Maintaining Market Share With Rehab and Renovation


Last month in our newsletter we talked about how Denver is in the midst of a boom. U.S. News ranked Denver #2 in the 100 best places to live in the US. A report that analyzed employment trends in the nation's 100 largest cities, also ranked Denver second in the nation for job seekers. The local multifamily housing market hasn't hesitated to take advantage of Denver's reputation.


Over 80 new projects were completed in the last 5 years. 25,000 units are currently under construction and will be completed this year with 3,246 new apartments already delivered in the first quarter. In a typical market, that might push vacancies up and drive rents down, however Denver isn't a typical market and properties like Dakota Ridge, a Berkshire Community located in Littleton, CO. know this.   Despite increases in inventory, rents are up. In March, metro Denver rental rates were 3.2 percent higher than last year. This exceeds the national average of 2.4 percent. Unincorporated Arapahoe County, Littleton and South Lakewood were among several other areas that saw increases at 5% and more. Given the market, existing projects need to look at ways to compete and hold their market share. And that's exactly what Dakota Ridge, a Berkshire Community located in Littleton CO, has done.

Stonebridge Builders has been fortunate to work with Berkshire Communities on several multifamily renovation and rehab projects. Their current project, the ongoing renovation of 480 units at Dakota Ridge, is a true partnership, with top to bottom oversight from Stonebridge and consistent timely feedback from Dakota Ridge.   Property manager, Kelsey Carter explained that in order to justify rent increases, maintain their share of the market and compete with other complexes, they needed to update the look and feel of their units as well as improve function and efficiency.   Based on market research, Dakota Ridge was anticipating adding an average rent premium of $65 - $225 based on the number of bedrooms in the unit. With the project a third of the way complete, a premium has been added to the rent for renovated apartments, however it exceeds their projections by as much as 37% in some cases.  

Dakota Ridge deliberately chose specific upgrades based on industry and market trends as well as feedback from residents and prospects. Certain upgrades were selected more for aesthetic purpose. For example, outdated bar level counter tops were replaced with single level surfaces to align with more desirable current kitchen design features. Other upgrades were chosen for improved function, durability and reduced maintenance long term, in addition to appearance. Vinyl blinds were replaced with 2-inch wood blinds. According to Carter, resident misuse has a greater impact on vinyl blinds and from the outside looking in aged vinyl blinds give a dated, unpolished look and feel. Replacing them with wood reduces maintenance costs, extends the life of the product and provides a more cohesive appearance between the interior and exterior.   In first floor units, plank hardwood flooring was installed to replace carpet and vinyl. According to a survey done by Multifamily Executive's Concept Communitythe current renter wants hardwood flooring over carpet and they are willing to pay extra for it. Aware of this trend, Dakota Ridge believed they could achieve an additional rent premium of $15-40 for first floor units with plank hardwood over second and third floor units where it is not yet an option.  Given market conditions, on average they were actually able to achieve premiums 40-75% higher than projected.  

Choosing the right builder is one of the most critical components when undergoing a major renovation project. Berkshire Communities chose Stonebridge Builders for the Dakota Ridge rehabilitation project based on a long standing relationship and proven track record of success on previous projects.   About Stonebridge, Carter says that the main thing that sets them apart from other builders is how they handle situations with unexpected outcomes. Even with a perfect plan, things can still go awry. She explains, "Stonebridge works to make things right rather than placing blame where things went wrong. They are solution focused versus situation focused. Stonebridge's attitude is, it doesn't matter how it happened or who's fault it is, it's about how are we going to make it right."  

Stonebridge's President and CEO, Chris Tolar, says, "Our client relationships are equally as important as the quality of our work. Communication is paramount to the success of any project and we make that our number one priority from our first contact with the client, throughout construction and long after the completion of the project. That's how we do business."  

As an industry expert and leader, Stonebridge is the natural choice for any multifamily community or apartment renovation and rehabilitation. Contact us for industry insights, planning and execution of your next project. 

 

 

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Value-Add Projects Like Kitchen and Baths Yield Big ROI

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When a local multifamily community was feeling the pressure of Denver's highly competitive rental market, they turned to Stonebridge Builders for help. They needed to consider upgrades not only to address deferred maintenance issues and outdated amenities, but also to justify rent increases to be consistent with local demand.   In densely populated urban areas with many options for apartment living, property owners need to set themselves apart from the competition. For many, this means rehabilitation projects to bring value where others don't. By industry standards, a successful renovation project should generate rent increases between 10-30%from interior improvements, and renovations to kitchens and baths tend to generate the greatest ROI.     

