Multifamily developers across the country have being trying to outdo each other with greater amenities in what has become a full-out arms race to attract tenants. But Kettler CEO Bob Kettler (founder of DC's largest multifamily firm, in terms of units under construction) says the next big shift is developers being more selective about their amenity offerings.
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"They’ve put in every conceivable amenity," Bob, who will join hundreds of multifamily leaders at Bisnow's Multifamily Annual Conference on Thursday, says. "We went out and have tried to buy properties where we see people that overshot and over-programmed their amenities."
Many amenities have proven to be popular, Bob says, such as fitness facilities, dog parks and rooftop courtyards. But he warns about other amenities that can take up valuable square footage and are relatively underutilized.
"The issue with these areas is that they are not generating revenue," Bob says. "So the conversation needs to be around how developers can make their amenity offerings profitable in the future."
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With DC apartment rents already sky-high, Bob says adding amenities that force developers to raise rents can price more people out of the market than they attract to the building.
"If you look at where Class-A rents are coming out when you look at new projects, only a small percentage of the population in this market can afford those," Bob says. "That's one of the reasons we have sort of transitioned into repurposing buildings and looking at other marketplaces in states people are moving because they can’t afford to live in DC."
He has also identified some amenities that can cut costs, like automated package delivery and commercial laundry facilities. He has begun looking at mechanical parking systems that allow much higher density to save money on parking lot space.
Kettler has acquired properties in Greensboro, NC, and Charleston, SC. Bob says he has his eyes on other parts of the Southeast and Texas where he sees much stronger rent growth than in the DC area.
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Bob still feels optimistic about DC's multifamily future, though, and he has a massive construction pipeline to prove it. Kettler has 2,334 units in construction and lease-up, topping The JBG Cos by 28 units to make it DC's most active developer, according to data from Axiometrics.
Last month, Kettler and The Meridian Group broke ground on The Boro in Tysons, where we snapped Bob speaking above. At full build-out, the 3.5M SF development will have 1,500 residential units. Also in Tysons, Kettler is partnering with PS Business Parks to build the 395-unit Highgate at Metropolitan Mile. In Crystal City, Kettler recently delivered the 198-unit m.Flats and has been leasing it for about 30 days.
The developer is just as busy in suburban Maryland. Kettler is 60 days from delivering Element 28, a 101-unit high-end rental building in downtown Bethesda. It is also underway on a 275-unit mid-rise luxury apartment complex in Rockville and is partnering with Howard Hughes on a 437-unit apartment community in downtown Columbia.
In the hot Union Market area, Kettler has big plans for a five-acre site going through the approval process. The first phase of Market Terminal will bring 571 residential units, Bob says.
"We've really spiked in terms of our output," Bob says. "The pipeline we've been building since 2011 and 2012 has hit full production. We've never been busier."
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