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Putting Meaning into Amenities

May 2020

Beyond luxury, thoughtful touches resonate with residents.

Who doesn’t like a free cup of coffee?

For Chris Hughes, the way to his residents’ hearts is through their caffeine jones. As principal and co-chief investment officer of Praedium Group, an investor and operator of 6,000 apartment homes that’s deployed over $12 billion in capital, he makes sure each of his communities is stocked with artisanal coffee so onsite staff can offer it to residents every morning.

“I can’t think of a community where we don’t offer that,” says Hughes. “You’re on your way out in the morning, and you stop by the clubhouse to get a free cup of coffee. It makes a connection between the resident and staff onsite, and helps build that sense of community just a little bit more.”

Hughes’ free coffee may be one of the oldest plays in the customer care playbook, but it also exemplifies how apartment community operators are expanding their view of amenities today. While pools, fitness centers, package lockers and pet options still reign supreme as must-have offerings at apartment communities, the list has also expanded to include more “thoughtful” amenities operators can provide residents, without breaking
the bank.

“New amenities that don’t exist in their current building can entice residents to move, because shiny new objects are very desirable,” says Linda Kozloski, Creative Design Director at Australian real estate conglomerate LendLease, which operates several luxury properties in Chicago. “But ‘over-the-top’ amenities aren’t always what renters want. Amenities also need to be thoughtfully designed so residents use them every day.”

This isn’t to say luxury amenities aren’t still in vogue; for instance, an exclusive club, spa and 72-foot aerial indoor pool nestled on the 28th floor of AKA University City, a deluxe high rise in Philadelphia, provide testimony to continued draw of opulence. But those
types of eye-popping amenities are increasingly augmented with unique, but more down-to-earth add-ons that help set buildings apart while engaging residents in meaningful ways to build connection and community.

Since March, the idea of connection and community has changed. As units went to press, COVID-19 and the current social distancing measures forced the closure of amenity spaces. For instance, Castle Lanterra Properties shut down all common area amenities except for essentials, such as mailrooms, package lockers, laundry rooms and dog runs. “Our general message to residents is ‘We are all in this together and taking it one day at a time,’ as we monitor current events and follow guidance from officials and the CDC,” says Elie Rieder, founder and CEO of Castle Lanterra Properties.

Eventually things will return to normal and it seems a safe bet that residents will return to amenities en masse once the situation stabilizes.

Connecting at the Resident Level

Castle Lanterra Properties is an operator of 7,000 apartment homes at 22 communities coast to coast that focuses on value-add rehab. For Larry Mango, Vice President of Asset Management, it’s not necessarily the top four amenities—pools, fitness centers, package lockers and pet-oriented spaces—that set his properties apart. Instead, it’s the bespoke features and offerings that his prospective residents connect with—and which linger in their minds long after the tour is over—that really matter.

“They might be looking at three or four competing communities before making a decision,” Mango says. “We want our amenities to stick out and be a little bit different to make it easier for that prospect to remember us.”

What that difference is varies by community.

At Watergate Pointe, a 21-building, 608-apartment community in Annapolis, Md., located about a mile from the city’s historic downtown, it was a bike-share program that allows residents to easily access the boutiques and promenades fronting the languid waters of Annapolis Harbor and Chesapeake Bay. “It’s not a short walk, but it is a short bike ride,” Mango says.

At Capitol Crossing in southern Prince George’s County, Md., an attainably priced garden-style, 359-unit property, it was a patio with grills and a picnic area off a refurbished community room that residents can rent for events.

And at 544-apartment Harbor Pointe in Bayonne, N.J., located across New York Harbor from Lower Manhattan that skews heavily toward families with young kids, it was a children’s playroom behind a large glass wall, visible from the cardio machines in the fitness center.

“That’s been a great selling feature that our agents can really use,” Mango says. “Potential residents really like the thought of bringing their children down and being able to keep an eye on them while they’re getting a workout. Everybody has a great fitness center. But when we were doing renovations, this was something nobody else in the comp set had.”

Standing out comes from being thoughtful not only about how the amenities will be used, but also about who will be using them. “Depending on who our residents are,” says Hughes, “we’ll think about not just the size of the workout facility, but how it’s programmed as well. If it’s a younger demographic, that might mean more free weights and virtual boxing programs. For a little older demographic, it would be more machines.”

Covering the Basics First

But as Mango and other apartment community executives and managers emphasize, a fitness center remains at the top of the must-have list for communities today.

“You have to have a gym,” says Robert Heidel, Regional Operations Manager at Newton Square, Pa.-based GMH Capital Partners, which counts in its portfolio 190 multifamily properties and 80,000 student beds. “This generation is very active, and they want to have a gym right there in their community so they don't have to pay for a membership somewhere else.”

