The Renter's Case for Class A, Class B and Class C Apartments

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ARLINGTON, VA—Multifamily developers and investors aim to rapidly build new projects as the demand for multifamily housing increases. In addition to new construction, they are also repurposing existing properties located in prime locations inside and outside of the urban core.

“Over 349,000 units were built in 2017 but they are all now absorbed. We have a 4.6 million unit deficit in the multifamily sector,” says Bob Pinnegar, president & CEO of the National Apartment Association.

With so many residents clamoring for multifamily space, the demand for housing remains high with renters. A case can be made for the appeal of all three major categories—Class A, Class B and Class C assets.

Class A

The Class A multifamily property is the luxury apartment, located in prime and convenient areas and is “equipped with all the bells and whistles including fancy gyms, pet showers/groom areas plus resort-style amenities and finishings,” says Pinnegar.

If these properties are located in suburban areas, there is usually a life center or town square nearby that is newly constructed or a repurposed from a regional mall.

Class B

The Class B multifamily product tends to be around 10 years old and is a much more steady product. For a renter, the unit costs less than a mortgage and is well located. However, fancy gyms or pet shower stalls are not typically available.

Class C

These assets are typically 20-25+ years old and still uses the “one parking space per bedroom” formula. There are no gyms or extra amenities but there may be some outdoor space.These properties are usually near older neighborhoods.

“We are now seeing a rejuvenation of properties where product built decades ago, but is located in a highly sought after area, is now being revived,” observes Pinnegar.

For example, there is a “C” class property in the DC-area that happens to be in a prime location. Investors took the building all the way down to the studs and made it into a luxury apartment. “B” properties are also being repositioned as they are sometimes located in a prime location where higher rents can be commanded, Pinnegar tells GlobeSt.com.

“Over time, life evolves and commitments, personal preferences and neighborhood vibes change,” says Pinnegar. “Gen Z’s, millennials, first responders, baby boomers and empty nesters all like to reside in central locations at some point in their lives and possibly in a suburban setting at another point in their lives. There will always be a demand for multifamily housing.”