Coal-fired, brick-oven pizza. Despite the economy, droves of discretionary income-minded people continue to descend on Grimaldi’s Pizzeria underneath the Brooklyn Bridge for a taste of the brick-oven bounty that is consistently rated not only tops in New York City, but one of the best pizzas in the country. Lines often extend out the door and for several blocks up Old Fulton Street, there’s no delivery, and Grimaldi’s sells by the pie only, not by the slice.
After opening up locations in Hoboken, N.J., Las Vegas, and Dallas, Grimaldi’s is expanding again: right next door to Rockrose Development’s 200 Water Street, a 32-story high-rise newly converted from New York University faculty housing into 576 rental residences. Amenities in the pet-friendly building include a 24-hour doorman, laundry room, valet service, and fitness center. A sixth floor residents' lounge boasts a billiards table and flat-screen TV, a 33rd-floor rooftop terrace offers chaises, card tables, cabanas with sunshades, a BBQ grill, WiFi access, and a waterfall shower.
But all of the perks pale in comparison to the most coveted amenity being offered at 200 Water Street: VIP access to the legendary Grimaldi’s, where residents will enjoy not only front-of-the-line privileges but in-building delivery as well. “I’ve never offered delivery service, and I don’t plan to do it now, but as a company first ,we will make an exception and deliver free only within the building,” says Grimaldi's CEO Joseph Ciolli. “We’ll treat [the residents] like family. Even better, if you rent at 200 Water Street, we’ll treat you like the Mayor.”
Recession Mindsets
Super amenities like those at 200 Water Street were the norm at apartment properties (and many condo communities) across the country a couple of years ago. Before the implosion of the economy and the consequent degradation of multifamily rent fundamentals, apartment owners/operators were seemingly in an amenities arms race to offer up the latest and greatest in the battle to close prospective leads. All of that disappeared along with the wipeout of more than 6 million jobs and trillions of dollars in consumer wealth.
For the past year, apartment marketers have shied away from using the term "luxury" to attract prospective renters, who seemed to be entirely price-driven, counting every cent and cross-shopping every concession. But recent community lease-ups seem to indicate that amenities are once again becoming front-of-mind to potential residents, who, although still extremely cost-conscious, are seemingly open to a larger sales efforts incorporating the full lease value of products and services made available at apartment communities.
And it’s not just happening in New York City. “Consumers are voting with their dollars, and what we offer in luxury apartment living and über-amenities offers value and flexibility to prospects,” says Beth Van Winkle, a regional vice president of property operations for Dallas-based Milestone Management, which provides fee-management services for Foster City, Calif.-based Legacy Partners (among other clients) across Texas. “We don’t mind calling it luxury at all.”
Selling Amenities
Legacy at Memorial in Houston opened its doors for lease-up in late July, and Van Winkle is confident that the suite of amenities will be a driving force in attracting rental prospects to the property in addition to helping leasing office associates seal the deal. Amenities at the 330-unit high-rise include valet parking, bell hops, an entertainment lounge with screening and gaming room that boasts every gaming console available, a cigar lounge with humidors; a wine room with private wine storage and coolers ; and a pool with al fresco pool-side dining.
Although Legacy at Memorial only had 15 leases as of August, Van Winkle has zero worries about stabilization. Prospects strongly responded to similar lease-up and resident retention efforts at the 187 unit Legacy on the Lake and 2,044-unit RIATA communities in Austin, Texas, filling the super-amenitized (Bocce Ball court, anyone?)mega-properties to a 90 percent plus occupancies in several short months. A key to that absorption has been Milestone's and Legacy’s efforts to communicate the value of amenities during lease negotiations. If your property offers a fitness center, that’s a gym membership that a prospect does not have to pay for. Likewise, the pool, entertainment lounges, game consoles, and so on are all consumable services and products that a resident who leases up does not have to shell out cash for.
“As we work our marketing efforts, we are not afraid to show the value of having the strength and cardio center, or the wine coolers,” Van Winkle says. “Don’t be afraid to say ‘look what you are going to get’ and communicate the value associated with it. That makes a difference to a savvy consumer.”
Price Protections
That’s not to say that rent prospects are just blank-checking their way into amenity-heavy apartments. Even at 200 Water Street, Rockrose has discounted rents to those comparable in the outer boroughs of New York City ($2,045 for studios; $2,470 for one-bedrooms; and $3,715 for two-bedroom units), and is offering “market-based incentives” concessions for the first two months.
The Houston-based Finger Cos. opened a downtown signature high-rise that will compete with Legacy Memorial for high-end prospects, and thus offers a 1-acre rooftop garden, a pool and cabana lounges modeled after a Ritz-Carlton property in Maui, and an eight-floor amenities level with grand room, pool, coffee and juice bar, and fitness center. “There are a lot of worthy competitors in the market, so we have to do more than build a tower and just have a nice apartment,” says company president and CEO Marvy Finger. “We need to create something that establishes a way of life and encourages an image of exclusivity.”
Nonetheless, Finger is not sure if the amenities are difference-makers or just a ticket to the game in his markets across Texas, Illinois, California, Colorado, and Georgia. “Right now, the consumer is really looking for the low dollar, and it’s not the amenities that are closing the deals,” Finger says. “Quality product is important, and the consumer can determine the quality of developments in a submarket very quickly. Then they’ll shop them on price, and will ultimately get closed by the talent of your on-site salesperson.”
Still, amenities are starting to make a broad, if not exponential, comeback as a preferred tool in that lease sales process. Norfolk, Va.-based Internet listing service ForRent.com is seeing noticeable upticks in amenity offerings across many U.S. markets, according to the company's Midwest north regional manager Ann Meisenheimer, who points to shopping center shuttle services, wake-up calls, babysitting, and gourmet meal preparation as some of the more exciting perks being offered by ForRent.com clients. “But the top amenities right now are more pet perks being built into the communities and companies relaxing existing pet policies even further,” Meisenheimer says. “It is the most consistent trend we are seeing other than the effort to promote the green attributes of communities as an amenity.”
And ultimately, amenity packages are offering dollar value not just to penny-pinching prospects but to apartment communities struggling with occupancy and diminishing NOI in recession-racked submarkets. “It is an interesting time, and it really is becoming a function of cost and value on both sides of the transaction,” Meisenheimer says. “Everyone is just trying new things to offer more value and more appeal to their properties. The alternative is continuing to have to do more and more aggressive rental concessions.”
