Across the country, overall rent values are rising at an unprecedented rate. In the Triangle region (Raleigh, Durham, Chapel Hill), median gross rent has risen nearly 12%, compared to the national median gross rent increase of 6%¹.
In 2017, there were 200+ people a day who moved to Durham and Raleigh² — Raleigh had the 3rd fastest growing MSA in the US, with 20.5% population growth from 2010 to 2018³.
To meet this increasing demand, property developers have been building out more luxury apartments, condominiums, and townhomes.
However, this construction approach is typically accompanied with 2+ year project completion times (from breaking ground to move-in). During this lag, renters are spending more on housing while new housing supply catches up with increasing demand. The efficiency of supply is quite low compared to the amount of demand the market is facing.
The rise of new construction begs the question: Is building more supply the only way to meet the growing demand?
Currently, there is an average vacancy of ~6% in the Raleigh-Durham region, representing an inventory of around 8,000 rental units⁴ . The growth rate of demand in the region (especially for renters) outpaces the number of units that are up for lease. Alcove believes that the existing supply, already constructed homes and condos, can be optimized to better fit incoming demand rather than building new supply.
Our approach to this problem is simple: Convert existing supply into easily consumable coliving properties, outfit them with essential coliving services, and match people together to live in these premier homes.
As the region continues to grow, the demand for less efficient rental units (studio apartments, 1 bedroom units) will rise, and we believe that shared living arrangements can allow existing multi-family units to be converted instead to meet this demand. In Co-Living properties, tenants receive a better price/sq ft. ratio, in addition to other benefits that save them both time and money. Because of this, consumer education is important for this concept to work and grow.
From a property management perspective, owners have a harder time filling vacancy of larger homes (3+ bedrooms) vs. single bedroom units due to lower transaction volumes, knowledge of the per-bedroom demographic, and lack of technology.
However, homeowners and property managers on Alcove are converting their portfolio of multi-bedroom homes into Coliving homes, creating new rental products that cater to the young professional room seekers who are flocking to the area. Additionally, inventory of bedrooms in multi-bedroom properties are more price competitive than single bedroom units due to lower Net Square Footage/bedroom ratios (it’s a more efficient use of space). Tenants benefit with better pricing and choice, and homeowners receive greater occupancy and higher stabilized returns over the life of the lease.
By turning single family homes, townhomes and apartments into a new type of rental supply, we‘ve made renting more efficient and created downward pressure on rental prices. This is great news for renters, and thanks to this price pressure, property managers fill vacant homes with qualified roommates faster than leasing traditionally.
Ever since we introduced the concept of “Coliving” to the Raleigh-Durham area, we’ve placed thousands of people in per-bedroom leases in beautiful homes. Alcove has made this possible by coordinating move-in dates, budgets, and lease lengths of users and matching them into compatible groups.
For landlords, Alcove offers the opportunity to rapidly fill their rental homes, increasing occupancy and generating greater returns — 20% increased NOI over standard leasing.
All this being said, we’re excited to be at the forefront of the coliving industry helping both renters and landlords. We’ll soon expand to cities across the country. Let us know if you’d like to see us in your city.