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Short-Term Rentals: The Next Evolving Asset Class

CHICAGO, July 9, 2019 – The multifamily sector has become increasingly diversified over the past decade, with niche asset classes such as student housing, senior housing, co-living and micro-units garnering major investor interest.

Short-term rentals appear to be the next wave according to a report released today by Cushman & Wakefield, Short-Term Rentals: The Next Evolving Asset Class, as new players in the homeshare marketplace have scaled the concept in recent years to institutional investment-grade multifamily assets.

While the short-term rental concept has existed in a limited format for decades—with small local operations and corporate housing outfits dotting the nation—homeshare platforms like Airbnb and VRBO have revolutionized the market, steadily becoming a primary means of travel lodging for the common consumer—attaining over 500,000 average stays per night by 2018. At the same time, the 2010s real estate cycle saw a wave of new Class-A apartment buildings delivered largely around downtown submarkets nationwide. Given the valuable locations and amenity sets of these apartment buildings, an underground market emerged on homeshare platforms for these particular units.

In 2019, many of these operators now exist on a national scale, master leasing entire buildings for short-term rentals. Stay Alfred has established operations providing over 2,500 units in 33 cities across the country. Lyric has received funding from Airbnb for its portfolio of assets across 13 markets. WhyHotel has announced a new subdivision called Hospitality Living that will be dedicated to building ground-up short-term rental developments.

“The short-term rental space has evolved tremendously,” said Susan Tjarksen, Cushman & Wakefield Managing Director. “What began as small-time owners sharing space in their homes has morphed into a global industry where Airbnb alone is worth an estimated $31 billion.”

According to the report, several demographic factors have contributed to the short-term rental surge:

  1. Apartment-Grade Expectations: Travelers increasingly want to stay in places that have the complete set of amenities they’ve come to expect from the apartments they live in.
  2. Destigmatization of Short-Term Rentals: The National Multifamily Housing Council annual survey shows that over 60% of renters either have a positive or neutral view of sharing their building with short-term renters.
  3. Short-Term Rentals for the Business Traveler: Business travelers made up 15% of Airbnb bookings, with the homeshare platform looking to expand to 30% by the end of 2020.

What differentiates a short-term rental from a hotel or traditional multi-family residence is that guests pay on a nightly basis, often staying for only a few nights, and units are furnished with complete apartment-grade, in-unit amenities.

“Travelers initially were drawn to homeshares for price discounts and the added authenticity and community these offered over traditional hotels,” said Tjarksen. “Now, travelers have reevaluated what they’re looking for in their accommodations entirely, seeking more of a home in the location they desire than just a ‘place to stay.’”

Chicago is among major U.S. cities experiencing a short-term rental boom:

  • According to AirDNA, there are over 7,500 short-term rental units currently on homeshare platforms in Chicago.
  • Short-term rental concepts such as Stay Alfred, Lyric and Sonder already provide over 300 units for Chicago visitors. Chicago is the number one destination request for Stay Alfred—both for families traveling on vacation and business travelers alike.
  • Arrival of Hyatt House—the extended stay arm of Hyatt—in Fulton Market is expected to provide 67 residences to attendees of McDonald’s famed Hamburger University.
  • Corporate short-term rentals have also grown in prevalence, with firms like Oakwood and Onni Group scaling corporate housing operations to full floors of newly delivered downtown Class-A apartments.

The expansion of short-term rentals is expected to continue into the foreseeable future in the U.S. and internationally with an increase in build-to-spec short-term rental developments.

“For investors, incorporating short-term rentals can improve a multifamily asset by reducing vacancy and by diversifying the customer base to fill empty units,” added Tjarksen. “Boosting net operating income through multi-year leases with guaranteed market rents and providing additional amenities to full-time residents, including discounts and event planning, is a trend we are likely to continue to see.”

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit  or follow  @CushWake  on Twitter.


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