Don’t look now, but that block down the street that just went under construction? It could very well be a brand-new apartment complex coming out of the ground ready to compete with your asset. As occupancy and rents have blossomed over the course of 2011, so too has the interest in new apartment construction—predictions for multifamily development put 2011 starts at 179,000 units, according to the latest data available from the U.S. Census, an impressive increase over the 2009 and 2010 starts of 109,000 and 116,000 units, respectively. This projected increase in new product is worrying operators who may have let up a bit on site-level maintenance and cap-ex investments during the recessionary years. And rightfully so—trying to compete for Gen Y renters with brand-new communities that have next-gen amenities is going to be an uphill climb.
Say Again
Keep these three communication tips in mind during renovation.
During its 10-year renovation of apartments and common-area amenity spaces at the 2,362-unit Presidential Towers in Chicago—completion of which is planned for 2017—Chicago-based Waterton Residential has discovered three keys for managing resident expectations: communicate, communicate, communicate.
1) Listen up. “With any cap-ex investment, you want to figure out what your demographic needs, and that’s what you should be renovating to,” says Waterton COO Greg Lozinak. “Whether it’s a clubhouse, a residence center, or a coffee bar, staff those spaces with associates to interact with residents and respond to their questions quickly.”
2) Keep talking. “Over-communicate across all channels,” Lozinak says. “That’s really how to sum up resident management during a renovation: Over-communicate with all of your outreach, whether it is putting fliers under the door, including letters with rent statements, or providing updates via Facebook or Twitter.”
3) Get social. Indeed, for operators engaging in common-area renovations, resident portals and Facebook and Twitter offer primo channels for tuning into your residents’ state of mind. As long as you know your resident demographic and communicate across lots of channels, using social media is a great way to keep the conversation going.
“Just remember that most communities have a wide spectrum of residents,” Lozinak says. “Most residents want updates via Twitter or Facebook, [but] the little old lady in 2501 may not have a Twitter account.”
Still, for apartment shops that took a pass or two on deferred maintenance during the recession, there’s a window of opportunity to make property-level investments now that will keep you looking shiny and new as the new players roll in. Here’s how three of your key team members need to respond to keep pace in the amenities arms race.
The Portfolio Manager
Critical decisions about cap-ex are going to live and die somewhere on the portfolio executive’s desk. Deciding what communities to invest in—and when—requires submarket and comp analysis and market intelligence regarding what types of development projects are coming on line.
“In any submarket, we take a look around to see what is available from the competition versus our offering mode,” says Jeff Prosapio, director at Naperville, Ill.–based Marquette Cos., an owner/operator with 8,500 units under management. “We pretty much stack it up on a head-to-head basis with all competing product. That said, keep in mind that suburban versus urban situations are very different. In an urban market, where there are a lot of local amenities, you don’t necessarily have to put in a ton of features unless the neighborhood demands it.”
As development heats up, most multifamily operators are likely to embrace smaller unit sizes and trade that square footage for blown-out amenity areas, particularly in urban and urban-esque submarkets anticipating a high proportion of Gen Y renters. In practice, that means keeping up with tony new Chicago developments for Marquette, including Alta at K Station, a Fifield Cos. development that packs in a 48,000-square-foot amenity deck called K2 Club that features a full-court indoor sports court. K2 also offers a resident lounge; party suite and private balcony equipped with outdoor seating and a grill; business center; stadium-style theater; locker rooms (each with a sauna); workout areas featuring iPod compatibility; and more. Alta also offers 24-hour maintenance, a guest services staff, and an on-site valet dry cleaner, and there are plans for a Blue Agave Restaurant and Tequila Bar to occupy 6,000 square feet of retail space in the building’s ground floor this fall.
At McLean, Va.–based Kettler, which has 18,000 units under management from New York to the Carolinas, property management president Cindy Clare says virtually all her operators are moving to make serious cap-ex investments now to keep pace with the communities of tomorrow. “Our clients are renovating common areas in part to increase the ability to both retain residents and push rents,” Clare says. “The newer developments are dialing down square footage and investing more in common areas to fit in tons of amenities to attract Gen Y renters but still be able to get them in at a rent they’ll be willing to pay.”
The Property Manager
When it comes to common-area renovations, property managers are your firm’s frontline commanders, managing both resident and on-site staff expectations while communicating critical project information to the executive staff (not to mention dealing with construction crews, landscapers, and the like). In any multifamily business model predicated on customer service, that means conveying an obvious residents-come-first concern. “Where the market has caused other people to not spend, we saw it as an opportunity to set ourselves apart from the competition and give our existing residents more reasons to stay with us,” says Jack Linefsky, vice president of property management for Clifton, N.J.–based Value Cos., an owner/operator of 3,700 units that just completed major pool and fitness center upgrades to several properties in northern New Jersey.
Linefsky and other property management veterans say residents are typically excited when major common-area upgrades are announced, and property managers can play a lead role in ongoing communications to keep that energy high when the construction equipment shows up (see “Say Again,” on page 38).
“We manage the conversation from the beginning, putting out fliers that say ‘coming soon,’ posting information on ‘here’s what’s happening,’ covering construction areas with signs that say ‘excuse our dust,’?” Linefsky says. “But most of our residents like to communicate with us electronically, so we also manage renovations with updates to our Facebook pages at each community and our corporate Facebook page.”
The Leasing Associate
At the end of the day, common-area investments are all about the prospect payoff. Luckily, leasing associates can use the opportunity before, after, and during construction to create excitement about a community and close sales. “Amenities don’t just become part of the overall statement of a community—good amenities are also great marketing tools,” says Jay McGarvey, owner of Jacksonville, Fla.–based McGarvey Residential, a boutique developer that just broke ground on a luxury amenities center for its Old San Jose on the River community. McGarvey credits the sale of half the community’s 18 luxury condos to the upgrade and says selling amenities is even more critical to leasing agents at apartment properties. “It’s really where amenities are a vital influencer, where they become a silent way to establish quality and credibility.”
Value Cos. used an expansion opportunity at one of its Middleton, N.Y., communities to collocate a new leasing office and state-of-the-art fitness center and pulled curious residents aside to look at photos, plans, and, oh, by the way, lease renewal status. “Our resident response was tremendous,” Linefsky says. Proving that when it comes to seriously upgraded community amenities, if you build it, the renters will come.