Back to Press + Awards

Amenities arms race: How Houston multifamily developers are upping the ante on amenities

Houston Business Journal | 06.30.2017

When Marvy Finger developed his first Houston apartment project in 1960, it offered a few basic amenities.

Colony Oaks, a two-story, 317-unit garden-style apartment complex near the Galleria, featured landscaping, courtyards and a swimming pool.

Six decades later, the founder and CEO of The Finger Cos. infuses a bevy of luxury amenities into his Class A apartments. One of the prolific Houston multifamily developer’s most recent projects — 1900 Yorktown — is located just three miles from Colony Oaks. The eight-story, 262-unit apartment complex features a resort-style pool with cabanas, a state-of-the-art fitness center and a clubroom with bars and kitchen that can be rented out for private parties.

“The amenities in these apartments of today are outrageous compared to what was available on the market when I started,” Finger said.

Houston’s Class A apartment developers and architects are increasingly engaged in an amenities arms race — upping the ante on features, services and technology — as competition heats up for wealthy renters.

Developers are now planning new amenities that are poised to revolutionize apartments. Many developers are designing apartments for a future where drones, self-driving cars and artificial intelligence will transform the way renters live.

Developers are building high-end amenities and new technologies into their projects to differentiate them in an ever-crowded market. All of this means living in a luxury apartment in Houston these days can rival a relaxing stay at a five-star hotel.

“Houston’s apartment amenities are very, very nice and very upscale,” said Bruce McClenny, president of Houston-based Apartment Data Services. “The amenities are right up there with custom homes.”

Amenities galore

Several years ago, Scott Ziegler began keeping a “menu list” of amenities for clients looking to develop a luxury apartment project in Houston. The senior principal of Houston-based Ziegler Cooper Architects started with about 35 amenities on his first list about seven years ago. Today, that list has expanded to a whopping 98 amenities.

Ziegler works with developers to dissect their target renter audience, narrowing a project’s amenity package based on location, demographics and economics. The architect travels the world looking for inspiration in hotels, markets and residences in other countries. When he’s not globetrotting, Ziegler is constantly combing the Internet, especially Pinterest, to give his design team ideas for Houston’s next big apartment amenity.

“Amenities are so important,” Ziegler said. “From the moment you walk into a leasing center, we want the tour to have a wow factor so that by the time the tour is done, you’re ready to sign.”

Modern Houston apartments boast a bevy of high-end amenities, such as resort-style pools with cabanas, high-end fitness centers and high-tech conference rooms.

Some Houston apartments feature amenities geared toward Millennials and young professionals working in energy, law and medicine. These youth-oriented apartments offer video arcade rooms, pool tables, bocce ball pits, bowling lanes and resort-style pools with cabanas, outdoor grills and even full-service bars.

StreetLights Residential offers a full-service bar — complete with a bartender mixing drinks — at its three Houston apartment projects: The Ivy, The James and The Carter. Residents can stop by during happy hour, and pay for a bottle of beer, a glass of wine or a mixed cocktail. The James, located near the River Oaks District, is an eight-story midrise featuring 344 high-end units. Rents are about $2.60 per square foot, or $2,210 per month for an average 850-square-foot unit.

Other apartments feature amenities designed to woo Baby Boomers, such as demonstration kitchens for cooking classes and wine lockers. Some apartment developers, like Martin Fein Interests and Greystar, are building apartments that cater to active-adult renters ages 55 years and up. Both developers offer spas that feature hair and nail salons in their active-adult projects. Rents at Greystar’s Overture Sugar Land, a four-story, 200-unit complex southwest of Houston, averages $2,174 per month. Rents at Fein’s Olympia at Willowick Park, an eight-story, 189-unit midrise near Highland Village, average $3,554 per month.

Apartment amenities aren’t just about physical features — they’re also about offering unparalleled hotel-like services.

Many Houston luxury apartments feature a concierge desk that can handle packages, dry cleaning, changing lightbulbs and even restaurant reservations and appointments. The Morgan Group is offering a hotel-like shuttle service at Pearl CityCentre that transports apartment residents to the nearby CityCentre mixed-use development. The seven-story, 311-unit midrise has an average monthly rent of $2,069.

Apartments are also catering to canine residents, featuring dog washes and dog parks, as 60 percent of renters in Houston own pets. Trammell Crow Residential set aside a large 1 acre fenced-in park featuring dog exercises for its four-pawed tenants at its Alexan Yale Street apartments in the Heights. Rents at the midrise apartment complex range from $1,231 per month for a one-bedroom, 630-square-foot unit to $3,315 per month for a two-bedroom, 1,498-square-foot unit.

ROI

Some amenities may look good on paper, but are often underutilized by residents, said Paul Forbes, a co-principal at Houston-based Allen Harrison Co.

Amenities, like a business center, can sit empty most of the time — costing developers money to maintain without benefiting residents.

“I believe the amenities arms race is a losing battle because it’s kind of trendy,” Forbes said. “Instead, we’re trying to focus on something that is going to stand the test of time. That means building amenities that everyone wants, uses and values: a pool, fitness center and common area for residents.”

Higher-end amenities drive development costs up, but it pays off major dividends, Ziegler said. Apartments with attractive amenities lease up more quickly and can charge higher rents. Moreover, high-end amenities add value to the property upon sale, he said.

“Amenities are expensive,” Ziegler said. “But the cost of not doing it is more than just doing it.”

