PALM SPRINGS, CA—The suburbs may be getting a bad rap, but they still dominate new apartment construction and still hold appeal for renters—as long as they have an urban vibe, said panelists at NMHC's Apartment Strategies Outlook Conference here yesterday. The importance of modern design, amenities and walkability are key to multifamily builds outside the urban core.

Dean Henry, CEO of Legacy Partners Residential, said his firm is blending product type, such as suburban product in an urban location. Carter Siegel, director of Wood Partners, added that “it doesn't matter” if the product is in the suburbs or the urban core “as long as you deliver the price point that's appealing to the consumer.”

Moderator Greg Willett, VP of MPF Research, a division of Real Page Inc., pointed out that the suburbs still dominate new construction, and Brian Natwick, president, multifamily, for Crescent Communities, added that location has “evolved over time. The definition of suburbs is changing.”

Indeed, the panelists were unable to define what the word suburbs really meant, partially because “not all suburbs are the same,” said Jay Parsons, director of analytics & forecasts for MPF Research. “There are some good ones out there. Good suburbs achieve strong rent growth. In the right suburbs, vacancy is perpetually low. The drivers for good suburbs are better economics, more jobs, higher home values and urban characteristics such as lifestyle amenities.”

Siegel said the barriers of entry are stronger in the suburbs than in infill urban markets. “NIMBYism is strong in the suburbs.” Natwick added, “You're looking for a compelling story, sustainable value creation whether it's urban or suburban.”

Willett said the suburbs are “pretty active if you go out there and look, although the activity is not as visible as in the urban core.”

With regard to demographic groups, Henry said in the last 12 months one million of the three million jobs created in this country went to Millennials, although about half of these were relatively low-paying service and retail jobs. “Only the top 20% were high-pay jobs,” so most Millennials are doubling up and sharing rent in urban locations.

Because of the price point, often you will see more older renters in pricier urban apartments and more younger renters in more-affordable suburban apartments. Siegel added, “Suburban product needs to be more urban to appeal to Millennials, even if it's technically suburban garden—it feels like urban.”

While the urban-core development landscape is undoubtedly competitive, the suburban environment is also heating up, although “it's easier to attract capital on urban than suburban product,” said Henry. Siegel added that it has “become more competitive in the suburbs recently.”

Regarding move-outs for home purchases, Henry said he hasn't noticed this trend occurring, and Parsons said there is a higher renewal upon lease expiration in the suburbs than in the urban core.

Although urban product is demanded by renters, so there will always be a supply there, said Siegel, “We will invest most in the suburbs and have more of an emphasis on the suburban strategy, even though we will always have a core presence.” Natwick added that capital “wants to diversify into the suburbs” and not remain strictly in the core.