When space and budget don’t permit a pool, a chef-style communal kitchen, a dog park, and other features associated with big, luxe buildings, there are other steps you can take.
For years, developers have worked to come up with the right amenity package to attract renters and owners in multifamily dwellings. New options can make a huge difference in distinguishing one property from another in an increasingly crowded field. But the downside to incorporating the extras is that the choices offered may cut into a bottom line since many features are costly to build, maintain, and insure.
In recent years, competition among bigger, high-end, luxury buildings has meant a smorgasbord of increasingly diverse, upscale features. Options often include well-outfitted fitness centers and studios, resort-style swimming pools, communal kitchens and dining areas sometimes staffed by a chef, collaborative conference centers, and front desks where employees accept and store groceries in refrigerated compartments. Some sites feature food trucks that stop by regularly and perks that dog lovers want, from parks to runs, grooming stations and trained walkers.
Smaller buildings may take cues from larger sites but, when it comes to the amenity packages they offer, they’re more limited by space and funds. Developers with fewer units can still do their part to offer amenities, just not the same number or kind. But the good news is that their occupants may be content with a few choice ones, along with a good location, condition and maintenance, and lower rent or sales price than their amenity-laden bigger counterparts. Here are six ways developers, property managers, and investors can still stand out:
Tracking data rather than guessing. Improvements in technology help give experienced developers, investors, and property managers a leg-up. Rob Finlay, founder of tech start-up Lyra Intel based in Charlotte, N.C., developed a software solution that helps them make smart property choices for a specific site. These choices are based on up-to-date data collection rather than random information based on what they think might appeal or what competitors are doing. “We help developers and others know exactly who their occupants are, what they say they want, and what they actually end up using or ‘engaging with’ rather than guessing,” he says. The reason is key. Finlay adds, “Every property varies according to the people who live there. Do they want a big lobby, a brew pub or a climbing wall? We monetize residents’ behavior rather than base decisions on assumptions that aren’t backed up by fact.” Results can be an increase in net operating income, less turnover and the chance to make changes since information is continually updated. “We’re able to find out if residents actually use a dog park or grooming station, for example, or if that space could be put to better use so the owner doesn’t waste money,” he says.
In addition, a mobile app allows managers to conduct surveys, deliver news on special events on site or nearby locations, and track attendance. In turn, residents can use the app to send maintenance requests or sign into events. And the costs are affordable, even for most small buildings. Prices vary depending on the type of license, but range between $150 and $1,500 per month, he says.
Wi-Fi and other bells and whistles. These days a building of any size needs to be outfitted with reliable Wi-Fi that doesn’t drop off repeatedly. This is a relatively inexpensive return on investment over time, says Nat Kunes, vice president, Product, AppFolio, a software developer based in Santa Barbara, Calif.. AppFolio specializes in programs that aid developers, investors and property managers. His best practices advice is that they focus on such features as 1) access control cards to lock and unlock doors rather than hand out—and replace—traditional keys; 2) install smart thermostats that give each resident control over their own premises; and 3) gift them with a smart home speaker when they move in that will allow them to pay rent and file maintenance requests, along with other needs.
Such features are especially important to Gen Z—those born in the late 1990s to early 2000s. They are a cohort beginning to move into their own apartments and homes and they expect “on-demand” and “digital-first” living, Kunes says. But they also expect such features not just in their apartments but throughout their building. “They’re a social group that likes to gather in communal spaces, not just their own spaces,” he says.
Smaller, less costly features. Once more is known about a demographic’s preferences, decisions can be made about whether the space and funds are available, or if it’s better to go with Plan B and other options. Even if there’s no room for a gym (unless it’s very small but it still needs to be well ventilated), swimming pool or hot tub (which may increase insurance costs) or any kind of food service, there may be both room and funds for on-site storage lockers or bicycle racks, both of which are also relatively inexpensive to install, says Josh Kaplan, senior vice president at Transwestern’s Los Angeles Multifamily Investment Services Group. In his Los Angeles market, rooftop decks are now the No. 1 amenity for smaller boutique buildings because of the area’s great weather. “This is something that tenants can’t usually get in a high-rise, fully-amenitized property,” he says. And in many cases, the roof can be landscaped affordably with some hardscape, softscape of plantings, and casual furnishings since the space already exists. Costs will vary greatly depending on whether it’s a ground-up development or an existing small building that is being renovated, Kaplan says.
Other features like a bike storage room with tire pump and in-unit laundry equipment could pay for themselves soon after purchase through increased rents. For example, in-unit laundry appliances might run $200 to monthly rental rates, Kaplan says.
Some buildings have been known to charge tenants or owners extra to partake of certain features not everyone wants such as the use of a gym.
Lifestyle curation. Yet, another option is to let the residents tell the building developer, manager or investors what building activities should be. Richard B. Broder, a multifamily developer in Detroit, likes this approach for his properties and calls it lifestyle curation. At The Albert, Capitol Park, the team did programming like another of its properties that is larger, younger and more party-ish but feedback revealed that the Albert clientele was mellower. “‘What happened to the wine and cheese party?’” they wondered, so we’re changing it back,” Broder says. At it’s soon to open The Hamilton, Midtown, the activities may be more wine and cheese fetes or perhaps ribs and beer with a DJ, depending on what it learns. “Buildings take on personalities.” Broder says, and he has found the best way is to test some out and constantly survey residents.
When it comes to budgeting for them, all such activities are expensive, Broder finds. “We only hope we achieve greater rent than comparable properties in the market and see less turnover,” he says.
A related idea is to create a budget line item for such times to keep costs down, perhaps to between $3,000 and $6,000 or up to $20,000 and more, depending on the finances, says Hector Vargas, President, South Florida High-Rise Division, FirstService Residential, North America’s largest property management company, based in Miami.
Beyond a building’s walls. When a site doesn’t offer extra square footage or the owner doesn’t have the financial resources to install amenities, another option is to connect occupants with existing community resources that will agree to a special arrangement. The thinking goes that you provide them with a steady stream of customers in return for a discount for customers and even a referral fee to you. Possible customers with whom this might work well could be almost any place, from a neighborhood gym to yoga or Pilates studio, restaurants, hair salons, dentist and doctor offices, and so on. Lyra Intel’s app does this automatically.
A slight variation on this that adds a touch of personalization, which many residents and owners seek today, is to offer each resident a gift certificate for an activity they’ve expressed interest in such as a month or two of dog walking or yoga classes. This would be offered rather than a rent concession of $100 or so when they move in. “These days people like having something tailored to their wants rather than being given something that’s very generic,” says Kunes. And if it works, you might repeat the practice when residents renew their lease or for owners at holiday time.
Preventive maintenance. Protecting your building’s assets is also key to success. “Be sure all repairs, replacement, and maintenance of the structure and systems is handled, as well as properly funded through a reserve component,” says Vargas of FirstService Residential. Renters and owners don’t want to live in a building that looks bad and is poorly maintained. Think ahead and plan rather than only react, especially before there’s a crisis.