Other must-have amenities at the top of operators’ lists include a pool, a package solution, a co-working space and some kind of pet-oriented feature, such as a grooming station or dog run.

By the Numbers

Indeed, according to the 2020 National Multi Housing Council/Kingsley Associates Apartment Resident Preferences Report, which surveyed 373,000 residents, 85 percent of respondents listed pools as a must-have, virtually tied with the 84 percent who listed a gym as something they were either interested in having onsite, or wouldn’t rent without one. Other key considerations for residents included good cell phone coverage, reliable and fast internet, smart-home features — especially those that save them money such as connected thermostats — and co-working spaces or business centers in common areas.

For Sean O’Neill, Area Vice President at King of Prussia, Pa.-based Morgan Properties, which operates 75,000 apartment homes nationally, the very things that used to set properties apart have now become requirements.

“I think what is changing today is that the amenities that were hot have become checklist items now,” O’Neill says. “Does it have a pool? Check. Does it have a fitness center? Check. Does it have a dog park? Check.”

Upping the Amenities War—Again—in the Luxury Space

Despite that must-have focus, don’t simply tick off the boxes to ensure your amenities strategy is on track today. This is where thoughtfulness and attention to detail start. For example, when it comes to fitness centers, the facilities at best-in-class buildings today rival those at private clubs.

“Fitness centers used to be your run-of-the-mill space with some basic pieces of equipment,” says Ali Gagliardo, Project Manager for Atlanta-based architecture firm Cooper Carry, which specializes in mixed-use projects. “Now residents expect top-of-the-line equipment like Peloton bikes and fitness on-demand services as part of a standard fitness studio. Often, you’ll see full, spa-like locker rooms with steam, sauna and massage spaces.”

A Pool in the Sky, and Other “Niche” Amenities

Just look at Level28, a 25,000-square-foot lifestyle club on the 28th floor of AKA University City in Philadelphia, a 268-apartment, full-service luxury high rise developed by Philadelphia-based Korman Communities, which runs 7,000 apartment homes under its AKA, AVE and ARK brands. The space includes a 72-foot indoor aerial pool; fully equipped Technogym fitness center; 3-D indoor golf simulator; 16-seat private theater; 5,000-square-foot greenscaped terrace 400 feet above street level; lounge with a private bar; and private boardroom and business center.

“Our artfully curated luxury amenities have played a major role in attracting new residents,” says Evan O’Donnell, Managing Director at AKA University City. “The way people work has changed. We have a few residents who work from the pool every single day. They like the relaxing, spa-like atmosphere.”

Other firms are forging into more and more unusual amenity ideas in an effort to create a sense of community at their properties to help with retention.

Take The Cooper at Southbank, a 29-story, 452-apartment luxury tower in Chicago’s South Loop owned by LendLease. The building has a listening lounge with playable instruments; a shop space with sewing machines, craft supplies and easels; a sports simulator room; a resident lounge with billiards, ping-pong and shuffleboard tables; a cozy reading room with a fireplace; and a styling studio for in-home hair and makeup services.

“Those kinds of niche amenity spaces have been so popular with residents we’ve started incorporating them into future projects,” says LendLease’s Kozloski.

FirstService Residential New York, which overseas 500 rental, condominium and co-op communities throughout New York City, provides residents with demo kitchens, game rooms, makerspaces and soundproof music rooms with amps that players can plug into. At one luxury tower in Manhattan’s Financial District, it even has a full-size bowling alley.

“You have to think about those kinds of creative spaces,” says Dan Wurtzel, President of FirstService Residential New York. “They don’t just happen by themselves.”

Indeed, for O’Neill at Morgan Properties, such over-the-top amenities are still very much a part of multifamily’s firmament. “Luxury will always be appealing,” he says. “Do you ever see a time when there won’t be luxury cars? No way, right? Rock climbing walls, golf simulators, spa facilities, outdoor kitchens, theater rooms, on-demand fitness centers, dog parks and spas, bowling alleys and kayak share programs all have a wow factor. In fact, that’s why they’re there.”

Pampering Residents, While Keeping Apartments Attainable

At the other end of the multifamily spectrum, the trend, amid rising rents, is toward more “attainable” apartments.

That can mean either apartments priced for residents making 60 to 120 percent of area median income (AMI), or those simply priced 10 to 15 percent below others on the market.

But operators say residents looking for apartments in this price range still expect a certain level of amenities. The intersection of these two pressure points—affordability and amenitization—has led operators to come up with creative solutions in the space.

Take Oakland-based Riaz Capital, operator of 1,200 workforce housing residences throughout the San Francisco Bay Area. It strives to price its apartment homes to be affordable for residents making 80 to 120 percent of AMI, or what founder Riaz Taplin describes as “someone making 65 grand a year.”

