According to Buildium’s annual industry report and analyses from leading real estate sources, there are 7 rental market trends for 2023.
As a result, many property managers’ business plans over the past two years “were reactionary, keeping their businesses afloat amid lockdowns, record inflation, panicked residents, and a supply shortage on everything.”
“As we get ready for 2023, we are waiting to see if the Federal Reserve will continue to raise interest rates to rein in inflation. That leaves rental-market predictions a bit tough to make, but there are some clear trends coming to the fore,” Buildium says.
Here are the top 7 rental market trends for 2023
1. The rental real estate market is becoming more investment-minded
Buildium, Propertyware, and NARPM released a report in 2023 that revealed 52 percent of rental owners consider themselves intentional investors, while only 24 percent think they are accidental landlords. An unintentional investor is someone who became a landlord by accident and now considers themselves an investor because they own or inherited a property they could not sell. Over the last five years, property managers have seen a significant increase in investors as clients.
Property managers have had to pivot their service offerings to meet the demands of more investment-minded owners. Today, more owners want a partner in their investment strategy, not just a professional to handle maintenance, rent collection, and tenant turnover.
Property managers now advise their clients on upgrades and services that will increase property value and portfolio expansion. Property managers are experts in their local markets, so they can find properties for investors.
Consider the services you currently provide. Are you able to capitalize on your team’s expertise to meet the needs of more investment-minded rental owners? Would you be able to partner with a local contractor to offer property upgrades, or would you be able to build your own team in-house? Make sure your new service offerings are included in your marketing strategy.
2. There is a resurgence of mixed-use properties
As construction gets underway once more, mixed-use properties, which combine residential, retail/entertainment, and business properties, are making a comeback.
Of the 1,300 malls in the United States, 500 are undergoing renovations into mixed-use spaces, according to Price Waterhouse Cooper’s Emerging Trends in Real Estate 2023. Residents enjoy easy access to restaurants, shops, entertainment, grocery stores, and medical facilities, as well as easy access to restaurants, shops, and entertainment.
Property managers with the staff and resources to add commercial space to their portfolios may be interested in mixed-use properties.
Even if mixed-use properties aren’t on your radar, it’s still worth knowing how they could affect your current portfolio. The convenience of being near so many shops, restaurants, and other resources will benefit properties near a mixed-use complex.
3. Suburbs and single-family rentals remain attractive
According to PwC’s report and Buildium’s report, single-family rentals are continuing to be popular. Over the past five years, 68 percent of respondents have lived in suburban or rural areas. These tenants are looking for:
A safe, quiet, family-friendly neighborhood
Whether it’s bringing children, pets, or other family members into their home, they need space that allows them to grow their families
A child-friendly home that provides air conditioning, a washer and dryer, and a dishwasher
These amenities can attract residents to single-family properties managed by property managers.
One thing property managers should keep in mind, however, is the amount of debt and lack of savings single-family renters tend to have. As we found in our Single-Family Renter’s Survey, single-family renters had larger families, less savings, and more debt. Keeping in constant communication with residents and working with those who may be affected by the current economic climate is crucial as we move toward 2023.
4. In 2023, inflation is likely to continue to rise
Everything is more expensive now, from food to gas to home heating fuel. The Federal Reserve Bank of Dallas reports that inflation has reached a 40-year high. As we move into 2023, the cost of living continues to rise despite the Inflation Reduction Act.
Approximately 26 percent of renter respondents paid most bills on time and in full, and 11 percent reported they were struggling to keep up with household expenses, according to the 2023 Property Management Industry Report.
Open lines of communication between property managers and their residents helped ease the burden of missed rent payments during the height of the pandemic. Your property-management strategy will continue to depend on those lines. Government assistance programs can be found by property managers, for example.
Additionally, rising costs will affect how property managers keep their businesses profitable. You can renegotiate contracts or find more economical solutions by looking at your vendor costs and overhead.
5. Rates on mortgages may continue to rise
A fourth rate hike in 2022 occurred in early November when the Fed raised interest rates to just over 7 percent. Nasdaq predicts they could reach 9 percent in 2023. People who had planned to become homeowners have been forced to reconsider, and are now renting instead.
To keep vacancy rates low, property managers should pay attention to how mortgage rates net out in the coming months and adjust their marketing and resident onboarding strategies accordingly.
6. Renters now come from a variety of ages
Increasingly, baby boomers are renting in the United States because they are tired of keeping up a house. Every year, more millennials, the largest generation in the country, enter the housing market as renters.
As a result, property managers are providing their residents with a different type of housing and services. To help older residents age at home, accessibility and convenience will be important. Rental properties with elevators, ramps, safety rails in bathrooms, and other ADA-compliant equipment are in high demand.
There will also be a shift in communications, marketing, and amenities. Even baby boomers will want more convenience, more digital options for communication and rent payments, as well as services that cater to multiple generations within a household.
7. Diversified space appeals to renters
The increasing number of families as renters and the shift from work-from-home will continue to impact the types of spaces renters are looking for. According to PwC and our Industry Report, rental market trends show more residents want:
Homes with an extra room or flex space: Homeowners are borrowing space from larger open rooms to create smaller private spaces, or adding offices off hallways.
Outdoor space doesn’t necessarily mean a large yard. A simple patio or a small garden could be used as outdoor spaces.
A mix of public and private spaces: Homes may have a large kitchen and living room with adjacent food prep spaces and reading nooks.
The buzz around rental-market predictions grows louder as 2023 approaches, as well as opportunities for owners and managers to invest in, improve, and expand their properties.
For more detailed information on coming rental real estate trends for 2023, check out the full 2023 Property Management Industry Report.