Various trends have coalesced to increase the popularity of short-term rentals in mixed-used communities.
First is an uptick in travel, by 1.9 percent in the leisure sector and 1.6 percent in the business sector, in 2018. All told, domestic travelers spent over $1 trillion last year. Second is the desire for apartment-like lodging — full kitchens, room to spread out, etc., as offered by platforms like Airbnb — at prices generally more affordable than those offered by hotels. Estimates are that some 500,000 companies around the world use Airbnb for Work, for instance.
Airbnb is among many companies to successfully mine multifamily properties for short-term rentals; some 65 percent of Airbnb’s 2017 rentals were in such properties. Also notable is the approach of WhyHotel, which has been known to accumulate as many as 100 empty properties in a new building during the lease-up process, which can take as long as a year. And as leases are signed, WhyHotel scales back.
The point being that long- and short-term rentals can exist side by side. Developers have in the past held a dim view of the latter group, but a study showed that that is not true of long-term renters themselves. Over 60 percent either have a positive or neutral opinion of their short-term brethren.
All of which brings us to another trend — the rise of the mixed-use community. These properties, featuring places where renters can live, work, shop and play, are popular with 78 percent of the population, including 85 percent of Millennials. The latter number immediately has galvanized the real estate community, which is forever looking to tap into the gold mine represented by that age cohort.
Among the places that has been evident is Chicago, where an old retail center is in the process of being transformed into a mixed-used community known as Sawmill Station, featuring a 240-unit multifamily property, as well as shopping, dining and entertainment options. It is scheduled to open in the fall of 2020.
And there, as in other properties in that class, short-term rentals would appear to be a distinct possibility, as such places offer the dual benefit of filling vacancies and boosting the developers’ net operating income. WhyHotel, which to date has largely explored short-term rental options in the Baltimore-Washington corridor, is looking to make inroads elsewhere. Other companies, like Stay Alfred, and Lyric, are already involved in 33 and 13 markets, respectively.
The bottom line is that while there has often been an uneasy peace between long- and short-term rental properties in the past, it is now becoming increasingly possible for them to exist side by side.