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Apartment Amenity Battles Peaking As Developers Fight To Find Balance With Their Ideal Tenants

Four residential developers sat on a stage in Houston and described their ideal tenants. Their target markets were vastly different, from high-end to millennials to seniors to well, everyone. 

However, one thing they all had in common was optimism for the strength of the Houston multifamily market, which has historically had ongoing demand and which saw an influx of apartment activity after Hurricane Harvey

"Houston has always been a demand market," Alliance Residential Managing Director Cyrus Bahrami said to a crowd of more than 250 people during Bisnow's multifamily event at The Westin Galleria in Houston March 19. "You will always have supply, but you will always have more demand. Over the past 10 years that has been the case."  

Panelists at Bisnow's Houston multifamily 2019 event: moderator LJA Engineering's Hugh Durlam, Sudoff Cos.' Jacob Sudhoff, Caydon's Derrek LeRouax, Gables Residential's Micah Conn and Alliance Residential's Cyrus Bahrami

The end of 2018 was a bit rough — there was a sluggish construction pipeline in 2018 and negative 1,500 units absorbed in the fourth quarter due in part to people moving back into their repaired homes. But Gables Residential Vice President Micah Conn sees a positive future: He believes Houston's positive job and population growth will eat up the new supply coming over the next couple of years.

"Concession battles are killing Downtown," he said. "Currently, [the market] looks really crazy. But, as we get into '19 and '20, there should be a really nice window." 

Houston has about 15,000 units under construction, Bahrami said. Nearly half of that will deliver in 2019 and the rest the following year.

Developers are breaking ground on new apartments from the Inner Loop to the farthest Houston suburbs like Fulshear and Arcola

Caydon is creating a mixed-use, residential-anchored development in Midtown. Chief Operating Officer Derrek LeRouax exclusively announced during the panel the next phases of the company's Midtown project, Laneways.

In addition to the apartment project under construction at 2850 Fannin St., Laneways will include additional multifamily units, condos and a hotel in future phases. 

Sudhoff Cos. has six new projects slated for 2019, President Jacob Sudhoff said. It is focusing on high-end condominiums, costing upward of $750K.

Alliance Residential, which has been on a development tear around the city, has a goal to be attractive to everyone, Bahrami said. Alliance has eight projects under construction and another seven planned to launch this year, totaling roughly 6,000 units to deliver in the next few years.  

"We really don't have stock that has been built over the last year," he said. "It's a good situation for development." 

Tackling Tenants' Wants   

Understanding future renters drives all other decisions, such as building design, rental rates, amenities and programming, the panelists said. 

Panelists at Bisnow's Houston multifamily 2019 event: Sonder's Chris Turney, Greystar's Stacy Hunt, Madison Marquette's Bryant Nail, Hines' Mary Trevino, City of Houston's Margaret Wallace Brown and moderator Veritas Title Partners' Sandra Paige

"The amenity game is getting challenging as far as how can you one-up the other developer," Hines Managing Director Mary Trevino said.

She said it is important to check the comparables in the neighborhood to get a sense of the market's expectation.

Sonder, which offers premier furnished units for short-term rentals in apartments, has found it can charge 20% to 40% more by putting in high-quality amenities, even though they are used by between 3% and 10% of residents, according to Head of Real Estate Chris Turney. 

As amenity spaces become underutilized, property owners should find alternative uses for those spaces, Trevino said. 

Gables Residential has found its rental resident base wants more services that could be found in a condo, such as concierge services and coworking spaces.

These services must match the target market for each specific building, Conn said. It doesn't make sense to partner with coworking provider like WeWork in a building slated for empty nesters. 

Caydon seeks to enhance services by adding restaurants, bars and hotels near its multifamily and condo projects, LeRouax said. Home automation such as Bluetooth-enabled door hardware, WiFi-connected appliances and smart thermostat and other app-based technology services are also often a standard component to its properties.    

"We have a broad desire to provide that experience regardless who is the age or demographic that live there," he said. 

Sudhoff is adding amenities that make high-rise condo living more attractive, Sudhoff said. Since over 50% of its residents have dogs, a major concern was that residents didn't like going up and down to take their dogs to the bathroom. 

Residents can add a porch potty, which is an AstroTurf landing strip connected to a drain, for their dogs. This amenity improved sales by 30%, according to Sudhoff.  

While the battle continues among developers to have the best and greatest amenities and services, Bahrami questioned at what cost to the consumers. 

While still offering many of the traditional amenities, Alliance builds to a lower basis, especially in the suburban markets, which makes it faster to build, lease up and sell, Bahrami said.  

"Do you all get worried at how much you all are pushing rents?" Bahrami asked. "People move to Houston because of the low cost of living."