Alternative Leasing Models Gain Traction
Industry analysis suggests conventional 12-month leases are being challenged by alternative occupancy strategies. Some operators are reportedly realizing up to four times more revenue by leveraging furnished, flexible-term leases for short-term or corporate rentals, a strategy that pays more in high-demand urban markets. This trend includes hybrid models that blend traditional long-term leases with short- or mid-term rentals to capture a wider range of tenants.
- The "mid-term" rental market, defined as furnished rentals for 30 days to a year, is a rapidly growing segment, with renters willing to pay an average of $600 to $800 more per month for the flexibility and convenience. - Companies specializing in flexible living, such as Sentral, are actively partnering with multifamily owners to manage and market both short-term stays and traditional leases within the same building. This hybrid model allows properties to cater to a wider range of tenants, from vacationers to long-term residents. - One operator, Sentral, which manages a portfolio of over $4 billion in Class A multifamily assets, anticipates that $45 million of its 2024 revenue will be generated from furnished, flexible-stay units. Their model involves managing about 15% of a building's units as furnished, short-term rentals, which has been shown to increase a property's net operating income by an average of 20%. - In a strategic move to capture the corporate housing market, The Deco, a competitor in Chicago's Gold Coast, is now offering upscale furnished accommodations specifically targeting business professionals and travelers. - The demand for flexible leasing is driven by the rise of remote work and the "digital nomad" lifestyle, creating a new class of renters who prioritize the ability to live and work in different locations without the commitment of a 12-month lease. - Third-party platforms like Blueground and Landing are establishing a significant presence in high-end Chicago neighborhoods, including the Gold Coast and Streeterville, by leasing blocks of apartments and then subletting them as furnished, flexible-term rentals. - Short-term rentals have the potential to generate 2-3 times more income than a traditional long-term lease, especially in high-demand urban areas and during peak seasons. However, this strategy comes with higher operational costs for cleaning, utilities, and management. - Beyond full-unit rentals, some models even allow traditional long-term residents to monetize their own apartments by subletting them for short periods through platforms like Airbnb, with management's approval and partnership.
