noted that lenders want at least six-month leases, but that doesn’t fit with digital nomads looking to move around more frequently.
It was that niche that prompted Smith in 2019 to found the membership-based company whose members pay a $199 annual fee. Landing signs leases with apartment properties around the country once it determines there’s demand for a unit. Landing fully furnishes the place, including dishes and everything needed for cooking, bedding, smart televisions, Wi-Fi and even shampoo and soap.
The flatware is made specifically for Landing. Smith said the company found the manufacturer for linens used at Four Seasons hotels and has those in the apartments.
Smith said the company has tens of thousands of members and more than 20,000 units. Its locations are scattered across the country’s largest metropolitan areas, including urban and suburban markets. Business grew 500% last year, Smith said. Even with that growth, he's still mostly known as the founder of same-day delivery company Shipt, which he sold to Target for $550 million.
Those fully furnished apartments come with a premium price. The Katy in Victory Park, a 5-year-old, 30-story apartment tower near downtown Dallas, has asking rents for unfurnished one-bedroom units at $2,675 per month, according to CoStar data, while the Landing lists the one-bedroom units on its site for between $3,133 and $3,598 per month — and that’s if there’s a six-month commitment.
For leases less than six months, Landing's units charge a nightly rate with a minimum stay of 30 days. Smith said the average stay is about six months. For example, the Dallas property charges between $167 and $189 per night, so a total of about $5,010 to $5,670 for 30 days.
Smith said sometimes members move within the same city rather than between cities. The company has about 91% occupancy at its units.
Millennials and Gen Zers are “working hard to not be committed” but tend to exit the flexible lifestyle once they decide to have children, Smith said.
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