As Homeshare Platforms Have Taken Over the Hospitality Sector, New Players Have Scaled the Concept to Institutional Investment-Grade Multifamily Assets

AS HOMESHARE PLATFORMS HAVE TAKEN OVER THE HOSPITALITY SECTOR, NEW PLAYERS HAVE SCALED THE CONCEPT TO INSTITUTIONAL INVESTMENT-GRADE MULTIFAMILY ASSETS

Multifamily has become an increasingly diversified sector - with WHAT MAKES THIS niche asset classes such as student housing, senior housing, coliving and micro-units garnering major investor interest. DIFFERENT FROM A HOTEL?

• Units are furnished with complete apartment-grade Short-Term Rentals Are The Next Niche In Multifamily in-unit amenities - often including full kitchen, full bath and in-unit washer/dryer The concept has existed in a limited format for decades - with small local operations and corporate housing outfits dotting the nation. • An operational platform that is streamlined to provide Homeshare platforms like Airbnb and VRBO then revolutionized a frictionless interface for guest booking, access, the market, steadily becoming a primary means of travel lodging customer nurture, and event planning 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 WHAT MAKES THIS DIFFERENT downtown submarkets nationwide. Given the valuable locations FROM TRADITIONAL MULTIFAMILY? and amenity sets of these apartment buildings, an underground market emerged on homeshare platforms for these particular units. • Guests pay on a nightly basis, often staying for only a A new crop of startups arose to legitimize and streamline this few nights market, with the most successful among them creating independent • All apartments come fully furnished with furniture, national platforms with hundreds of branded, furnished apartments. kitchenware and basic necessities Many of these platforms first began by partnering with existing multifamily properties to deploy a small sample set of units. For example, WhyHotel targeted newly delivered multifamily assets in HOW DOES INCORPORATING SHORT lease-up - offering to fill the rooms until full term leases could be TERM RENTALS IMPROVE A signed for 90%+ units. Several other platforms decided to begin on MULTIFAMILY ASSET? a smaller scale, ownership-based model. These operators focused • Reduces vacancy by diversifying customer base to fill on purchasing smaller three-flat and garden-style apartments, empty units converting them to short-term rentals as proof of concept. • Boost NOI through multi-year leases with guaranteed In 2019, many of these operators now exist on a national scale, market rents master leasing entire buildings for short-term rentals. Stay Alfred has established operations providing over 2,500 units in 33 cities • Provide additional amenities to full-time residents, across the country. Lyric has received funding from Airbnb for its including discounts and event planning 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. 2

OVER THE PAST DECADE, SEVERAL DEMOGRAPHIC FACTORS HAVE PRIMED U.S. MARKETS FOR 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. TOP FACTORS AFFECTING LODGING DECISION

42% 50% 41% HALF OF ALL MILLENNIAL TRAVELERS EXPECT LODGING STAY IN AN FEEL AT HOME STAY IN LOCAL TO FEEL LIKE A HOME UNUSUAL PLACE AWAY FROM HOME NEIGHBORHOOD AWAY FROM HOME

Source: Data from Conde Nast Traveler

2. DESTIGMATIZATION OF SHORT-TERM RENTALS

The National Multifamily Housing Council has conducted annual surveys showing that over 60% of renters either have a positive or neu- tral view of sharing their building with short-term renters, with the highest approving age group skewing towards those under 25.

100%

80%

HOW WOULD KNOWING THAT SHORT 60% -TERM RENTALS ARE ALLOWED 40% IN YOUR COMMUNITY 20% AFFECT YOUR OPINION? 0% Under 25 25-34 35-44 45-54 55-64 65+

Percent saying positive or no impact (by age)

Source: National Multifamily Housing Council (NMHC) 2017 Renter Preferences Survey

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. The global business travel industry is estimated to be over $1T. Over 700,000 companies have already utilized Airbnb for employee travel lodging. Short-term platforms that can provide consistent, guaranteed accommodations with high proximity to downtown offices will be the premier choice for business travelers.

OF HOMESHARE BOOKINGS NUMBER OF COMPANIES SIZE OF GLOBAL BUSINESS WILL BE FOR BUSINESS USING AIRBNB FOR TRAVEL LODGING STAYS BY 2020 TRAVEL LODGING INDUSTRY

Source: AirDNA, Curbed, McKinsey, Airbnb 3

MAJOR SHORT-TERM RENTAL OPTIONS NATIONWIDE

Seattle Spokane

Portland Montreal

Boise Minneapolis Boston

Pittsburgh New York Chicago Cleveland San Francisco Philadelphia Baltimore Denver Indianapolis Columbus Washington D.C. Cincinnati

Chattanooga Nashville Phoenix Charlotte Scottsdale San Diego Memphis Tempe Atlanta

Fort Worth Dallas Savannah THE GUILD Austin New Orleans LYRIC San Antonio Houston STAY ALFRED Tampa SONDER Miami WHYHOTEL

Current Beds Estimated Markets Present Venture Funding The Guild 300+ 4 $9M Lyric 400+ 7 $99M Stay Alfred 2,500+ 33 $62M Sonder 2,200+ 18 $135M WhyHotel 400+ 2 $14M TOTAL 5,300+ 63 $319M

