Short-term rentals provide an added layer of income in a changing marketplace
The savvy developer has long been drawn to the safest investment with a steady return. With that in mind, residential units and properties, offices and commercial spaces have all provided the long-term ‘safe-bet’ rental to guarantee a steady income stream. However, in mixed-use properties, the short-term rental is finding its feet as a realistic option to increase culture, create community, and most important of all, raise the developer’s operating income. Taking advantage of a mixed-use building for rent rewards should surely be high on every developer’s modus operandi.
Developers do not just see the financial advantages to the boost in net operating incomes, but also the community and culture of their developments, and the draw it creates for further tenants in each section. The market for short-term renters is ever-changing, broad, and far from short of occupants. There is an abundance of renters who are looking for a predominantly home-from-home experience, and that creates a shift from hotel life into community living. The mixed-use development has everything these higher-end travellers and business operatives want and need.
Short-term rents can significantly boost NOI
For multi-family and mix-use properties, short-term rentals can seriously add to the net operating income. Increases of up to 25% are obtainable, allowing developers to switch to more affordable financing, creating just one of many desirable outcomes. So, what are the other advantages of engaging in short-term rentals? The short-term renter may once have held a reputation for disruption and revelry, making them unsuitable as a mix for the steady, family-formed long-term tenant. The market is now predominantly one of millennials and baby boomers, who are more upscale, seeking a relaxed and higher-end living style from their accommodation. With travel playing a major role in consumer spending within the tourism industry, not only do these families and business travellers have more disposable income to release, they want so much more than just a room to sleep in from their stay.
Is there any truth behind the culture clash of mixed-use rentals?
There might once have been a clash between the long-term renter, creating a family home within the more popular points of a densely populated city, and a leisure-seeking tourist looking for late-night entertainment and living the high-life. More recently, both types have become more appreciative of the benefits within a mixed-use development. Having restaurants, coffee shops, leisure facilities, retail centres and services within the complex, saves time and effort travelling to or seeking out amenities that offer the same bonuses to travellers, workers, couples and families. A little luxury with the lack of effort holds a healthy advantage to all.
Long- and short-term renters are moving towards the same goals
It takes intelligence and experience to merge these markets without causing disruption. The long-term resident can have immediate reservations about neighbours who don’t conform to the same ideals and desires from their residence. With that in mind, the agencies managing a development’s short-term rentals will often take over a full floor, or floors, creating a community of different cultures, yet still keeping them almost separate.
Operating in prosperous areas of culture, the long-term and short-term resident are looking for much nearer the same thing. Enlightenment, good taste, ease of life, and sophistication. Galleries, restaurants, art, leisure and entertainment. It turns out the short and long-term renters aren’t a million miles apart after all. Providing accommodation within the best neighbourhoods and the easiest access to these commodities draws the right type of tenant with the right budget. Operators with a steady stream of rent-ready guests can give the developer the security they need with the types of tenant that aren’t going to rock anybody’s boat.
The seasoned operator is the key to the mix’s success
An experienced operator with a steady stream of tenants ready to go should be the developers’ dream. Understanding the needs of the existing tenants, and the culture of the development, they are the ones ideally placed to fill the units with just the right type of tenant.
In doing so, a better match is made, and as shown by recent surveys, the experience of those family-filled units provides a happy fit with their new guest neighbours.
And which neighbourhoods are they looking for? The operator’s guests are consistently looking for the best areas of Paris to live, or the best areas of London to live; even for short periods, they’re still looking for the prime stay in Europe’s major cities for their visit. If you’ve created a premium development in a highly sought after area, the experienced operator should have the guests you need already waiting in the wings. The guaranteed rental income offered by such operators takes the pressure off the developer too, adding one more healthy tick down the list of advantages they’re now finding it hard to resist.
Juggling the applications of mixed-use spaces, the developer has the option to switch harder to occupy areas with those that are working more efficiently. Could-be commercial floors can be converted to residential units, designed to complement the short-stay visitor, with the responsibility lying clearly at the short-term rental operator’s door. It’s an easy sell to travellers that prefer apartment-style living vs hotel-style living, especially as corporation based accounts create a client built for this more luxurious model.
Full building lease options lead to a selection of pseudo hotels
The short-term market at every budget has shown that travellers love the idea of more relaxed and personal accommodation at every level. Airbnb has led the way for travellers of every social class seeking out a home-from-home over regimented hotel life and conforming to timetables and regulations. That doesn’t change whether you’re crashing on someone’s couch to leasing a villa or a penthouse suite. Predominantly filling the majority of floors or an entire development with short-term lease apartments creates the pseudo- or quasi-hotels seen to be gaining massive popularity as a highly desired niche in the industry.
What to look for when renting to a company
The developer who asks, “How do I rent out my property to take advantage of this mixed-use and mixed-market evolution?” needs to look no further than Serenty. With a portfolio of ready-to-go tenants, we’ve already established how to find a corporate tenant in London / Paris / Zurich, and filling the gap developers are looking to.
Our experts develop your mixed-use property for rent rewards you perhaps haven’t fully considered. Take the time to talk to one of our consultants about how short-term rentals can provide security and a boost in NOI. Alternatively, we can explain the benefits of a mid-term rental, and why it’s better than long-term options in certain situations and occasions.
We honestly believe that for the mixed-used property developer, the three best reasons to rent to a company are the same as the single unit operator: less work, less stress, and a guaranteed income.