Rooftop amenities add tremendous value to urban multifamily properties.
Competition among urban apartment buildings can be fierce. Especially in a high supply market. Luxury apartment building deliveries are at historic highs. It’s crucial to stand out and attract more renters.
At the same time, budgets are tight. Operating and construction costs have remained high. You need to invest wisely.
Invest in well-designed rooftop amenities to impact:
- Leasing velocity
- Resident retention
- Higher rents
- Lower cap rates
- Better IRRs
If designed well, rooftop amenities can be the perfect opportunity. Invest in something that will help your property outperform the market.
Increase Leasing Velocity with Rooftop Amenities
Leasing velocity measures how quickly newly available units are being rented. To calculate, divide the number of units leased by the total number of available units during a given period.
A low leasing velocity can be a major problem, especially for new lease-up properties. Without enough units rented out, the financial performance of the property will be negatively affected. So will its market value.
The quantity and quality of amenities is one of the major factors that can affect a property’s leasing velocity. Rooftop amenities continue to be one of the most sought-after amenities. They improve the marketability of your property. Properties with inferior amenities struggle to secure leases. But standout properties with one-of-a-kind amenities are able to outlease the market.
Improve Resident Retention with Rooftop Amenities
Resident retention measures how well a property keeps its tenants. To calculate, simply divide the number of tenants who have renewed their leases by the total number of tenants whose leases were set to expire during a given period. Then, multiply by 100 to get the percentage.
Poor resident retention is a costly issue. It causes higher vacancy rates, less stable income, and increased turnover costs. Based on a 2022 Zego report, the average unit turnover cost takes 17 months to recoupe.
Rooftop amenities can help improve resident retention in at least a couple of ways. First, your property outshines the competition by offering better amenities. Residents are less likely to downgrade when they move apartments; they’ll be looking for an upgrade. When your property is the best they’ll have less reason to leave. Second, rooftop amenities are social amenities that foster a sense of community. When residents socialize at the rooftop, they’ll meet each other and make friends. And they won’t want to leave those relationships behind.
Increase Rent with Rooftop Amenities
Based on CoStar data, rooftop amenities drive a $0.20 per square foot increase in unit rent prices. On the average Loft Six Four project, this translates to a half million dollar increase in annual revenue.
Rooftop amenities are one of the higher value apartment amenities. They give residents access to million dollar views. They provide social networking opportunities. And they offer a connection to nature in an otherwise deficient environment.
Because of their desirability, rooftop amenities get used more than other amenities. This makes them a more social environment. As Paula Munger, Director of Research for The National Apartment Association explained, “We found that the amenities residents wanted most, and were thus willing to pay more for, were the social ones – those that fostered a sense of community.”
Lower Cap Rates with Rooftop Amenities
The cap rate helps investors measure their return on investment in your property. It provides a valuation based on the Net Operating Income (NOI) and is calculated by dividing the NOI by the property’s value.
Rooftop amenities help lower cap rates by increasing the NOI through added revenue. That income will also likely rise at a higher than average rate because of the higher occupancy at properties with better amenities.
Better Internal Rates of Return (IRRs) with Rooftop Amenities
A property’s internal rate of return is a projection of the profit it could earn over the time you own it. When all contributing factors are the same, a higher IRR will likely provide a better return.
Rooftop amenities can lead to higher IRRs by increasing cash flow. When you partner with Loft Six Four, we’ll help you maximize the profitability of your rooftop, while keeping your total investment cost low.
Have a rooftop amenity project in mind? Let’s talk about how we can help you make the most of your investment.