A Student of the Real Estate Game

(ASotREG)

The Best Amenity is Affordability

Feb 20, 2021 | Development, Innovation, Multifamily, Technology

There is a lot of conversation within the multifamily real estate development community about the size and layout of unit types. For years, the average size of apartments was trending downward as developers favored density to achieve higher rents per square foot to make deals pencil.

In a post-pandemic world where we anticipate more ‘work from anywhere’ including the home, the chatter is around increasing unit sizes. In my view, it’s not that straightforward. What I look at is affordability, functionality, and designing with a specific end user in mind.

Here are a few of the topics I’m exploring as we work on new development deals:

  • The viability/livability of micro units in a post-pandemic world that favors more work-from-home.
  • The rise of co-living and how this unit type performs relative to micro units.
  • How to maximize the functionality of spaces; built-in furniture, dedicated spaces for home fitness equipment etc.
  • Designing spaces like a consumer product with a clear end user in mind and designing amenities that serve as an extension of the living area.

Micro Units

The micro unit type is hotly debated. I generally define micro units as sub-300 SF units. Some are fully-furnished and all bills paid, while others are just small studio spaces. These units provide renters their own space at an affordable price point and tend to perform well in competitive high rent markets. They thrive on the idea that the best amenity is affordability. However, micro units have drawbacks; the unit is for a narrow niche audience and the residents tend to be more transient, leading to higher tenant turnover and increased turn and marketing costs.

Co-Living

Similar to micro units, co-living units thrive on affordability. These unit types may provide renters (typically young professionals) an opportunity to live in newly constructed and highly-amenitized buildings in urban locations at an affordable price point.  

Co-living operators will tout the sense of community, but that isn’t the primary selling point…It’s the affordability. However, co-living units do offer conveniences which differentiate them from conventional units (such as micros) and appeal to a niche demographic; they’re typically furnished, offer complimentary cleaning, have free Wi-Fi, utilities are included in the rent, and provide a built-in community.

  Eric Rodriguez, the VP of Operations for Common said it best;

Renters come to our co-living buildings for the lower prices and convenience, and stay for the community.

Built in Multifunctional Furniture

Although a lot of the conversation with unit types is around square footage, I spend a lot of time thinking about functionality and layout of spaces. A smaller unit with an intentional and functional layout will command a higher rent than a larger unit awkwardly designed.

A trend I’m closely following and testing is the use of built-in multifunctional furniture. I recently toured The Smile Building in Harlem which includes select units furnished by Bumblebee Spaces. The bed and storage units com down from the ceiling, greatly improving the functionality of the space. It’s really cool technology. Ori Living and BentoBuild are other interesting players in the space.

Designing to a Specific End User and Amenities as an Extension of the Home

When designing a new multifamily project, it’s critical to design to a specific end user. Dror Poleg said it best in a recent blog post.

“In the future, winning places — cities, offices, residential communities — will be those that are made with “passionate intensity,” with a point of view, with a direct connection to a specific group of people (and no one else).”

Bobby Fijan, an experienced developer, shared a similar sentiment.  

I completely agree. When you successfully build a product and community that appeals to a niche tribe, you’ve got something special. However the product is not just the units, it is the amenities as well.  

As units have gotten smaller, community amenities have played a more important role. Functional and rentable spaces serve as an extension of the living area. This includes co-working spaces, commercial kitchens, and onsite storage. Functional amenities that appeal to specific lifestyles such pet parks, dog washes, bike rooms, podcasting studios, and maker spaces are the norm. It’s important for amenities to be functional spaces that will be valued and used by residents.   

The reality of real estate development is that the unique aspects and unproven design considerations often get value-engineered out. As a result, we end up with a lot of commoditized product with little differentiation and no soul.

What do you think?