Ziegler points to one of his Houston projects, The Sovereign at Regent Square, developed by Boston-based GID Development. Plans for the Class A apartment project in Upper Kirby evolved from a three- or four-story garden-style apartment to an eight-story midrise to the current 21-story, 290-unit tower. The project includes a demonstration kitchen, zen garden, on-site ATM, valet parking and electric car charging station among its many amenities.

The Sovereign came to market during the middle of the oil slump, but leased up in half the normal time — within eight months instead of the typical 12 to 15 months, Ziegler said. Rents at The Sovereign start from $1,470 per month for a 592-square-foot studio to more than $5,000 per month for a two-bedroom unit spanning 1,453 square feet.

“Our client wanted a blowout amenity package,” Ziegler said. “And they hit it out of the park.”

Pool of luxury renters

With so many luxury apartment units being delivered, industry observers have often wondered: Just how deep is this pool of affluent renters in Houston?

It might not be as big as developers may think, according to RENTCafé. The national apartment search firm analyzed U.S. Census data and found that Houston had the fifth-largest number of affluent renters nationally. There are 22,000 renter-occupied households in Houston who earn more than $150,000 a year, an increase of 4.8 percent between 2014 and 2015.

Still, this well-heeled group represents just 4.4 percent of all renters in Houston. The majority of Houston renters — 64.3 percent — earn less than $50,000 a year, according to RENTCafé.

Nearly half of Houston apartment residents are considered “rent-burdened,” meaning they spend more than 30 percent of their income on rent, according to Abodo, an online apartment marketplace.

In Houston, 48 percent of apartment residents are considered rent-burdened. Houston ranks No. 58 among the top 100 cities with the highest share of rent-burdened residents, according to Abodo.

Amenities of the future

Emerging technologies are transforming the way developers build Houston apartments and amenities.

With the rise of ride-sharing and autonomous cars, Gensler is advising clients to delay construction on parking garages and instead design parking structures that could be converted into other uses in the future.

Peter Merwin, a principal at Gensler overseeing the architect’s mixed-use practice in Houston, believes emerging technologies, such as self-driving cars and automated parking garages that can stack cars on top of each other, could mean more space for apartment units and amenities for Houston developers.

“We won’t immediately eliminate the need for parking, but if we can nibble back 10 percent, it’ll be a huge boon to developers,” Merwin said. “Like the Dutch from the sea, taking back real estate is very crucial.”

Several apartment operators, including Scottsdale, Arizona-based Alliance Residential Co., are looking at incorporating smart home technology and artificial intelligence into their units. Residents of these “smart apartments” will be able to control lights, surround sound systems and thermostats with just their voice.

As online shopping becomes more popular, developers such as Morgan Group and Midway Cos. are installing automated package lockers that can text or email residents to pick up their Amazon deliveries securely. Other developers, like Hanover Co., have incorporated refrigerated package storage areas for Blue Apron and other food deliveries. With the rising popularity of online shopping and near-instant delivery services, developers are also looking into drone landing pads where flying drones can deliver packages.

Amenities can be a risky proposition, however, said Jonathan Brinsden, CEO of Houston-based Midway Cos. High-tech amenities in particular can be hard to predict, because new technologies change rapidly.

“People tend to gravitate toward what’s the hot new thing today, but it may not be relevant in a decade,” Brinsden said. “At one point, everyone raced to put in an iPod speaker dock, but when Apple changed their connector, it rendered everything into obsolescence.”

Neighborhood amenities

Developers are increasingly harnessing neighborhood amenities — restaurants, nightlife, shopping, entertainment, park or even a grocery store on the ground floor — to attract high-end renters.

Marvy Finger was one of the first to incorporate a grocery store in the One Park Place apartment tower downtown, which has a Phoenicia grocery store on the ground floor.

Today, Ziegler Cooper is working with The Morgan Group on a Pearl-branded apartment midrise anchored by a Whole Foods Market in Midtown, as well as with Midway Cos. on Buffalo Heights, a boutique office and apartment midrise anchored by a H-E-B grocery store near Buffalo Bayou Park.

Apartment and mixed-use developers are keen to partner with grocers because they can charge higher rents and earn a greater return on their investment, Ziegler said. A recent Urban Land Institute study found that an urban mixed-use apartment project can charge a 25 to 30 percent rent premium over single-use apartment projects.

“We’re seeing a densification in our living patterns,” Ziegler said. “People are looking for more of an urban lifestyle, and we see the grocer as one of the key elements in a niche neighborhood.”

Ultimately, the fundamentals of real estate — great location and design — will always trump amenities and technologies, Brinsden said.

Midway Cos. recently completed Avenue Grove, an eight-story, 270-unit apartment project in Upper Kirby that features all the usual luxury amenities: a resort-style pool, a high-end fitness center and an automated package locker system.

But Avenue Grove’s biggest amenity sits across the street. Levy Park, a 6-acre urban park, underwent a $15 million makeover and now features a pavilion, green space, playground, fountains, games and even a restaurant. Rents start from $1,650 a month for a one-bedroom unit spanning 623 square feet to nearly $4,000 per month for a two-bedroom brownstone spanning 1,135 square feet.

Hines Interests also included a pocket park in The Southmore, a 24-story, 233-unit tower in the Museum District. Rents for the average units range from $2,200 to $6,400 per month.

“Rather than focusing on the amenity of the day, we try to focus on the human aspect: What is it that day-to-day impacts the way people live?” Brinsden said. “It’s the simple things, such as connectivity, location and access to neighborhood amenities like restaurants. Those are going to be a constant for the foreseeable future.”