08 Aug The Growing Role of Amenities in Multifamily Real Estate
The old adage “location, location, location” might soon be replaced in the multifamily real estate market with “amenities, amenities, amenities.” Amenities, from appliances to community centers, are playing an increasingly large role in multifamily buildings.
Residents in primary and submarkets expect more amenities, and properties with the most in-demand amenities gain more market appeal.
“When you think about the new product that was built 20 years ago, even 25 years ago, you put in a pool, maybe you put in a fitness center and you might have a club room. That was pretty much it,” Cindy Clare, chairman of the board of directors at the National Apartment Association (NAA) and president of Kettler Management told the Washington Post. “Now we are much more focused on a lifestyle, what’s going to work for our residents. Our club rooms are much more open and multi-purpose and they get used. It’s rare now when I go into one of our buildings where someone isn’t in one of the amenity spaces versus when I first started in this business and it was rare to see someone in the amenity spaces.”
With home ownership on the decline and a trend toward apartment living on the upswing, the demand for more amenities is worth noting for developers, owners, and investors.
There’s a wide range in the types of amenities a property can offer, and the value it can gain from those amenities.
The NAA’s 2017 study “Adding Value in the Age of Amenity Wars” finds that “overall, community-wide amenities garnered higher average rent increases of $77 per unit compared to $52 for unit-specific upgrades. Pet-friendly amenities had the greatest impact on rent increases, and with a relatively low cost to implement, clearly offer the best bang for the buck. Fitness centers, swimming pools, common areas for socializing and outdoor kitchens also played a role in adding value. Although business centers remain a commonplace amenity, ranking second during the past few years, they have little impact on rents and also fell farther down the cost scale among the survey respondents. Likewise, package-holding areas came at a relatively small price tag but have become such an expected amenity that their value-add is limited.”
Trends in Amenities
The demand for amenities clearly differs from market to market, but there are a few trends on the rise. Now, apartment developers and property managers say the trend is towards providing services that save residents time, or experiences that make effective use of it.
Across the country, high-end apartments are now offering a host of new services to attract renters: concierge services, dry cleaning, dog-walking, and errand-runners.
Additionally, there is a large focus on experiences, and developers are building space to support social interaction, such as wine tastings, poker nights, food tasting, etc. New companies such as Doorbell offer residents a fun, differentiated apartment experience driven by community, using software and events to activate existing amenity spaces to promote resident retention.
As trends change, traditional amenity spaces are being altered. Gyms are now being modified to accommodate new trends like cross-fit, or circuit-based workouts, and gym equipment is placed to accommodate group classes. Most urban communities built today include designated areas for ride-share pickups and drop-offs.
Technology also continues to impact amenities. Free Wi-Fi, smart home systems, and security hardware are seeing greater demand in multifamily projects. Companies like IOTAS offer an entire digitalized apartment living experience, integrating an app and voice recognition software to control lights, outlets, thermostats, and door locks, and can also provide feedback to management on utility and appliance usage.
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