When you hear the term “amenities” you probably think fitness center, clubhouse, pet park or some other extra space at an apartment community.
But the amenities with the biggest impact on revenue at your apartment homes are most likely those things that aren’t as obvious as you first thought. The revenue-driving amenities, according to the panelists in the “Amenities: The Misunderstood Revenue Driver” at NAA’s Apartmentalize, are the physical elements of an apartment home that truly differentiate it from others at the community and in the market.
“Amenities can tell the story of an apartment home,” says Rich Hughes, Senior Vice President of Data Science at RealPage. “You need to know why your unit is different and why somebody might want it.”
These differentiating amenities drive real revenue increases either in rent rate or reduced days on market and account for 5 percent of total rent in most properties. Some examples might be views, square footage, interior finishes, washers and dryers, prestige and proximity (to pool, fitness center, parking, etc.)
Knowing which amenities make every apartment home different or better is the key to correctly setting rent and maximizing revenue.
“In an ideal world, if you had all your amenities priced right, in that world there wouldn’t be a good unit or bad unit, or preferred or non-preferred unit,” Hughes says. “They’d all be priced perfectly.”
The biggest rent gains from amenities are found in Class A communities, where higher income earners are willing to pay more for extravagances, according to Hughes. But there are amenities, especially in these communities, that don’t allow you to increase the rent you charge.
That doesn’t mean these amenities don’t play a role in other factors, such as days on market. “Higher amenitization leads to faster moving units,” Hughes says. “The higher the percentage of your amenities with a zero value, the lower your days on market.”
But the law of diminishing returns still applies: Stacking a new development with every possible amenity you can buy won’t maximize your ROI.
“Corn doesn’t grow on the moon,” Hughes says. “There are times when you’ve over-amenitized.”
And there are times when a differentiating amenity negatively affects value, according to Evan Hoffman, Principal and Chief Strategist at Incisive Solutions. Allowing smoking and promoting it, for example, negatively impacts the value of an apartment home.
Simply put, by correctly identifying the amenities of your apartment home and properly pricing them, they can have a significant impact on maximizing your revenue. —LTM
Learn More Weren’t able to join us in San Diego or want to review your favorite session? The NAA Education Institute presents the collection of 50+ PowerPoint-synced audio sessions, REWIND program, for NAA’s Apartmentalize.