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 For example, outdated bar level counter tops were replaced with single level surfaces to align with more desirable current kitchen design features.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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In the Midst of a Boom, Existing Properties Need to Compete with New Construction

Denver is in the midst of a boom in the multifamily market. Over 80 new projects were completed in the last 5 years, and with 25,000 units under construction this year and 3,246 new apartments delivered in the first quarter, existing projects need to step it up to compete.

Average rents for apartments built since 2010 are 60% higher than rents for apartments built in the 1970’s. Compare $1729 versus $1079 respectively and it’s clear that outdated multifamily properties need to renovate, remodel and add amenities in order to take advantage of rising rental rates. 

Chris Tolar, President of Stonebridge Builders, a Denver-based commercial construction company specializing in apartment renovations says, “The bulk of our business is in multi-unit apartment rehabs. Regardless of location, property owners are feeling the pressure to upgrade and update individual units given the current market conditions. The increase in inventory of brand new units is creating a pressure to keep up and compete. “

Stonebridge Builders Business Development Director, Lance Miller, confirms that complete unit renovations and clubhouse remodels consist of the bulk of their contracts for properties with larger renovation budgets. However, for apartment communities with tighter budgets, upgrading existing common areas and clubhouses and adding amenities like BBQs, dog runs, dog washes and especially package rooms, allows them to compete with new construction.

Construction of a package room can be a big upgrade at a relatively low price point compared to other renovations. Package rooms provide a much desired, convenient service for residents. Safe, 24-7 access to package retrieval is an amenity most residents are willing to pay extra for, and can be a deciding factor when choosing a community.

Tolar says, “Since Amazon has come on the scene, with most people doing the bulk of their shopping online these days, it can be a major burden for the on-site staff to constantly have to pull packages for residents. As a solution, we convert space inside of a clubhouse or common area into a self-service package retrieval facility. For communities that just don’t have inside space to convert, outdoor/weatherproof lockers are also available. Also, we can, and have built additions to house a new package room when space is limited.”

Whether you’re considering a complete overhaul of your multifamily property, a new clubhouse or looking to add or upgrade specific amenities, call Stonebridge Builders, the industry expert in Rehabs and construction.

The Benefit of Unit-by-Unit Renovations vs. Major Overhauls of Apartment Complexes and Multifamily Communities

Regardless of the size of the property, whether it is luxury or affordable, urban or rural, property owners are concerned about the same things, property value and profitability. Maximizing rental income and keeping expenses low are the top priorities. When the Net Operating Income (NOI = Income minus Expenses) on a Multi-Family property increases, so does the overall property value.

Metro Denver has one of the most competitive rental markets in the country. Demand is high and supply is low. Last year inventory added by new construction was absorbed without increasing vacancy rates, in fact, vacancy rates decreased by over 1%. At the same time, apartment rents grew by 2.9%, which is slightly faster than the overall inflation rate.

To keep up with the competition and capitalize on current market opportunities, property owners need to justify rent bumps while keeping expenses and vacancy rates low. Individual unit renovations and rehabilitation of the property are the main factors in generating and justifying rent increases.

For most property owners, a complete rehab of the entire property is cost prohibitive and not feasible. However, opting for unit-by-unit renovations as apartments become vacant softens the financial burden of a complete overhaul while keeping occupancy and rental income stable.

Stonebridge Builders, a Colorado-owned and operated commercial construction company, has perfected unit-by-unit apartment rehabilitation and has made this a top priority in their business model. For all projects, the scope of work and timeframe for completion is determined by allocated budgets and projected lease turnover.

Stonebridge understands local market conditions and works diligently with property owners to ensure that unit availability and quick turnaround are maximized while costs and income loss remain low. Currently, on a larger scale, Stonebridge is renovating 600 units over a 2-year period for a large multifamily community in Superior, CO and completing 55 units over 12 months for a smaller Denver metro apartment complex. When Stonebridge recently completed turn key renovations for an apartment complex in Littleton, each unit was completed in 10 days or less, maximizing unit availability and minimizing rent loss.

Successful unit-by-unit apartment renovations and value-add projects require planning, preparation and careful oversight and management of the project. When tenant occupancy is high, exterior improvements like new siding, stamped concrete, designer patio finishes, parking lot re-paving and landscaping can supplement a lower volume of interior renovations of kitchens, baths, plumbing and lighting, new paint and flooring.  

To create a strategic plan and partnership to renovate an Apartment Complex or Multi-Family Community, call us. 20 years of experience in the industry, a portfolio of successful outcomes and our commitment to providing the absolute best customer service will ensure an outstanding experience from start to finish.

Design Trends in Multifamily Living- Spaces that Build Community

The new generation of renter is looking for amenities that extend beyond their own apartment and into shared and common spaces. What does this mean for the Multi-family industry? To keep units filled, multifamily properties need to respond to this new demand and keep “community” in mind when renovating existing spaces and designing new ones.

To meet these new demands, common use amenities like lobbies, laundry rooms and recreational areas should be designed for multi-use and to encourage community connectivity. For example, a space that serves as a leasing office by day that can be converted to a shared common room after hours. This space should have lightweight and easy to move furniture that residents can arrange for small gatherings or large events for many people. In designing these multi-use spaces, materials should be chosen with durability as a priority. Fabrics and floor coverings need to hold up to greater wear and tear without looking worn or used.

