In many respects, the decision to renovate an apartment community has never been easier. The boom of new, market-rate multifamily projects has seen to that. You step up or fall away.
The tricky part is what comes next.
For REITs and other national and regional owners, those next-step questions have taken on a new urgency: How do you profitably reposition an asset? How do you do that with labor in historically short supply? How do you budget for surging building-materials costs?
A growing number of public and private owners believe they have found an answer that rewrites the multifamily renovation playbook. The new approach promises:
- More affordable property repositioning. The road map from a Class C to a Class B property or Class B to A has never been more direct and easier to attain.
- Better preservation of NOI in battleground markets. The new renovation strategy carefully calibrates the project to achieve maximum tenant retention without needless overbuilding.
- Stable, predictable materials costs. The pricing trend line of lumber and other project materials is sky-high, with no end in sight. Breakthrough purchasing power promises to minimize pricing surprises.
- Nationwide uniform, consistent construction quality. Why face uncertain labor issues market to market? The new approach disrupts traditional local-market contractor recruitment and retention with unmatched project certainty.
- True coast-to-coast renovation service area. Looking at renovation projects in Boston? Washington, D.C.? Tampa? Dallas? Phoenix? Seattle? Now, one call is all it takes to put renovation projects in those markets and many others in motion.
- Comprehensive renovation services from initial design to final walk-through. Whether the need is a deep, down-to-the-studs renovation or cosmetic kitchen and bath updates, the solution easily scales to the need.
The exciting part? It works. So reports Steven Bolos, president of the Renovation Division of Katerra, a turnkey, vertically residential construction company. “We’re working on a 1,000-unit project in California, turning about 100 units a month. With our global network of suppliers and our own products, we’re capable of saving millions of dollars in material costs,” Bolos says.
Bolos explains the savings in two words: Purchasing power. “Katerra has made a huge investment in U.S. and overseas manufacturing facilities and distribution centers, and built a massive supplier network. This volume reduces costs for all our customers.”
As for labor concerns, Bolos says Katerra doesn’t have that problem. “They want to team up with us because we really take care of subcontractors. We’re a respected national player, we pay well, and we’re very organized. Subcontractors love to work for companies like that.”
Bolos also understands price gets his company in the door. Then quality, performance, and timely execution must take over to earn their shot on the next project. Bolos points to projects in New Jersey, Chicago, Dallas, and elsewhere to illustrate the point. “We’re scaled to take on renovation projects from $6,000 to as much as $50,000 a door. Garden style. Three-story. Two-story. Mid-rise. High-rise. You name it.”
For multifamily property owners, the “what comes next” in apartment renovation projects may not be nearly as challenging as once thought.