Do small (50 unit) new build apartments need amenities?

Question

What experiences have you had (or seen) in say <5 year old apartments having success without pools / workout facilities on site?

This would be in regards to an affordable complex. Small town. Good economy. Not a luxury area. Lots of restaurants / shops nearby.

Some examples of successful newer, 50ish unit complex?

Thanks for the help BPers.

Colton

John Lenhart · Answer

@Evan Polaski There is certainly construction of that size in all markets. Go downtown and look at some of the building conversions down there. There are projects in the 20-50 unit variety going on there now. I dont know much about ground up construction of that size, but you will see a bunch of office, mixed use building conversions in the inner ring and even OTR. Look at what Model is doing or Urban Sites downtown. Most of what they do is that size in scale from what I understand. One of the projects that come to mind recently was the BOE Building in downtown that was recently converted to about 30 apartments.

If you go to the burbs, you may find a developer sitting on a small piece of land who can develop a small project but it would likely be an infill project and can be developed cheaply. I think you are seeing some of this around the universities in the area which are still fairly urban.

Steven Lowe · Answer

Amenities could give you an edge over competing properties depending on what they are and if your competitors offer them or not.  It also makes a difference in terms of how those amenities are done.  I would look at it like this...if I pay X amount to put in a pool, and it costs me Y amount to maintain and service that pool, what can I expect to make in additional rent, if anything?

John Lenhart · Answer

Smaller amenities that do not require a ton of maint are not a bad thing. I have seen a number of 50-60 unit complexes with smaller playground equipment or picnic areas. A picnic area is easy and tenants do use that. also in unit amenities can always be justified. Upgrading units to add new appliances, washer dryer hook ups, other smart technology can go a long way too

Greg Dickerson · Answer

Amenities for this type of property are not typical or necessary depending on the condition, market and competition. Obviously amenities will enhance the desirability of the property and offer the opportunity to increase rents for most properties however I would not plan on rent increases in this environment anytime soon.

Robert C. · Answer

@Colton Tapp, I agree that the decision should be market driven. Where I'm at, a brand new 50 unit building would need to have amenities to attract top dollar, compete with the other new buildings, and pencil out. Then again, a 50-unit here is a $25-$30 million project.

On another note, I've been working on a 42-unit value add building, and been able to hit above projections without adding any external amenities (although interior laundry and A/C are being put in). The rents are slightly less than what new buildings with amenities get, but that's the niche I'm after. You can't assume you can get the same rents with less product.

Evan Polaski · Answer

@Colton Tapp I am not aware of any 50-ish sized new construction projects at all around me.  New construction MF is almost exclusively 100+.  And again, what I see in Cincinnati, OH is semi-irrelevant to what you are doing in TX.  There are brand new build 200+ unit complexes going up without pools that lease up well.  In Cincinnati, a pool is really only useable about 4 months of the year, so it is not a huge selling point.  Rooftop decks/common areas are fairly common for the infill stuff I see.

@John Lenhart do you know of any 50-ish unit new construction around Cincinnati?

Evan Polaski · Answer

@Colton Tapp the market will dictate this more than size, in my opinion.  Typically "affordable" to me also means limited/no amenities.  The daily use amenities will be more valuable than the occasional, so washer dryer hookups may not be required by market, although for a 5yr old property, I would assume those would be in-unit.

Beyond that, depending on your climate, things like a pool may or may not be needed.  In FL, I would guess a pool is more expected than in the midwest.  Workout rooms are great and can help the marketing generally are rarely used. And if you demographic is older versus younger, take rare to next to never used.

Ryan Daigle · Answer

@Colton Tapp to echo what many have already said: doesn't sound like amenities are a necessity in an area like you describe for this type of property. Of course, what you mean by amenities may vary so it's good to be specific. Your knowledge of the market should come into play in this decision as well.

Maybe your comps don't have pools, but maybe they do have in-unit or onsite laundry and your tenant demographic has that expectation. Then you'd want to account for that in your models.

I certainly wouldn't expect car wash bays and a pet bathing center on your property, but as you go down the list of amenities there might be some that are considered standard for your area. So survey what similar properties in your area are offering and use that to inform this decision.

Cheers!

Colton T. · Answer

Thanks, Evan.

Have you seen some smaller new build apartments that offered little or no amenities that appeared successful?

Colton T. · Answer

Thanks Steven, very helpful.

Would you say amenities can be a large determining factor in a renters decisions making when comparing properties? Enough to not want to be the one without amenities?

Do small (50 unit) new build apartments need amenities?

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