A great example of this strategy is Home Properties, headquartered in Rochester, NY. The company owns over 43,000 units in 121 properties primarily located in the Mid-Atlantic and Northeast. The company strategy is to acquire assets that most other developers would not be interested in. They're not looking for the newest, most attractive or luxury communities. The assets they acquire are in need of rehabilitation. The company knows that by rehabbing and renovating properties that are "a little beaten up and a little run-down" they can achieve substantial rent increases, which ultimately drives revenue. This strategy has yielded an 11.4 percent average annual total return over the past 10 years, and a 5- year compounded return of 11.7 percent.

Deferred maintenance is certainly an area of focus in multifamily renovation, however the most significant investments are made in upgrading kitchens and baths.   In Denver, Stonebridge Builders helped the local company to exercise this strategy and achieve the same results. Kitchens were upgraded with updated cabinetry and counter tops, state of the art appliances and both pendant and recessed  lighting to create a brighter look and feel. Baths were also remodeled with upgraded materials and lighting, which justified rent increases, encouraged retention and decreased vacancies.  


If your multifamily property could use a little TLC, and you're considering a value-add project, look to Stonebridge Builders for a consultation and ultimately for a seamless and successful process.  

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In the Midst of a Boom, Existing Properties Need to Compete with New Construction

Denver is in the midst of a boom in the multifamily market. Over 80 new projects were completed in the last 5 years, and with 25,000 units under construction this year and 3,246 new apartments delivered in the first quarter, existing projects need to step it up to compete.

Average rents for apartments built since 2010 are 60% higher than rents for apartments built in the 1970’s. Compare $1729 versus $1079 respectively and it’s clear that outdated multifamily properties need to renovate, remodel and add amenities in order to take advantage of rising rental rates. 

Chris Tolar, President of Stonebridge Builders, a Denver-based commercial construction company specializing in apartment renovations says, “The bulk of our business is in multi-unit apartment rehabs. Regardless of location, property owners are feeling the pressure to upgrade and update individual units given the current market conditions. The increase in inventory of brand new units is creating a pressure to keep up and compete. “

Stonebridge Builders Business Development Director, Lance Miller, confirms that complete unit renovations and clubhouse remodels consist of the bulk of their contracts for properties with larger renovation budgets. However, for apartment communities with tighter budgets, upgrading existing common areas and clubhouses and adding amenities like BBQs, dog runs, dog washes and especially package rooms, allows them to compete with new construction.

Construction of a package room can be a big upgrade at a relatively low price point compared to other renovations. Package rooms provide a much desired, convenient service for residents. Safe, 24-7 access to package retrieval is an amenity most residents are willing to pay extra for, and can be a deciding factor when choosing a community.

Tolar says, “Since Amazon has come on the scene, with most people doing the bulk of their shopping online these days, it can be a major burden for the on-site staff to constantly have to pull packages for residents. As a solution, we convert space inside of a clubhouse or common area into a self-service package retrieval facility. For communities that just don’t have inside space to convert, outdoor/weatherproof lockers are also available. Also, we can, and have built additions to house a new package room when space is limited.”

Whether you’re considering a complete overhaul of your multifamily property, a new clubhouse or looking to add or upgrade specific amenities, call Stonebridge Builders, the industry expert in Rehabs and construction.

Keeping Up with Color

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Whether it’s the leaves on the trees or the latest fashion, color is always changing. In fall, the leaves are changing colors and the climate becomes blustery. This results in the finest of entertaining shifting from the backyard ball game or a BBQ on the deck to the coziness of the kitchen, family room or media room to take in a big game of football.

Often, the seasons change inspires us to update our home as well. Changes can be uncomplicated and minimal to refresh a room. Obliviously, major changes are exciting.  A remodeled kitchen or the basement finish of your dreams may be in the budget and can be done just in time for your entertaining events. Changing seasons is the perfect time to remember color for the walls. Because walls take up over half of the space in a room, wall color is essential to achieving the right look. Brighter colors create a more stimulating and playful environment, while pale and neutral tones evoke a sense of relaxation. You may want to set a certain mood. Design details and color choices will allow you to do so. Engaging a contractor can help you get the best design ideas and the remodel can be completed with minimal stress and anxiety.