6 Considerations for Cost-Effective Redesign in Multifamily
- Jun 26, 2018
With multifamily development on the rise, many owners turn to renovations to pull ahead and remain competitive in a crowded market. Additionally, owners have continued their pursuit of value-add acquisition opportunities. According to a 2017 study by the National Multifamily Housing Council and National Apartment Association, more than 4.6 million units will need to be built by 2030 to meet new demand. With more than half of the current apartment stock built before 1980, more than 11.7 million units will need upgrades over the next 12 years.
While it may be tempting to jump feet first into an aggressive renovation, a disciplined approach and a bit of creativity can help navigate the challenges of a cost-effective redesign. Here are six factors to consider when upping your position in a competitive market:
- Design Your Approach Before Redesigning a Community. It’s not unusual for owners to find themselves over time, over budget and in over their heads with property renovations. At the onset of the redesign, it’s important to understand the investment strategy, the competitive landscape and weigh each project against the opportunity it presents to ensure return. “With a proper game plan in place a property can ‘play in a bigger sandbox’ and command a certain price based on the value of the services and features added,” said David Nischwitz, senior vice president redevelopment of Fogelman Properties. “We take a holistic approach and evaluate which opportunities allow us to play in the bigger and better sandbox by asking:
- What is the financial strategy of the owner? What are they trying to achieve and what is the timeline?
- How do we create the story for the community and build the momentum around the strategy?
- What are the current market considerations, opportunities and competitors?
- How do we prioritize the investment? Specifically, where should our dollars go for upgrades and redesign?”
- Fitness First. Nischwitz advises owners to prioritize fitness center upgrades in redevelopment as the space is continually evolving, often walked with prospects and most importantly, always viewed as a true amenity. In the last five years, fitness has rapidly evolved with the rise of boutique fitness and on-demand apps. With that, there has been a seismic shift in the design of multifamily fitness centers. These are moving away from the traditional, weight room layout with racks of dumbbells and big-gym machinery to a more customized studio approach with circuit and cardio trainers, Pilates, spin and yoga spaces and a focus on core equipment. “Today’s residents crave state of the art equipment and the ability to customize training through fitness on demand,” said Nischwitz. “At many of our properties, we’ve fulfilled demand by installing dropdown screens and kiosks on spin and cardio equipment which allows residents to train with an interactive, on-demand fitness instructor.”
- Mind the Gap. Rent to income ratios are currently raising concerns across the industry. The income levels of most residents grow about 2-3 percent annually, but the multifamily sector has seen larger rental increases of more than 5 percent. The income to rent ratio is much tighter today than it was five years ago. Many are wondering how much owners can push rents with new renovations and still remain sensitive to the salary increases. Taking a disciplined approach to renovations ensures long-term return in alleviating the need for drastic rent increases and ensuring maximum retention.
- Pools Play an Important Part. Within the sunbelt markets, the pool area is often another hot spot for renovation as this common area is the first amenity a prospect sees both online and onsite. As an industry, we are seeing the rise of resort-like designs in the pool area with additional landscaping, updated lounge furnishings and flexible use spaces such as outdoor kitchens or compartmentalized outdoor rooms with pergolas and televisions.
- Cater to Connectivity and Community. Residents want to connect emotionally to a property and feel a sense of community, which helps build loyalty and ultimately leads to higher rents. Redesigns and amenity selection can play an important role in community building. For example, clubhouse renovations now include more open floorplans with soft seating lounges, coffee kiosks, dedicated Wi-Fi, iPad ports and even gaming areas with Pacman. With more residents working from home, there is also an increased desire for flexibility in community and coworking spaces, which is now trending in multifamily redevelopment.
- Rebrands Done Right. For owners of older building stock, it’s difficult to stand out in a modern crowd without expensive renovations. However, a rebrand can give a property new life and a new identity, especially when coupled with new management, new monument signage and a bit of landscaping. “Small changes go a long way when repositioning a property,” said Nischwitz. “We advise owners and clients to focus on a few key elements during the redesign process, including landscaping the entrance beds, use of multi-seasonal perennial plantings and a rebranding of tasteful monument and streetscape signage. These ‘first impression pieces’ truly set a new tone for the community.”
Fogelman Properties is one of the country’s largest and most experienced privately owned multifamily investment and property management companies. As a fully integrated company, Fogelman specializes in multifamily acquisitions, property management, construction management, and asset management. Founded in 1963, Fogelman presently operates 88 multifamily communities totaling 27,000 apartment homes, spread across 10 states in the Southeast, Southwest and Midwest regions of the country. For more information about Fogelman, please visit www.fogelman.com or follow on Facebook, Twitter and Instagram.