What exactly is the value of a rooftop amenity? How do I budget for that? Developers often find themselves asking these questions without any clear answers.
Most developers who have struggled with this challenge will ultimately spitball a number and put it as one line item in their pro forma under “landscape.” Or, they will leave it off the pro forma completely and pick it up in their contingency budget after all is said and done.
If this sounds like you then you’re probably looking for a better way to make those creative rooftop and outdoor living experiences you’ve been dreaming a reality. Continue reading below as we outline the questions you should be asking yourself up front to plan and deliver rooftop amenities that will finally measure up to your expectations and metrics for success.
Are my pro forma hard costs accurate for the level of amenities my project needs?
The pro forma is your starting point for all hard and soft costs. Your project’s success begins and ends with the right allocation of funds. Often your estimate for outdoor space, and especially outdoor rooftop space, is in no way even close to what is really required.
The overall cost per square foot that you should use is dependent on where your market is located as well as the current economy. Construction costs fluctuate so it is necessary for you to have an expert verify and validate your numbers so you aren’t blindsided when contractors begin to bid on your design. A qualified and experienced designer should have the knowledge to inform the project, but you’ll have to get them involved early enough to help guide you to make the right estimates.
In our experience, estimators generally underestimate early on for two main reasons. First, they are using out-dated information that doesn’t account for rising costs of materials and neglects the market trend of bigger and better outdoor spaces. They typically only carry enough to cover the cost of turf and trees, which is nowhere near sufficient. Second, their number doesn’t account for the lack of experience that subcontractors tend to have. Landscape contractors have varying levels of experience which means if your plan includes more than basic planting, you may be in for some inflated bids to cover the cost of their learning curve.
Without the help of a knowledgable design consultant who can give you direction on your hard costs, you’re bound to face great risks. Nontraditional outdoor features such as custom overhead structures, unique paving, and water features can fall through the cracks during preliminary estimating. They can even be mishandled during final bidding if subcontractors become confused about what belongs in their scope. Many assume these elements are being built alongside the rest of their project only to find out that thousands of extra dollars are required to finish the project. This scenario does not please investors and certainly causes a lot of avoidable stress.
Your complex development projects are difficult enough. Let an expert verify the estimated hard costs of your outdoor program early on and partner with them throughout the process. You’ll have a much smoother route, guaranteed.
Do the proposed amenities justify my target rent?
You may have noticed a nationwide trend toward smaller units, especially in major urban areas. Smaller unit sizes provide a win-win for developers and renters alike. Renters can afford to live in the city by sacrificing a few square feet of living space and developers can fit more units into their development leading to higher returns. With unit size shrinking, the main differentiating factor between urban multifamily properties is access to amenities and common areas. Does your property have enough of these features to be competitive in your market?
Let’s say for example you are developing a mid-rise apartment complex on the downtown fringe of a major U.S. city. Your competition will have the same downtown views, access to transit, and proximity to restaurants and bars. They will most likely have the same quality of interior finishes and the same list of interior amenities as well. With the current land value and construction costs, however, you’ll be asking for higher rents. What will make your property more appealing to prospective tenants? How can you create value to offset your competition? The answer is simple: Give them outdoor amenities they can’t get anywhere else.
Outdoor and rooftop amenities provide the greatest opportunity to make your project distinct. Make sure that you have the appropriate amount of capital available to create outdoor spaces that will make a stir in the neighborhood. Remember: Your renters are less concerned with the actual rent per square foot of their unit as they are with how much to pay for access to the lifestyle they want. When your property offers more attractive amenities to these city dwellers, they’ll be leasing up your units and your development will remain competitive.
How do I know which amenities will have the most value for my target demographic?
Knowing your target demographic is essential to marketing your property. You may at times be unsure about which amenities will make the difference to your potential tenants. Working with a design expert is a great way to get informed. Designers empathize with the user and they have their fingers on the pulse of what is trendy and popular.
By teaming up with a pro, your demographic studies will be bolstered by their experience. It’s critically important to understand the end user so that your investment in outdoor space doesn’t become a waste. When your tenants are using the rooftop and outdoor amenity spaces they will be socializing and establishing the community. It’s much harder to move away from a place where you have made good friends and lasting memories. In that way, you’ll be increasing retention. As your project outshines the competition with outstanding outdoor spaces, more people will want to live at that address. This will increase occupancy and, directly after construction, boost your absorption rate.
Is there a mismatch between the investment I’m making on the units and the investment I’m making on the amenities?
Imagine you are touring a luxury downtown apartment community. You’re guided through a dozen or so different and uniquely mesmerizing units with extra large stainless steel appliances, 42″ plus upper cabinets, granite countertops, and custom fixtures and details.
Chandeliers and opulent finishes greet you in the interior clubhouse, along with millions of dollars worth of designer furniture. Everything you see justifies the rent you’d pay there as a tenant until you see the courtyard.
The majority of the outdoor space is paved with plain gray concrete. The small planter areas are sparingly planted with even smaller plants. It looks like there was supposed to be a fountain that never got put in. The furniture looks like it belongs at a yard sale. Your trip to the rooftop is no better. With no shade and no significant change in color or material, it’s difficult to appreciate the city skyline views without retreating back into the building.
In a true urban environment, there is no shortage of well designed interior spaces. What really will make your property stand apart from the rest is the quality of your outdoor space.
City dwellers have a shortage of quality outdoor spaces. Several studies have shown that being outdoors increases energy, enhances creativity, boosts your immune system, restores your focus, and improves mental and emotional health. Your potential tenants are looking for places that will provide them with these benefits.
If you’ve ever been disappointed with the outdoor spaces on your projects, you likely didn’t invest in them well enough. The more you spend on the interior spaces, the more apparent it will be if you skimp on the outdoor spaces. In order to create a truly impressive experience you must strike a balance between the two.
Do I know how much physical space is needed to accomplish my goals?
To test the viability of any project you have to consider your land value, parking requirements, and unit mix. There’s a lot to think about, but don’t get caught neglecting the rooftop and outdoor amenity spaces early on.
You’ll find it beneficial to have a landscape architect engaged at the beginning of this process. A landscape architect will see and understand things that, by the nature of their training, are a blind spot to the architect and civil engineer. A qualified landscape architect will help you get the most value from your outdoor spaces because they know how much physical area should be set aside to meet code and program requirements.
It can be difficult, if not impossible, to cram certain desirable outdoor features in the leftover space that is not occupied by the building or parking if it is only treated as an afterthought. If there are certain make it or break it features (such as a swimming pool, rooftop patio, or sport court) that you want included in your development, take a minute and consult an expert to make certain you have enough room before you lock in to a particular building and parking configuration.
Rise to the Occasion
Across the country, social and economic factors are raising the bar on urban outdoor spaces. To keep up with the exciting changes, you’ll need to start planning ahead for these important components of your development.
Ask yourself the tough questions before it’s too late. You don’t want to get stuck with a disconnect between your aspirations and a lack of planning. As you intentionally plan ahead, you’ll reach new heights and consistently develop outstanding projects.