The future of residential construction: focus on tenants

Misallocation of housing as a core problem

In times of weakened economic fundamentals at the national level, investment-induced housing planning leads to a discussion of effective housing demand. Because the capital released by the national banks is primarily looking for land to invest in, rather than for tenants to live in, there is a risk of building in the wrong places. The five major Swiss centres are chronically undersupplied with flats. They account for 14% of the national housing stock, but only 3.5% of all vacant housing. Since 2014 their vacancy rate has been consistently low at 0.3 %. On the other hand, in rural and peripheral regions, the danger of oversupply has built up continuously since 2013. What is missing for intact markets in Geneva, Basel, Lausanne and Zurich is created here. Today, 31% of the housing stock already accounts for 38% of vacancies.

Options for action

In tenant-friendly markets, it is above all older buildings that have to compete with new projects. Only small rent surcharges for new buildings increase the turnover from old to new flats. Vacancy management is gaining in importance and an up-to-date supply of apartments plays an important role. Old flats can be adapted to new target groups with renovations and adjustments to the floor plans, but the potential for passing on the costs of renovations by increasing rents is low. Lean solutions are required in order to retain loyal tenants or to avoid the risk of voids in new tenancies. On the other hand, development projects and densities in the major and core cities offer the possibility of attracting more households. Additional floors or extensions enable acceptable high-quality, flexible and yet inexpensive densification.

Knowledge of the target group needs for a demand-oriented supply

The even stronger target group orientation in the future is common to all options for action. The short and long-term rentability of apartments in newly built housing developments depends on the diversity of the offer and the environmental qualities created. The key lies in a housing mix that is geared to future demographic conditions in the region or compensates for a lack of supply in the surrounding area. The stability of the residents also depends on the residential environment, which is characterised by the new buildings. The residential environment is the result of urban planning considerations as to the degree of privacy and public realm to be created, as well as the facilities in and around the buildings. A variety of measures are required, depending on the situation.

Housing quality as a unique selling point

The differentiation of housing quality can ultimately be the decisive unique selling point compared to the offer by the competition. Because when the tenant is spoilt for choice, he looks for something special. Sustainable rental housing construction forms a stable basic framework, enriches it with a specific residential quality and is filled with a well-thought-out initial letting.

Further development of data-supported product definition

The challenge in defining target groups is to convert the available data on these target groups and their needs into concrete quantitative product characteristics. Due to the rapid development of data, we now know more than ever about local numerical data concerning household structures, age groups, incomes and their development. But we are only starting to link this data to the needs of tenants and transform it into an accurate and qualitatively coordinated product. In the not too distant future, data-based product design will be further boosted by the increasing availability of big data and the resulting learning effects about user behaviour.