Location. It’s one of the most critical decisions you will make when building an apartment complex.
It’s why it’s important to do your research and be fully informed before breaking ground.
While incredibly important, choosing the right location for an apartment complex is not so black and white. There are many factors that can impact its success.
- Who is the target demographic for the living space?
- What price point is best for future tenets?
- Is there a need for living space in the proposed location?
- What competitors exist in the area? What is their annual revenue?
Not only is this type of information helpful for contractors, but having clear answers to support these questions will also help acquire a loan.
Keep reading to learn more about how to choose the best location when building an apartment complex – plus, how to uncover data to support your proposed location with lenders.
Before investing time and money into a new apartment complex, conduct a custom market analysis with Drive Research. The report will determine whether a market is attractive or not for your new concept. Download a Market Analysis Example Report to see what it includes.
Why Location is Important When Building an Apartment Complex
Perhaps aside from price, location is the most important factor renters consider when choosing where to live. In fact, only 14% of renters say they are willing to compromise on location.
That’s because people want and need close access to basic amenities. It is better to live somewhere that is relatively close to grocery stores, restaurants, shopping centers, entertainment, and offices.
From the perspective of a renter, you may be able to change different things about an apartment, but you can absolutely not change the location.
With this in mind, those building an apartment complex must pick a location that is in close proximity to different attractions. By doing so, you’ll have an easier time keeping the apartment at full capacity.
Additionally, with a good location, property managers can increase monthly rent because people are willing to pay more to be close to all of their favorite spots.
That means more money in your pocket.
Factors to Consider When Looking for Building Sites
When building an apartment complex and on the hunt for the best location, put yourself in the shoes of renters.
What factors are important to people when deciding where to live? And what factors should property owners consider when deciding where to build an apartment complex?
We list a few below.
Amenities and transportation options
Again, one of the reasons why location is so important when building an apartment complex is that renters often want to live somewhere that is close to different amenities and transportation services.
Perhaps it’s a downtown location that is situated near important highways, bus stops, subway stations, and public bike-share locations.
Or, it’s a suburban location that is a few minutes from restaurants, bars, and grocery stores.
In a majority of instances, close proximity to these types of amenities will improve the value of an apartment complex.
Crime and safety should be top of mind when measuring the demand for new apartment buildings.
Renters want to feel comfortable walking in and out of their homes. They do not want to live in areas where crime and danger are extreme.
Plus, from the perspective of a building owner, you do not want to worry about your apartment building being vandalized or broken into.
Luckily, there are many surveillance options available today such as Ring Doorbells and Security Cams that can help make all parties feel safe.
Future appreciation potential
Sure the market in your proposed area looks good now, but what about in five years? Or, is there an area that is set to be up and coming where you can hit the ground running?
Therefore, looking at the future appreciation potential of an area is important for most brick-and-mortar locations, but especially housing. That’s because location dictates the demand in a real estate market.
If you build an apartment complex in a desirable location where people are moving, then you can expect the building’s value to withstand for years to come.
Depending on your target demographic, considering nearby schools when choosing where to build an apartment complex is a good idea.
This is especially true if the city where you are building is family-oriented. Moms and/or dad renters will surely evaluate this when looking at rental properties.
How to Choose a Location When Building an Apartment Complex
Investing in an apartment complex is an effective way to generate income and build wealth over time.
For context, at least 55% of renters live in apartment buildings. Therefore, multifamily investing comes with an already established clientele.
To maximize profits, the location of an apartment complex must be ideal for renters in the area.
The best way to choose the right property is by conducting secondary research into various components of the proposed concept.
For example, our market research company often conducts apartment feasibility studies on behalf of contractors and developers hoping to choose the best location for housing units.
The real estate market analysis includes three major components:
- Review of demographic trends of the primary market area (PMA)
- Top consumer personas in the target market
- Market opportunity analysis within the rental property segment and breakdown of similar apartment complexes in the primary market area
For a better understanding of what information is inside this type of report, download our free Market Analysis Example Report.
Understanding the demographics of potential renters
A market analysis for your apartment complex looks at current and forward-looking market data using 5-year Census projections.
More specifically, the report includes key demographics of potential renters of the proposed apartment building, such as:
- Household income and size
- Housing and vehicles
- Race and ethnicity
- Marital status
- Occupation types
By knowing this information, building owners can better understand the characteristics of people who are more likely to rent an apartment.
With demographics, property managers can see who their building appeals to the most by age, income, preferred property type, and more.
This level of information is useful when marketing the housing building and getting more applications before your doors are even open.
Understanding consumer segments within the target market
Additionally, market survey research with our team provides you with the top consumer personas and valuable segments in the tested geography.
Through Mosaic clusters, we tell a story of the socio-demographics, lifestyles, behaviors, and culture to better understand your target audience.
Understanding the size of the opportunity
This section of the report focuses on the market potential of the housing industry within a 10-mile radius of the proposed location. Here is where we showcase a list of competitors.
Identifying potential competitors and their profitability is the key to success for any startup or new business venture.
Our market analysis reports share a plot point map of your proposed market area that details an inventory of competitors, locations, and revenue amounts.
This section of the market analysis also discusses consumer expenditure, average daily traffic volumes, and ideal marketing tactics to attract target renters.
With this information, you can find a location that allows your apartment complex to establish its own base.
Better yet, you will better understand the demand for a new housing concept and predict its success based on other apartment buildings in the area.
Drive Research is a national market research company located in New York. Our team partners with architect, engineering, and construction professionals to provide predictive analytics that helps determine the projected ROI of a new housing concept.
We offer various packages from multi-component feasibility studies to custom market analysis reports starting at $2,500.
To learn more about our services, contact us today.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
A SUNY Cortland graduate, Emily has taken her passion for social and content marketing to Drive Research as the Marketing Manager. She has earned certificates for both Google Analytics and Google AdWords.
Learn more about Emily, here.