Growing Multifamily Demand Has Sparked A Renovation Arms Race Among Property Owners
Value-add is not just for fixer-uppers anymore.
To stay competitive with new units coming to the market, many recently built multifamily properties have fast-tracked renovations, adding everything from modern kitchens to state-of-the-art fitness facilities. This is not a matter of keeping the property up-to-date; it is about keeping vacancies as low as possible.
Adivo Construction, a general contractor with local teams across the U.S., is knee-deep in the amenities arms race. Adivo focuses only on multifamily renovation, specializing in unit interiors; clubhouse, leasing office and fitness center remodels; and exterior paint and roofing. The first two are where the company sees a growing interest. In late 2015, Adivo was brought on to handle a multimillion-dollar rehab job at the Residences at the Domain in Austin.
The complex was built in 2007, hardly the traditional, older value-add property type. Adivo repositioned and renovated 306 units, remodeled the clubhouse, office and fitness center, and painted nearly four miles of hallway. The Residences also commissioned new outdoor zen gardens and custom ceiling fixtures in the main corridors. Adivo has recently taken on a similar renovation project at The Davis SoCo apartments in Austin, a 373-unit complex built in 2008. Supply continues to grow in popular markets like Austin, where construction is around 8% of the total inventory, adding to the competition.
Owners who put off renovations not only run the risk of losing out to properties with more amenities, but they also could miss out on significant rent growth opportunities. "After an Adivo Construction renovation, clients typically see a rent increase between 15% to 25%," said Jeffrey Verchow, director of repositioning and renovations. Translated into potential net operating income, investing $300 to $500/unit quickly becomes millions. While keeping with the trends a new generation of apartment-seekers craves, these upgrades are timeless, ensuring the lasting value of the property beyond fads.
Loans have become increasingly harder to obtain for prospective homebuyers, who are required to put down larger down payments; for those looking in more popular markets, renting offers a more affordable solution that is still close to urban amenities. It is no longer enough for properties to be close to these luxuries; they must have comparable, if not better, in-unit features.
As multifamily booms, property owners will continue to compete for lower vacancies and higher rents. Adivo Construction, with over 10 years working exclusively in multifamily renovation, has experience knowing what tenants desire across the nation's most popular markets.
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