The changes that the pandemic outbreak brought about will alter the competitive landscape for several years. Several business owners are on hold to review their assets honestly during this crisis. And while assessing options, two prominent scopes came out because of the pandemic disruption:
- Converting hotels into affordable housing.
- Converting hotels for marketing rental apartments for capitalizing on the unprecedented demand.
The Conversion Of Hotels Into Affordable Housing Units – Scope To Diversify Risk And Maximize Asset Value
With the world trying to move to its “next normal” stage, the demand for lodging and travel is likely to boost the hotel industry vertical. Simultaneously, the hotel values are low, and the housing costs are increasing across entire Canada and other places. Furthermore, Maxwell Drever says that there is great demand for affordable housing units.
In 2018, a single-member from various households across Canada and other places made it to the waiting list for affordable housing. Hence, multiple government levels have developed programs for addressing the crisis of affordable housing. Here the conversion of the hotels which have a good location is a favorable solution.
The concept of affordable housing indicates a lucrative conversion scope for hotels along with complementary infrastructure and footprints. And because this housing type doesn’t have to undergo economic cycles, it is a good alternative for hotel properties. And in addition to the government incentives, it can provide some owners with the scope to maximize the asset value and diversify risk. People can also lucratively divest from the hotel investment.
The Convention To An Apartment Rental – Scopes For Long-Term And Stable Returns
Apartment rental rates are increasing. The rate for a national average vacancy for 2019 was approximately 2.0%. Also, the average rents for the rental units are purposely by 4.1% nationally. And when the pandemic outbreak restricted immigration and the requirement for student housing, the occupancy rates increased to 2020. However, as the market moves forward after everything normalizes, it’s anticipated to gain back its power.
Today, there is rental growth and unprecedented tenant demand in apartment buildings all over the country. Hence, the conversion of the hotel to the apartment is gaining momentum. A hotel in North America that opened back in 1970 underwent a renovation in 2019 and transformed into short and long-term rental apartments.
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How Can You Decide If The Conversion Is Correct For The Property?
According to Maxwell Drever, if you want to know the feasibility of the conversion, you need to opt-in for the best and highest use analysis. This analysis can help evaluate the supply and demand level for the optional building uses within a particular market. It can highlight the option that will add value and bring long-term returns. The analysis helps to answer some of the essential queries like:
- What is the future or current market demand?
- And what are the regulatory controls?
- and what is the sector profitability?
- or what is the industry price structure?
- What is the competitive landscape?
- What is the position of the community on a potential redevelopment?
Hence, the outcome of this analysis can assist you in deciding the ideal asset use and guide the conversion process in a better way.
