“Without strategy, execution is aimless. Without execution, strategy is useless.”Morris Chang
As a multifamily real estate developer, you know there is a difference between an exciting development vision and actually getting a quality project built. Successful projects don’t come to fruition without experienced planning and preparation beforehand. Likewise, without the ability to properly execute, many developments fail to live up to their potential.
And yet, so many developers delay putting their full team together until the execution stage of the project begins. This approach limits your possibilities during the phase in which the stakes are the highest. It’s the strategic decisions made early on in the development process that pave the way for future success or failure.
If you believe in your project vision, why wait to bring on your team of expert consultants? Experts, like those who specialize in rooftop amenities, have the most value to offer at the beginning of the project when there is room to make big moves. If you wait until you’ve secured financing and received preliminary city approvals, there won’t be as much space for strategic thinking.
You need to consult an expert firm much earlier than you already are to get the full benefit. Don’t continue to miss out on expertise and experience that would help inform a more successful development process. Consider the following ways a rooftop amenity expert can contribute to your success by being involved in your development strategy.
Rooftop Amenities Appeal to Tenants
When your outdoor amenities are delivered, communicated, and acknowledged in the correct way for your target demographic, you’ll never have to worry about attracting the best tenants to your property.
Rooftop amenities are a key part of high value multifamily developments. In any location where land value is high (like in most urban areas), you have to maximize unit count by building to the lot line. That doesn’t leave much room for ground level outdoor space.
But, outdoor amenities are critical to making an apartment community livable. Amplified by the pandemic, discerning tenants won’t settle for a lack of outdoor space. Furthermore, rooftop amenities are essential to achieving rents that will make your development feasible. That’s why we’re seeing a huge rise in rooftop amenities that provide opportunities for outdoor living from previously unused spaces.
On top of that, rooftop amenities and outdoor living spaces are tied to the value proposition of your development. For centuries, Americans have lived with the expectation of their own piece of earth next to their home. The stereotypical quarter-acre lot on a winding suburban street is the physical manifestation of “The American Dream.” Now, as home ownership becomes significantly less attainable and the prospect of home and yard maintenance far less popular, people are modifying this expectation to fit the apartment lifestyle.
What many people want now isn’t responsibility for their own patch of turf grass and a trampoline. They want access to resort-style amenities that provide outdoor living experiences far exceeding what would be possible for an average suburban home.
That’s why it’s not good enough to have a patch of grass, maybe an outdoor grill, and a few trees at your multifamily property and call it an amenity. That won’t resonate with anyone in a meaningful way.
Instead, rooftop amenities should be the centerpiece of your development — its main differentiating feature. They should be part of the discussion as soon as you are figuring out who your target demographic will be. As soon as you have demographic data on the market you are building in, it’s time to bring on a rooftop amenity designer. That way, they can help you dial in your value proposition for your development.
They’ll dive deep into the purpose behind your development, its theme, and identify typical user personas of your target demographic in order to chart a course toward an outdoor amenity lineup that will get their attention. Then, they’ll develop a program for the ideal amenity spaces you’ll want to have in mind as move into execution. This often involves adjustments to the architecture and site plan, making it even more of an important step before going all in on a particular configuration.
Rooftop Amenities Increase Investment Cost and Returns
Rooftop amenities play a notable part in your development pro forma. Most developers understand they will increase your estimated expenses. But few fully understand their impact on operating income and sale value.
Rooftop amenities can add hundreds of thousands to your construction costs, while also tacking on a good chunk of ongoing maintenance costs. It would be a mistake to overlook this at the beginning of your project.
But how do you anticipate rooftop amenity costs for your project in the planning stages? A rooftop amenity expert can inform you on a rough square foot construction cost. And, by involving them earlier in the strategy for your design, they can help you optimize your investment by arranging your rooftop amenities to the locations where they will have the most impact. They can give you a budget range that you can plug into your pro forma and ensure you have realistic expectations.
When designed well, rooftop amenities can add a substantial amount to rents. Simply put, people are willing to pay more for access to better outdoor amenities. What’s not so simple is quantifying how much rooftop amenities will impact rent.
While you may choose to ignore the impact of amenities on rent, your investors won’t. They might wonder why you’re planning on elaborate resort-style amenities when it’s clearly going to cost more. By showing rooftop amenity cost on your pro forma, but not separating the increased revenue, you’re not telling your investors the full story. Thus, they may not understand what you’re trying to accomplish. One of the best ways to communicate this is by estimating the percentage of rent driven by the amenities and showing it as a separate line item on your pro forma.
A rooftop amenity expert will know what kind of impact you can expect from the spaces they design and can inform you on how to communicate that value. Let’s say, for example, your project has about 300,000 square feet of leasable space. You have around 30,000 square feet of podium and rooftop deck amenities. It may cost a couple million to build them, but you can attribute to the amenities an increase of over $700,000 in annual revenue.
The most exciting aspect of rooftop amenity impact on your ROI has to be the sale value. Amenities should be a premier part of your exit strategy. Projects with high value rooftop amenities sell sooner, faster, and for more than those without.
With the insight on increased net operating income that you receive from your rooftop amenity expert, you can predict the dollar amount your amenities will add to the value of your property. Using the example above, divide your $700,000 of increased annual revenue by your cap rate. For instance, at a 5% cap rate, your amenities would contribute $14 million to your property value, between 5 and 10 times the amount for which you built them.
Once your investors understand that your rooftop amenities will have at least a 5-10x return on investment, they’ll be much more supportive of your big ideas.
Rooftop Amenities are Critical Open Space
Most cities have open space requirements for multifamily developments. With limited space at street level, rooftop amenities become a critical piece of fulfilling that requirement.
We’ve seen projects stall at the preliminary site plan submittal stage because developers chose to leave out one of the biggest selling points of their projects to the city — the outdoor amenities. Trying to get approval for a site plan without any design for the outdoor spaces used to be successful. That isn’t going to work for you anymore. Nowadays multifamily developments receive public scrutiny like never before. Quality open space can be the difference between public support and staunch opposition to your project.
City officials across the country have seen too many development plans with swaths of nebulous “green slime” called out as open space, only to be disappointed and frustrated by the actual execution of poorly realized outdoor spaces that don’t add value to the city. They’re not going to want to receive more complaints from citizens outraged by their approval of half-baked open space proposals.
A rooftop amenity expert can produce the visuals necessary to impress the city and present a compelling list of reasons for them to enthusiastically support your project. If you’re truly attempting to provide a product that is above and beyond their expectations, it doesn’t make sense to keep it a secret. Positive momentum comes from getting the city excited about your project early on. Rooftop amenity designs are a fool-proof way of doing just that.
Amenity Strategy and Execution
The best projects are the ones that get off to the right start. It’s critically important to set the right tone from the beginning and really make your project attractive to future tenants, investors, and the city. The sooner we get involved in that process, the bigger the impact we can make.
At Loft Six Four we’re known for our creativity and unique design solutions. But on top of that, we have the expertise and experience to both provide strategy and execute successfully on any multifamily rooftop amenity project.
Ready to discuss your strategy? Let’s talk.