“At that income level, you’ve got $43 of discretionary income a day—before you buy a latté,” Taplin says. “Our philosophy has been to focus on the things they care about, which is maintaining a reasonable ratio of income to rent.”

To do so, Riaz targets a cost of just $225,000 per apartment in development costs in a state where a luxury apartment can run well over $400,000 to build. At the same time, Taplin understands the necessity of including basic amenities, including the all-important fitness center.

But fitness centers or gyms take up space, and with his buildings averaging just 400 square feet per resident to pencil out, that means he’s had to rethink the typical fitness room off the lobby. So instead of putting a fitness center in all of his new developments, he’s adding them to his “core” buildings, and opening them to residents from his other portfolio communities in the area.

Riaz is currently developing a portfolio of some 2,500 new residences across Oakland—designed as a large core community surrounded by smaller projects, says Taplin. “So we’re putting the gym, yoga room, community room, self-serve café, bike storage and package lockers at the larger developments, which residents from all the buildings we have in that neighborhood can share.”

In lieu of indoor common areas at every community, Riaz aims to provide common outdoor spaces at each. “How expensive is a picnic table, lounge chairs and a barbecue?” Taplin says. “It's a meaningless amount of money in the grand scheme of the project, but the amenity itself is really meaningful to our residents.”

Programming Your Amenities, for Free

These kinds of thoughtful but low-priced add-ons can help uniquely position a property while offsetting capital expenses. In that vein, many operators look at programming events in their spaces that help foster a sense of fun and community without adding costs.

“We'll do things like food trucks and sponsor events around the pool just to get people to interact,” (after the current virus outbreak) says Hughes. “The cost is incremental, but the benefit is huge.”

At LendLease, partnering with other businesses in the community goes hand in hand with making residents feel at home. “If an amenity helps foster a sense of community among residents, it will influence their decision to stay,” says Kozloski. “Residents love pop-up events that neighborhood restaurants and stores host in our amenity spaces, which don’t necessarily translate into additional costs for the building or themselves.”

Using What’s Already There

Others look at how they might be able to do more with what’s already available on a property by retooling older areas for today’s uses. At the Praedium Group, Hughes says he’s converted 1990s-era communal laundry areas into additional spin rooms to enhance fitness offerings.

“It’s not a terrible burden from an expense perspective, because the physical structure is already there,” Hughes says. “It's a way to add on without putting a cost burden on the rents to justify it.”

Indeed, the idea of adding amenities, without adding lots of costs, is something operators come back to again and again. Take package lockers. While they’re one of the “must-have” amenities commonly cited by operators, they also cost money to deploy, take up room at a property and can still be quickly overwhelmed by delivery volumes.

To combat this at Castle Lanterra, Mango offers both package and trash valets at the properties, which allow residents to receive packages when they’re home and leave trash outside their doors. “Even in an attainable community, it gives people a feeling that they have that extra little touch of luxury,” Mango says.

While Castle Lanterra charges an amenity fee for the service — $10 for packages, $25 for trash — Mango and others say residents aren’t averse to paying extra, as long as they see value in it. “Residents who expect to have a Class A experience are willing to pay for it,” says GMH Capital’s Heidel.

In fact, setting up those kinds of pay-as-you-go add-ons may even help with retention, according to Houston-based Spruce, a provider of hotel-like services to the multifamily industry. The firm says that residents who take advantage of at least two hotel-style services at their apartments have an 81.4 percent renewal rate, well above the industry average of 52 percent.

Service as an Amenity

The outsized impact such services on retention makes sense, operators say.  While amenities do help sign leases, many in the industry say the one amenity your competitors can’t replicate is the unique service level and style your staff provides onsite.

“There are certain aspects of a community that don’t cost anything,” says Lela Cirjakovic, Executive Vice President at Chicago-based Waterton, whose portfolio includes $5.6 billion in assets. “To me, the service aspect is really critical. That’s what we’ve built our brand around.”

That kind of service comes down to, again, focusing on residents. “It requires thoughtful consideration and delivering on what is important to a resident, not what is important to us,” Cirjakovic says. That may include extended office hours during the summer, when residents might be busy immediately after work but still want to be able to talk to someone when they eventually get home.

At Atlanta-based Cortland, operator of 60,000 apartment homes, Chief Experience Officer Mike Gomes, a former Disney exec, brings his experience working with theme parks to try to push Cortland’s service to the next level.

“People might say they wanted to come for Tower of Terror, but all they talked about when they left was the cleanliness of the parks and how great the cast members were,” Gomes says. “It was a reminder that the product has to be really great, but service is even more important. I really think service is an underappreciated amenity in [this] industry, but it’s not an underappreciated by the people who live in our apartments. They want to know they live somewhere that’s run by professionals who are going to take care of them and their homes.”

So while shiny new amenities may bring residents to your community today, it’s the little touches like Hughes’ free cup of coffee that keep them there.