Maintaining Market Share With Rehab and Renovation

Last month in our newsletter we talked about how Denver is in the midst of a boom. U.S. News ranked Denver #2 in the 100 best places to live in the US. A report that analyzed employment trends in the nation's 100 largest cities, also ranked Denver second in the nation for job seekers. The local multifamily housing market hasn't hesitated to take advantage of Denver's reputation.

Over 80 new projects were completed in the last 5 years. 25,000 units are currently under construction and will be completed this year with 3,246 new apartments already delivered in the first quarter. In a typical market, that might push vacancies up and drive rents down, however Denver isn't a typical market and properties like Dakota Ridge, a Berkshire Community located in Littleton, CO. know this.   Despite increases in inventory, rents are up. In March, metro Denver rental rates were 3.2 percent higher than last year. This exceeds the national average of 2.4 percent. Unincorporated Arapahoe County, Littleton and South Lakewood were among several other areas that saw increases at 5% and more. Given the market, existing projects need to look at ways to compete and hold their market share. And that's exactly what Dakota Ridge, a Berkshire Community located in Littleton CO, has done.

Stonebridge Builders has been fortunate to work with Berkshire Communities on several multifamily renovation and rehab projects. Their current project, the ongoing renovation of 480 units at Dakota Ridge, is a true partnership, with top to bottom oversight from Stonebridge and consistent timely feedback from Dakota Ridge.   Property manager, Kelsey Carter explained that in order to justify rent increases, maintain their share of the market and compete with other complexes, they needed to update the look and feel of their units as well as improve function and efficiency.   Based on market research, Dakota Ridge was anticipating adding an average rent premium of $65 - $225 based on the number of bedrooms in the unit. With the project a third of the way complete, a premium has been added to the rent for renovated apartments, however it exceeds their projections by as much as 37% in some cases.  

Dakota Ridge deliberately chose specific upgrades based on industry and market trends as well as feedback from residents and prospects. Certain upgrades were selected more for aesthetic purpose. For example, outdated bar level counter tops were replaced with single level surfaces to align with more desirable current kitchen design features. Other upgrades were chosen for improved function, durability and reduced maintenance long term, in addition to appearance. Vinyl blinds were replaced with 2-inch wood blinds. According to Carter, resident misuse has a greater impact on vinyl blinds and from the outside looking in aged vinyl blinds give a dated, unpolished look and feel. Replacing them with wood reduces maintenance costs, extends the life of the product and provides a more cohesive appearance between the interior and exterior.   In first floor units, plank hardwood flooring was installed to replace carpet and vinyl. According to a survey done by Multifamily Executive's Concept Community, the current renter wants hardwood flooring over carpet and they are willing to pay extra for it. Aware of this trend, Dakota Ridge believed they could achieve an additional rent premium of $15-40 for first floor units with plank hardwood over second and third floor units where it is not yet an option.  Given market conditions, on average they were actually able to achieve premiums 40-75% higher than projected.  

Choosing the right builder is one of the most critical components when undergoing a major renovation project. Berkshire Communities chose Stonebridge Builders for the Dakota Ridge rehabilitation project based on a long standing relationship and proven track record of success on previous projects.   About Stonebridge, Carter says that the main thing that sets them apart from other builders is how they handle situations with unexpected outcomes. Even with a perfect plan, things can still go awry. She explains, "Stonebridge works to make things right rather than placing blame where things went wrong. They are solution focused versus situation focused. Stonebridge's attitude is, it doesn't matter how it happened or who's fault it is, it's about how are we going to make it right."  

Stonebridge's President and CEO, Chris Tolar, says, "Our client relationships are equally as important as the quality of our work. Communication is paramount to the success of any project and we make that our number one priority from our first contact with the client, throughout construction and long after the completion of the project. That's how we do business."  

As an industry expert and leader, Stonebridge is the natural choice for any multifamily community or apartment renovation and rehabilitation. Contact us for industry insights, planning and execution of your next project. 

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Business is Booming . . . What You Need to Know.

1) Denver is Hot!

No doubt if you are in the development industry in the Rocky Mountain region you are well aware of this fact. It is the main topic or at minimum the sub-headline of all industry events. Denver has garnered both domestic and international attention as the hot spot of the interior U.S. for capitol investment and development.

Check any top list (thriving economy, diversified economic market, gen Y hot spot, sustainable market, venture capital funded investment hot spot, 2nd Best place in the US to launch a start-up according to Forbes, healthy and fit communities, effective public education, etc.

Denver is the envy of almost any interior United States metropolitan community. So naturally investors and capital development has quickly followed these positive trends, creating the construction boom we are living and serving our clients in.

2) Emerging New Players

On both the development and investment side of the equation many new people are getting involved. Of course everyone wants the "best" working on their projects. However the labor market has not been flooded by the same vigor, in fact other factors, such as the need for labor in the emerging energy markets of North Dakota has pulled many away.

What does this mean? More people are demanding the supply of good labor and trades. Who are the trades choosing to work for in such a flush market? Their loyalties stay with those who they know, who will pay a fair price (within the hot market) and who have longevity and will survive when times are not as abundant. We are proud to maintain our strong trade relationships with those we have worked with for years.

3) You Get What You Pay For

Ah, yes. Quality and cost! 
Aren't these some of the most important factors that drive all business decisions?  Don't we wish they charted a parallel course to that of the proven trends of supply and demand (i.e the higher the quality (demand) the lower the cost (supply).

Even though this is what we all desire, the truth is, quality and cost DO NOT follow the trend of supply and demand. In fact your grandma's adage is more accurate; "You get what you pay for!"

These factors frequently consume conversations in our office. Stonebridge Builders is known for its quality. We characteristically find ourselves competitive with pricing, but exceed our customer's expectations with quality.

However, we still have clients that desire the supply and demand trend. Sometimes they pick a competitor that is cheaper, but pay for it in the long run with change orders. Or they pick the "yes" contractor that sounds good (i.e. is saying what we all want to hear) but in the end turns out to be a farce.

Stonebridge Builder's president Chris Tolar warns, "When clients treat cost and price as a top priority, they may very well be pursuing expensive, slow, and the wrong results. Just ask any friends who have hired the cheapest contractor for their project, how it went."

We as a firm actually believe there is another critical factor that matters the most and that's communication. When we can talk with our client and work together that is what creates a winning relationship for all. It is always why more than 90% of our business is referral based.