Although owners of class B/C communities have less capital to put towards renovations due to the ceiling on rents, that doesn’t mean they have to sacrifice on design and branding. There are several multifamily owner/operators creating unique and well-designed class B communities which command higher rents, maintain above-market occupancy, and enable firms to scale their business.
When buying existing assets, owners have to work with what they got. Flat roofs, cheap façade materials, and a lack of common space are typical. It’s up to the creativity of the owner to make the space unique and usable. That’s part of what makes real estate so fun!
The design of uninspired apartment communities can be transformed through paint colors, the introduction of new façade materials, and enhanced landscaping. These relatively minor façade enhancements can greatly improve the look and feel of a community.
At the Shenandoah, a 74-unit community in Salt Lake City, Preserve Partners added wood to the typically boring covered parking structures. The minor, and relatively inexpensive, design element gives the community a unique look. As a prospect tours multiple communities within a submarket, it’s great to be remembered as the community with the ‘cool wood covered parking’.
At Parc 88 Apartment, Trion Properties utilized cedar wooden fences to functionally create private yards for residents. The cedar fences also serve as architectural elements which improve the overall look and feel of the property. Additionally, their subtle use of accent colors makes otherwise boring and ugly structures look cool and minimizes the lack of architectural detail.
Similarly, Sundance Bay, another Salt Lake-based operator, added wood and a slick sign to the façade to the entrance to the clubhouse. First impressions mean everything and design touches like these go a long way to making ones that last.
Tides Equities added a horizontal wood railing to a two-story 70’s vintage property, creating a cool boutique product.
Unit Interior Design
Many value-add owners complete the same, boring, cookie-cutter interior upgrade. Although it’s proven and less risky, it’s likely identical to what the neighbor down the street is doing. Interior design provides another opportunity to do something unique, that grabs prospective renter’s attention.
Although the white shaker cabinets, stainless appliances, white quartz counters, and vinyl plank flooring is typical, the off-colored subway tile backsplash completely transforms this look. It’s a small design element which has a large impact.
One of the easiest ways to create value is adding washer/dryers to the units. Although it’s not always feasible, whenever you can add full-sized W/D units, do it.
It’s no surprise that renters prefer an open floor plan. Whenever possible, operators should knock down walls to make the unit more open and usable. Add breakfast bars and additional storage space as well.
When designing a unit interior, little design touches matter; USB outlets, curved shower rods, high-end fixtures, six-panel doors, modern light fixtures, and lots of storage are all important. In the unit pictured below, mirrored closet doors make the bedroom feel larger. It’s the little things that enable operators to differentiate their product.
Owners can go beyond the basic pool, fitness center, and tennis court amenity set that has characterized class B garden-style assets and create a set of unique amenities that meet the demand of the modern renter.
This could include grilling stations with shaded seating areas for residents to hang out and for staff members to host events. Cardinal Group, a fully integrated investment firm based in Denver, creates some cool ‘hang-out’ spaces for their residents.
Today, dog amenities are some of the most highly sought-after in apartment communities. Dog parks and dog wash stations are becoming standard. Simple dog wash stations like the one below can have a lasting impact on a prospective renter. People love their dogs!
Dog parks can be much more than a fenced-in area with mulch and a few pieces of equipment. They can include branded entrances (‘Paw Park’, ‘Central Bark’ etc.), shaded seating areas, agility equipment, great landscaping, trendy lighting, water features, and much more.
Pools remain a required amenity, but operators can enhance pools with fountains, turf seating areas, high-end pool furniture, cabanas, outdoor kitchens, and fire pits. Dallas-based Power Properties has some of the coolest pools I’ve ever seen at boutique apartment communities.
Similar to pools, fitness centers remain common but are no longer small, poorly lit spaces with a bench and dumbbells. They are now located in prime spots and include yoga rooms, areas for group classes, fitness-on-demand, and Peloton bikes.
Amenities are an easy way to differentiate an asset and provide the opportunity for class B assets to compete with class A. If you can offer class A amenities at class B prices, you have a winner.
Monument signs serve as a valuable marketing/branding tool and are typically the first thing prospective renters see when entering a property. Why not maximize the visibility and create a sign that showcases the brand in the best way possible. When thinking about signge, I tend to think simple and clean is best.
The combination of great design, good visibility and legibility, and landscaping can make a memorable first impression.
One place we never skimp is landscaping. Although it can be pricey, landscaping improves the sense of arrival and overall look and feel of the property. Many 70’s/80’s vintage properties are architecturally ugly, so operators can use landscaping to take the attention away from the physical building and move the eye toward amenities or open space. Renting a property is largely an emotional decision, and properties can stand out with great, well-kept landscaping.
Great design is not just about doing things differently, utilizing bright colors, and creating crazy amenities. It’s about maximizing what you have to work with, highlighting the key selling points, and creating a product that resonates with the target renter. At the end of the day buying value-add apartments is an investment and the numbers need to pencil so the return-on-cost justifies the improvements. Real estate is slowly transitioning from a capital business to an operations business, where operators with a strong sense of design and eye towards value can out-renovate the competition and create a branded product that resonates with the target renters within a submarket and ultimately maintains above market occupancy and commands premium rents.
What’s the best design you’ve seen in the class B multifamily space?