Design-Driven Strategy

The aesthetics and functionality of multifamily properties are becoming increasingly important to renters and condominium buyers, resulting in evolving design trends which are influencing the strategies of developers.
1611 Hermitage exterior

1611 Hermitage exterior

By Jeffrey Steele, Contributing Editor

The influence of design is reflected in developers’ growing preoccupation with getting every design detail just right, from the building façade to the sophistication, configuration and placement of amenity spaces, as well as the size and location of residences. Underpinning every decision are crucial budgetary and bottom line considerations, the desire to attract specific groups of prospective residents, and the need to keep pace with ever-changing design preferences.

Design has never been more important in development, according to Matt Birenbaum, chief investment officer of AvalonBay Communities Inc. The Arlington, Va.-based company operates in six broad macro markets on the East and West Coasts, with 9,000 units in development and another 9,500 in pre-development. AvalonBay is witnessing greater demand for product these days, but also faces additional competition. “So it’s more important than ever to make sure the design is appealing to the market, and that it stands out from the crowd,” Birenbaum said. “It’s important on the attract side.”

Design-driven development always involves trade-off, because the more that’s put into finish level and amenities, the more rent can be charged. “We’re more interested in the NOI divided by the total investment; the capital cost,” Birenbaum added. “Some of that depends on the competition, and customers’ willingness to pay, which varies from market to market and the customer you’re trying to attract.”

Design is all the more essential because prospective residents typically make their decisions in 30 or 40 seconds, based on what they initially see and feel, said Marty Paris, president of Chicago-based Sedgwick Properties, a development management company with related entities that shepherd its design and contracting work. The firm has 200 units in development at three apartment projects on Chicago’s near north side. He posed the question: “Why do they choose your building over another?” and answered it, saying, “Because they envision their lives there, and that’s driven by design and the lifestyle impression their minds create. You can’t appeal to everyone, but if your building can appeal to seven out of 10, you put yourself in a very good position.” Paris believes the design-cost tradeoff requires surmounting twin hurdles.

One is avoiding breaking the bank, the other dealing with increasingly busy contractors that are pushing up their prices. Sedgwick addresses that challenge through a value engineering process that’s the result of integrating the company‘s design group, development group and construction group, Paris reported. The tradeoff also means balancing the appeal of such amenities as the fitness center and outdoor community space against efficient units that are livable and functional. “There is no chance [the renters’] overall impression is not influenced by their first thought about the outside of that building,” Paris said. “So if there is any place we will spend an extra dollar, it’s on the exterior facade.”

From his perspective as a partner at Goldstein Hill & West Architects (GHWA) in New York City, partner David West believes the marketplace has become much more design-sensitive on multiple levels. GHWA, with several thousand units across New York City, is working primarily on condos in Manhattan, a mix of condos and rentals in Brooklyn, and primarily rentals in Queens and the Bronx. Signature design is important for condominium sales, as West said great design, sophisticated finishes and amenities have become the norm, even in rentals outside Manhattan.

“There is also an expectation of quality architectural design for new buildings in the broader communities in which projects are located,” he said. “Developers have to meet a certain level just to compete and must raise the bar to differentiate their projects. High prices for land and construction mean sophisticated design represents a lesser percentage of development price than was true in the past.”

Evolving design trends

Multifamily design trends are different today than they were five years ago, which has resulted in changes in configuration of units and common areas, placement and size of amenity spaces, and overall style. Paris said residents always wanted workout rooms, community rooms and outdoor space, but what’s changed is the expectation of heightened sophistication and drama.

Once, developers only had to include those spaces. “Today, you might have to have an all-glass exterior to the amenity space, with a downtown view to give it more sizzle,” he said. “The community room and workout room once looked at the back of someone’s garage. Today, it looks at the downtown skyline.”

A continuing evolution in kitchens is also impacting design, he said. The metamorphosis has taken kitchens from granite to quartz counter tops and from traditional wood shaker to flat-paneled modern looks. Meanwhile, appliances have segued from traditional stainless to designer finishes.

Birenbaum reports evolving design trends are influenced by the fact that renters spend more time today in amenity spaces, and less time in their homes, a trend paralleled in the hotel industry, where hotel guests tend to embrace the lobby over their rooms. “We think this may be running the course, and that unit sizes may be getting larger again,” he said. “Today, the other trends are a big move toward spaces for pets, for bikes and for bike storage, so we’re creating a lot of places where you can store and work on your bike. There’s also more of a trend toward island kitchens, greater openness and flexible spaces.”

Increased focus on design has substantially boosted the cost of new development deals compared with four or five years ago, Birenbaum added. “We’re building a nicer product, with all the stuff behind the walls, greater sound attenuation due to more hard surface flooring, additional sustainability features, added lighting, greater amenity spaces. And these things do not come cheap.”

Attracting generations

Developing multifamily housing to appeal to different generations also impacts design. At AvalonBay, the AVA and Avalon brands are targeted at different demographics, with corresponding design considerations. The Avalon brand, for instance, is geared to a segment of well-heeled renters who care deeply about showing off their living environment.

On the other hand, the AVA brand is aimed at young urban socials, who will pay premiums to live in transit-oriented, up-and-coming neighborhoods chock-full of inviting bars and restaurants. They aren’t as interested in 24-hour front desks or the most high-end appliances. “So it’s important the building fit in the neighborhood, and be of the neighborhood,” Birenbaum said.

Karen Asprea, director of New York City-based Whitehall Interiors, reported she is witnessing a trend toward community spaces in younger buildings. “Instead of intimate seating arrangements, we are designing toward cooperative spaces where idea exchange is encouraged,” she said.

Sedgwick’s developments are likely to appeal most to young professional college graduates. Next most likely to rent are empty-nest baby boomers migrating from the suburbs to the city, or city-dwelling boomers moving from homes into apartments. Millennials and Gen Xers, who covet pools next to community spaces adjacent to workout areas, are most likely to sway these types of design decisions.

“The tradeoff is, ‘I’ll take a smaller residence in exchange for common area amenities,’” Paris said of these younger renters.

Where is design headed?

How will the coming years transform design-driven development? Technology has allowed higher-functioning building management than was possible years ago, Paris said. “The future is how you keep your future developments in sync with what the technological demands are moving forward,” he added.

West feels the future of design will see more live-work communities. He is already observing this trend come to life in older commercial districts where housing has sprouted. For his part, Birenbaum sees the growing number of empty nester and lifestyle renters affecting rents per square foot. In many of AvalonBay’s markets, three-bedroom apartments are renting for more per square foot than two bedrooms.

“Some of that is roommates, but some of it is people with strong incomes and a desire for the worry-free lifestyle. They’re looking for three-bedrooms and three baths, big kitchens and entertaining spaces. And they’re paying the premiums for the best units in the building—those on the corner with the best views. [In the future] there will be more of a focus on the larger units, and a focus on the aging baby boomer or older Gen Xer, which are untapped markets.”