 Real estate start up Common, has taken the concept of providing amenities intended to build a greater sense of community in multifamily living to an entirely new level by creating Coliving “homes, ” a shared-living concept similar to boarding houses popular in cities during the Industrial Revolution and the early 20th century.  Co-living offers residents reduced rents in desirable, typically high cost, urban areas for a substantially reduced monthly rate. The monthly rent gets residents a bedroom, not an individual apartment. For many residents, common living rooms and kitchens and shared baths are the trade-offs for otherwise unaffordable rent. However, for others, this isn’t a trade-off, it’s a choice for a unique lifestyle and culture and the reduced rent is an additional bonus.

The biggest challenge with creating Coliving spaces is convincing developers to design buildings for this concept and purpose. The floor plans aren’t consistent with traditional multifamily properties. Sterling Jawitz, the head of real estate strategic partnerships at Common says “When we design our projects and work with developers from the beginning, whether it’s a ground-up development or rehab or adaptive reuse, we try to be very cognizant and respectful of the fact that we’re asking them to build something that is maybe not as typical as you would see in the market with studio and one- or two-bedroom units.”

Given Denver’s housing shortage and extremely tight rental market, maybe it’s time for developers to take a risk and consider creating spaces that offer renters seeking a different housing culture a place to create this new type of community?

At the very least, multifamily properties should consider using a local company like Denver’s Stonebridge Builders, to design, remodel and/or renovate existing common areas for greater flexibility, multiple-uses and to appeal to the new renter looking for amenities that extend beyond the 4 walls of their own individual unit. 

The Time is Right for Multifamily Renovations and Apartment Remodeling

 In 2015, Denver ranked 6th in the country for Top 10 cities adding jobs. This trend has continued into 2016 with growth rates of 3 to 4 percent per year. With more jobs available, Denver became one of the fastest growing cities in the nation. Last year, Denver’s population grew by 102,000, however according to the U.S. Census Bureau, the state added only 25,143 new homes, condos and apartments to accommodate those newcomers, adding 15,000 units to a shortfall that has been mounting since 2012. Colorado is currently at 55,000 homes short of where it needs to be to support the recent population growth.

With increased demand for housing, and a decrease in supply, rent growth is the natural consequence. In 2014, rent increase averaged 5.9% nationwide, this year it has been as high as 9% in markets like Denver, San Francisco and Portland. Despite higher rents, vacancy rates are low.

The conditions are perfect for investing in multi family housing. With the increased need for multi family housing also comes a greater need for Denver apartment renovations and Denver apartment remodeling for current property owners. Local commercial construction company, Stonebridge Builders, has been in business of Multifamily remodeling and Multifamily renovations and new construction for over 15 years. When considering a new purchase of a multi-family property or renovating an existing one, or a build from the ground up, contact Stonebridge Builders, the number one Denver commercial construction company, the top expert Multifamily renovations and Apartment remodeling.

Give Renters What They Want - More Storage!

The latest trends in apartment living are proving that it’s all about generation and location.  As a result, many multi-family developers are focusing on urban projects to attract millennials, the largest population of renters, who want to spend less time commuting and more time pursuing activities and creating a balanced lifestyle.

Jeff Kayce, in a recent webinar for the National Association of Home Builders (NAHB), discussed emerging trends in interior and exterior spaces and how generational differences impact apartment design.  He said, “It’s all about the lifestyle for today’s renters. They want the urban experience of less commute time and immediate access to various activities.” They are willing to sacrifice space for location and quality of life.

With the cost per square foot higher than in outlying neighborhoods, urban living means smaller living spaces.  To offset the higher cost of urban development, multi-family property owners are consistently looking for ways to maximize rental income. With 44% of non-homeowner millennials not looking to purchase a home, but instead choosing smaller living spaces in favor of more appealing locations, storage space isn’t just a want but has become a necessity, and they are willing to pay a premium for it.

This year, Multifamily Executive’s Concept Community conducted a nationwide survey of over 84,000 renters. The findings highlighted that in-unit storage and oversized closet space are highly desired amenities that can increase rent by upwards of $75 per month. Almost half of renters surveyed (49%) said they would pay $75 extra per month for a larger closet (10’ by 6’) versus the standard sized closet (4’ by 6’.)

J Turner Research surveyed Millennials, Gen X’ers, Baby Boomers and members of the Silent Generation. The two younger generations made up 80% of those surveyed. With other hot topics, in general, the older the renter the more cost conscious they tend to be. That is not so in this case. There isn’t a significant demographic difference in willingness to pay for additional closet and storage space. Across the board, when renters were asked if they would consider paying an additional $25 per month, or $100 total for more in-unit storage, surprisingly there wasn’t a significant change in willingness to pay extra. 45% of renters were still willing to pay more rent for more storage.  

Given the results of the survey, when it comes time to remodel or renovate current units or break ground on a new project, it is clear that building over-sized closets is a design feature that will pay off in the end, given that six feet of additional closet space can yield up to $100 more rent per unit per month. To generate increased revenue and appeal to all renters, call Stonebridge Builders to create the design and complete the renovations to your multi-family communities.