LARGE-SCALE SHORT-TERM RENTAL OPERATORS MANAGE OVER 5,000 BEDS NATIONALLY, WITH A FIRM SUCH AS STAY ALFRED OFFERING OVER 2,500+ BEDS IN 33 CITIES

Source: Crunchbase, The Guild, Lyric, Stay Alfred, Sonder, WhyHotel 4

SHORT-TERM RENTAL OPERATORS HAVE ALREADY RAISED ALMOST $320M IN VENTURE FUNDING AND ARE POISED TO BE THE NEXT NICHE ASSET CLASSES ON INVESTORS’ RADAR

THE HUNT FOR NICHE ASSETS Niche Asset Investment Sales Volumes Rolling 4Q, Dollars in Billions

0 DEC-11 DEC-17 DEC-12 DEC-13 DEC-15 DEC-18 DEC-16 DEC-14 DEC-10 DEC-01 DEC-07 DEC-02 DEC-03 DEC-05 DEC-08 DEC-09 DEC-06 DEC-04

Medical Office Datacenter Cold Storage Age-Restricted Student Housing Affordable Housing Senior Housing

Source: RCA, Cushman & Wakefield Research

RISE OF NICHE ASSET CLASSES INTENSIVE COMPETITION FOR ASSETS

Post-Recession, niche real estate classes such as age restricted and affordable housing, coworking, data centers, as well as self and cold storage have soared as solid investments. Over time, 2% investors have taken notice and many of these niche classes now 4% make an appearance in the most prestigious portfolios. In Price Waterhouse Cooper's annual 2018 Emerging Trends in Real Estate, 32% age restricted housing reached nearly $14B in year-over-year 30% transactions. In the same report, Price Waterhouse Coopers found that Medical Office was the strongest prospect among office sub- AMOUNT OF CAPITAL sectors for the third year in a row. More emergent niche areas FUND MANAGERS PLAN TO have also seen signs of promise. Data centers held another banner DEPLOY IN REAL ESTATE year in 2018, absorbing over 474 megawatt users and pre-leasing ASSETS IN THE NEXT 12 more than 55% of all new developments. Coworking office space MONTHS COMPARED WITH reached a record 51 million square feet globally in 2018. Cushman THE PAST 12 MONTHS & Wakefield investor surveys found that many were comfortable with up to 30% of a building devoted to coworking.

Short-term rentals follow in the footsteps of these niche asset classes that began with a small footprint but have been making a 32% large impact in investor portfolios.

Significantly More Capital Slightly More Capital Same Amount of Capital Slightly Less Capital Significantly Less Capital Source: Cushman & Wakefield Capital Markets Research, Preqin Fund Manager Survey Nov 2017 5

SHORT-TERM RENTAL PLATFORMS BEGAN BY PARTNERING WITH EXISTING MULTIFAMILY BUILDINGS TO LEASE EMPTY UNITS & DIVERSIFY REVENUE STREAMS

TIMELINE WHAT’S NEXT The short-term rental space has evolved tremendously over the past decade. What began as small-time owners sharing space in their homes has morphed into a global industry where Airbnb alone is worth an estimated $31B. Travelers initially were drawn to homeshares for price discounts and the added authenticity & Airbnb is founded community these offered over traditional hotels. Now, travelers have reevaluated what they’re looking for in travel accommodations entirely - seeking more of a home in the location they desire 2008 than just a ‘place to stay’. Travelers for vacation, business, medical or education have all been moving towards homeshare platforms. However, these platforms alone do not provide the quality and consistency that many travelers expect when it comes to in-unit furnishing, building amenities, service or location. This is where short-term platforms Stay Alfred is founded that utilize traditional multifamily assets come in. Not only have these found success in limited trials, but full-scale buildings built 2011 on this model are mere months away from delivery.

STR TRENDS GOING FORWARD:

Airbnb hits 10 million bookings and 4 million + guests

2012 BUILD-TO-SPEC SHORT-TERM RENTAL DEVELOPMENTS WILL PROLIFERATE Lyric2014 and Sonder are both founded

• Stay Alfred hits $25 million in revenue prior to debt/equity INSTITUTIONAL INVESTMENT raise AND ATTENTION WILL CONTINUE TO GROW • WhyHotel2016 and The Guild are both founded

NMHC holds summit on short-term rentals and includes questions on the topic for their annual survey CONTINUED EXPANSION 2017 ACROSS U.S. & INTERNATIONAL MARKETS WhyHotel announces subsidiary dedicated to ground-up short-term rental2019 assets 6

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 www.cushmanwakefield.com or follow @CushWake on Twitter.

SUSAN TJARKSEN Managing Director, Capital Markets Tel: +1 312 523 7617 [email protected]

LAURA BALLOU Senior Research Analyst, Capital Markets Tel: +1 630 244 2456 [email protected]

JACOB ALBERS Research Analyst, Capital Markets Tel: +1 510 735 4368 [email protected]

multifamily.cushwake.com

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