As a developer today you’re likely working in markets that are experiencing an unprecedented period of economic growth. For example, our home state of Utah is widely recognized as a great place to do business. As corporate expansions and relocations drive employment across the state, a steady stream of in-migration supports the continued development of the apartment housing market.
After nearly a decade of growth, however, the multifamily market supply is starting to catch up to the unusual demand. Rumors of a possible recession are starting to circulate, and it may be time to start considering the event of a downturn. At the same time, there is a lot of excitement about the nationwide amenities race. As developers are marketing to a younger generation with different values, apartment properties across the country are offering an increasing amount of luxury options to their would-be tenants.
Building in a Bubble
As you plan and market your new properties, you may be concerned about wasting money on amenity spaces that aren’t getting used or benefitting your bottom line. In today’s amenities race, you may be worried that when the bubble pops, the extra amenities you’ve created won’t stay relevant and will even make your properties less competitive.
In a bubble the relative price of low-amenity properties is higher than during a crash. Right now, most renters in such a market are primarily concerned with finding a place within their budget, reasonably close to their place of work or transit, and in time for the start date of their new job. The lack of available housing options and the continual rise in rent keeps these low-amenity properties competitive.
Once the bubble bursts, renters will have more options. The first properties to feel it will be those with few or poorly planned amenities. It’s becoming rare that a new or newly renovated apartment community doesn’t provide at least some of the go-to amenity checkboxes.
But how do you know if your amenity spaces will still be attractive to renters when the market cools down? By recognizing what makes the difference in amenities’ relevance under various market conditions, you can appropriately plan for apartment amenities that will bring sure results.
Top 3 Strategies for the Amenities Race
1) Get the space right.
Think of it this way: If you place a world-class exercise system in the basement with no windows, you’ve gotten the space wrong. It will always be a less attractive amenity space because of its lack of natural light, not because it is the wrong type of amenity. Even if you deck out the space with the coolest most high-end materials and fancy equipment, no amount of that is going to make the space feel right. Just as in placing your development, the amenities within need to have priority given to location and proximity to other amenities.
While it takes effort to get a space right, it’s a sure win for your property. This way it doesn’t matter which amenities are hot, you will always have an area provided for whatever programs will attract your target tenants. To explain how this works, let’s look at an example:
Built during the 15th century or earlier, the Court of the Oranges in Córdoba, Spain, is believed to be the oldest outdoor space that still retains its original design. The main feature of the courtyard is a grid of orange trees aligned to the interior columns of the mosque, each connected by a thin stream of water. With Cordoba’s warm climate, the cooling effect of this design is substantial in creating an inviting atmosphere for people to congregate.
This arrangement of space has been maintained through centuries of medieval conflict and multiple changes in ownership. It has been a key place of worship for two major world religions. It’s such a reliable arrangement of space that it has been replicated throughout Spain and the rest of the world.
Aim to make your amenity spaces unique outdoor living experiences for your target demographic –make them feel good to people. If you get the spaces right and design for the people who will be experiencing them your amenities will surely pay large dividends over time.
2) Create and market living experiences, not amenities.
Once you’ve got a space that feels good, you’re ready to start thinking about marketing. When future tenants look at your property, they will be thinking about the experience they want to have. Don’t just put in a pool or roll some barbecues onto a rooftop patio. It’s not enough to provide amenities – you’ve got to create an immersive experience.
If you’ve ever bought an Apple product, you know what this means. It’s an experience just opening the box. In fact, the packaging is so cool, it’s tempting to hold onto for months or years after you bought the product. Apple is expert at marketing an experience. They focus on what their customers want to feel and design for that rather than a list of checkboxes.
A majority of your tenants will be drawn to your property based more on their feelings than a detailed analysis of their unit. They aren’t looking at price per square foot, they are looking at what it costs for them to live with access to the lifestyle they want. When your property provides them the types of living experiences they can’t get anywhere else, they will be willing to pay a premium.
3) Do it right the first time by working until you are excited.
Be intentional enough to do things right the first time. It’s so much better to revise the drawings or do a capital call for more funds before something gets built and you’re stuck with it. Even better, learn beforehand what it takes to make a successful space and budget for that from the start.
A sure-fire way to get the most out of your amenity spaces is to not stop until you feel a heightened level of excitement. If you’re not feeling envious of the lucky tenants who get to hang out in the place you’ve crafted for them, keep going.
By doing so you will naturally be inclined to up your game on each project and ensure that you remain competitive and relevant.