As a developer in a high-growth market you’re probably considering the many interested, active buyers scouring your area for great deals. Many investors are looking for better returns and a higher quality asset than they can find elsewhere. You see large-scale luxury development properties selling for huge profit in your market and you want in on the action.
Or, maybe you have tried to develop and market a luxury project but are coming up short and you’re disappointed. Like so many developments, it looked better on paper.
When it comes to luxury real estate, one key to success is amenities. To compete in a high-growth market your property will need to match or exceed the level of luxury of that project you heard sold for a record-breaking amount. With rising construction costs across the country, how is this done?
The Pareto Principle and Amenities
The Pareto Principle, also known as the 80/20 rule, states that roughly 80% of the effects come form 20% of the causes. A common mistake developers make when designing a luxury project is limiting or removing the things that will have the greatest impact in differentiating their property. They choose to eliminate the very 20% that would lead to 80% of the project’s success.
After bidding a thoughtfully designed project they choose to cut cost by removing amenities in the name of value engineering. Too often this so-called value engineering does more to decrease value then it does to preserve it. This is not because the exercise of value engineering is fundamentally flawed. It is the result of poor planning.
The Amenity Problem
A property development with less access to community amenities must compensate for it by providing more on-site amenities. If your development doesn’t have a prime location with easy access to existing lifestyle amenities you can easily make your project competitive by offering more amenities within your property. This is generally possible because of lower land cost due to less-coveted location.
But let’s say you want to compete in the luxury category. Not only will you need to have an outstanding location, your property must provide the greatest selection of on-site amenities. This is the problem luxury developments face: how to maximize amenity spaces while preserving the bottom line.
What many don’t realize is that successful luxury projects are attainable with the same or similar dollar amounts you’re already paying. You just have to approach them in a smart way.
A Smarter Approach to Outdoor Amenities
For outdoor amenities the most important 20% comes down to two things: access and mindset.
For outdoor amenities to have an impact they need to be easily accessible. Position every outdoor amenity space immediately adjacent to an indoor amenity space. Incorporate way-finding and branded signage throughout the property to advertise and direct people to these locations. Make them accessible year-round at all hours of the day as much as possible.
Along with being accessible, outdoor amenities must provide access. Locate outdoor amenities where they will provide access to the best views. Put them where they will stand out and be visible from outside your property as a way of marketing the development. Outdoor amenities should be located away from private units whenever possible to extend the hours of use. This also helps to avoid the fishbowl affect of dozens of windows staring down upon the space.
Put forth the effort to place indoor and outdoor amenities in the right locations from the beginning. If your focus is on the number of private units or parking stalls you can fit in, you may miss out on the opportunity to create a stunning amenity space. You don’t want your amenities to feel tacked on. Your potential tenants will sense your carelessness and are less likely to spend the money and move in.
If a luxury project is your goal, it’s time to leave behind some traditional ways of thinking. Consider this example: you don’t want to place trees in a pool area because of the maintenance involved in keeping the pool clear of leaves and debris. While this may be a valid concern in planning your private backyard, it doesn’t apply to a luxury hotel or apartment. Leaves or no leaves, property management is going to pay someone to clean the pool periodically. But if you don’t have any greenery in your pool area, how can you justify touting it as a “resort style” amenity?
You may feel uncomfortable doing something just for the sake of it looking cool. Shift your mindset to reflect on the places you have visited that you love. They matter to you because of the feelings you have when you are there. Luxury outdoor amenities don’t just look cool – they feel amazing when you are there.
If you only do what you have already done (or what other local developers have done), you can’t expect your project to stand out. Let go of tradition and embrace innovation. Switch your focus from the appearance of luxury and seek to capture the experience of luxury.
Outdoor Amenity Essentials
What do you stand to lose if you only go 80% of the way on a luxury project? You find yourself stuck between the aspirations of huge returns and the reality of shrinking amenity spaces due to poor planning. In other words, you end up with a missed opportunity.
Plan ahead, change your mindset, and embrace what it means to develop a luxury project.