Don’t look now, but that block down the street that just went under construction? It could very well be a brand-new apartment complex coming out of the ground ready to compete with your asset. As occupancy and rents have blossomed over the course of 2011, so too has the interest in new apartment construction—predictions for multifamily development put 2011 starts at 179,000 units, according to the latest data available from the U.S. Census, an impressive increase over the 2009 and 2010 starts of 109,000 and 116,000 units, respectively. This projected increase in new product is worrying operators who may have let up a bit on site-level maintenance and cap-ex investments during the recessionary years. And rightfully so—trying to compete for Gen Y renters with brand-new communities that have next-gen amenities is going to be an uphill climb.
Still, for apartment shops that took a pass or two on deferred maintenance during the recession, there’s a window of opportunity to make property-level investments now that will keep you looking shiny and new as the new players roll in. Here’s how three of your key team members need to respond to keep pace in the amenities arms race.
The Portfolio Manager
Critical decisions about cap-ex are going to live and die somewhere on the portfolio executive’s desk. Deciding what communities to invest in—and when—requires submarket and comp analysis and market intelligence regarding what types of development projects are coming on line.
“In any submarket, we take a look around to see what is available from the competition versus our offering mode,” says Jeff Prosapio, director at Naperville, Ill.–based Marquette Cos., an owner/operator with 8,500 units under management. “We pretty much stack it up on a head-to-head basis with all competing product. That said, keep in mind that suburban versus urban situations are very different. In an urban market, where there are a lot of local amenities, you don’t necessarily have to put in a ton of features unless the neighborhood demands it.”