Do Multifamily Amenities Lead to Higher Rents and Lower Costs?
What types of buildings offer the highest rents? According to IREM data, all four building types reported increases in gross potential apartment rents in 2014. Elevator buildings reported the highest increase in gross potential rents, 4.4%, raising the rent/SF from $17.85/SF in 2013 to $18.63/SF in 2014. Low-rise buildings with 12 to 24 units increased from $11.79/SF in 2013 to $11.96 in 2014. The rents in garden buildings increased 3% to $11.36/SF, and low-rise buildings with 25 or more units experienced an increase of 2.1%, bringing rents to $11.82/SF.
This chart also reflects the NOI experienced by each building type. (NOI is defined as the income remaining after operating expenses have been paid, but before expenditures for ground rent, mortgage interest and amortization, capital improvements and income taxes.) Elevator buildings reported the highest NOI, rising 5.9% to $11.07. Garden buildings reported the greatest increase of 6.3%, from $5.56/SF in 2013 to $5.91/SF in 2014. Low-rise buildings with 12 to 24 units reported the lowest NOI, $4.93/SF in 2014. Low-rise buildings with 25 or more units reported a minimal increase of 0.6% at $6.30/SF in 2014.
“It is important to note that when evaluating your property’s current level of pricing, you need to make sure you also evaluate what amenities your competition is offering,” says Ingo Kraus, CPM, Regional Manager, Altman Management Co, AMO, Fort Washington, PA. “A great way to do this is by utilizing IREM’s Multifamily Comp Grid Spreadsheet. It is also very important to point out that property management staff need to be vigilant in maintaining their amenities. If your amenities are in disrepair, there may be no value to having those amenities.”
The Institute of Real Estate Management (IREM), an international community of real estate managers, collected income and expense data from the operations of apartment buildings containing unfurnished units. The 2014 sample has a total of 3,441 apartment projects, representing 679k units. Typical conventional financed apartment projects contains an average of 197 units.