Other CRE Sectors Caught Up in the Amenity Wars
What started with enhanced gyms, pools and bike storage has become cooking classes, personal shoppers, child-care services, digital driving ranges, climbing walls and even community gardens.
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NEW YORK—The term “amenities wars” might be most closely associated with the apartment sector, but Mitchell Schear, Executive Partner at Camber Creek, tells GlobeSt.com it is spreading to other segments of commercial real estate.
“The trends in the commercial office space are similar to the multifamily space,” says Schear, the former President of Vornado/Charles E. Smith. “Commercial buildings are launching tenant engagement apps and offering pop-up massage sessions, car cleaning services, food trucks, nap rooms and treadmill desks. Of course, co-working spaces are famous for offering free beer and cold brew coffee on tap, entertainment centers and even in-house chefs.”
Schear said the amenities wars began with enhanced gyms, pools, bike storage and repair units and pet spas in apartments. “Now we are seeing movie theaters, cooking classes, personal shoppers, child-care services, digital driving ranges, climbing walls and even ‘community’ gardens with outsourced gardeners and home vegetable delivery—rooftop to table,” he says. “One building in New York City offers residents private wine tastings, advice on collecting and a full-time sommelier on speed-dial.”
Changing consumer preferences are a big reason for the popularity of many of these amenities “Younger people look for convenience—whether that’s a dog walking service, a grocery delivery service or home cleaning,” Schear says. “Those shifting preferences are simultaneously reshaping what landlords are expected to provide.”
Competition also plays a huge role in the amenities wars. “Increasing competition among high-end multifamily buildings started driving property owners and managers to offer new amenities to attract tenants,” Schear says. “This led to more and more building owners getting into the amenities game, pushing high-end buildings to offer more and more elaborate amenities and services to stay ahead.”
To show the effectiveness of these amenities, Schear cited a recent Newmark Knight Frank study, saying apartment buildings with four or more service amenities had a 4.5-percent sale premium over those with three or fewer. Additionally, the survey said that projects with eight to 13 total amenities earned a 5.1-percent rent premium and leased up 5-percent more units per month than those with seven or fewer amenities. Overall, well-designed and well-amenitized buildings achieved a 17-percent rent premium and leased up 23-percent faster than the average building.
“With growing demand for amenities, companies have emerged in the PropTech universe to provide these services,” Schear says.
To ultimately be a winner in the amenities space, property owners and managers need to know where the market is headed, what consumers are looking for and the pain points that face property owners and managers.
Schear acknowledges that these amenities are creating logistical demands for property staff, who are often looking for service and technology companies that can provide these amenities directly.
“The companies that are able to capture the service side of tenant and resident experience are going to become deeply integrated into the lives of their customers—creating a huge market opportunity for the winners,” Schear says.