More Developers Are Opening In-Building Apartment Amenities To Outside Use As A Way To Generate Interest In Their Properties

CHICAGO — It is 7:30 on a Thursday evening and residents of L, Property Markets Group's apartment building in Logan Square, are flocking to the building's lawn for an evening of yoga, followed by a post-workout nosh of wine and cheese.

But they aren't alone. The yoga class is open to the public and people who don't call L home are entering the building to get in a workout, find inner peace and connect with friends and strangers.

"We do this as a reflection of our public values that life is better with company and that you should always seek to elevate your neighbors," PMG Brand & Experiences Director Brian Koles said.

The prospect of attracting new residents surely doesn't hurt.

Increased supply, smart tech and the sharing economy are changing the ways multifamily owners view amenities. Five years ago, it would have been unheard of to allow nonresidents to use in-house amenities. And though some still say opening those doors will hurt the value of a building when it comes time to sell, some developers are opening in-building amenities such as rooftop decks, fitness centers, and kitchens and screening rooms to nonresidents as a way to generate interest in a property.

Koles said his firm approaches opening the doors of its buildings to nonresidents as an amenity in itself.

“It further activates our spaces as a local activity hub,” Koles said.

PMG’s X Social Communities in Chicago and Miami host a wide array of events, from fitness boot camps and spin classes, dog meetups and galas, screenings and viewing parties, networking and workshops. These events are free to residents, while organizers can charge what they want to nonresidents.

Koles said many new leases start from people discovering a building through an event, and PMG plans to expand the program beyond the three assets where this is being applied.

The decision to open amenities to nonresidents is coming amid signs of softening in rental markets nationwide and in Chicago in particular. Zumper’s national rent report for May showed Chicago one-bedroom apartments rents declined 10.7% in the past year, while two-bedroom rents dropped 15.8% during the same time frame. RealPage reports 10,545 new units were added to the city’s inventory in 2017, and another 3,350 are expected to come online this year. Yardi Matrix estimates 360,000 new apartments will be delivered in 2018 across the country, a 20% increase over last year.

Developers — starting in Miami and the West Coast and now those in Chicago — are increasingly hoping open doors will change that course. Danish coffee house chain Joe & the Juice opened a Chicago shop at 8 East Huron that is accessible to residents of the 26-story River North apartment tower, as well as passers-by. 

“It’s advertising for the building,” Luxury Living Chicago Realty founder and CEO Aaron Galvin said.

Galvin said opening amenities in neighborhood buildings makes sense, because neighborhood development can be a contentious process between developer and the surrounding neighborhood.

“It is about creating a sense of community,” Galvin said.

CedarSt Cos. Managing Partner Alex Samoylovich said his firm has leveraged lobbies for years as a public amenity. CedarSt’s Lawrence House in Uptown has a coffee house, Heritage Outpost, and Larry’s, CedarSt’s take on a modern dive bar. Galvin said Luxury Living Chicago Realty is talking to developers about opening food halls and partnering with artisanal vendors at other properties.

There are developers who resist the allure of opening up amenities to nonresidents. Bond Cos. co-founder and President Rob Bond said doing so can devalue a building, especially a newer, Class-A residential property, because amenities packages are baked into rents.

“A higher-end property attracts a customer who expects to be able to use facilities when they want. If you have a popular amenity being used by outsiders, the tenants can get crowded out. Opening amenities to nonresidents adds to wear and tear and drives up maintenance costs,” Bond said. He is taking a long-term view of what is best for the quality and value of the asset, as he has partners in his buildings to consider.

“Sometimes you need short-term pain for long-term gain,” Bond said.

Galvin said while opening up amenities to the surrounding area has its benefits in the outer neighborhoods where new apartment developments are mid-rise developments, it can be trickier downtown where renters are paying premiums and the buildings are taller, almost enclosed neighborhoods.

"People want to be friends with the folks who live in their buildings and amenities help foster those connections. Allowing others to use the amenities renters are paying a premium for can dilute the sense of community," Galvin said.

The biggest issue to consider when allowing nonresidents to use multifamily amenities is security. Bond said nonresidents can get into other areas of a building and cause problems.

“They’re effectively uninvited guests,” Bond said.

To ensure liability issues are covered, PMG is listed by the event organizer as an additional insured party. Organizers pay for additional security, certify they will lawfully handle alcohol consumption and pull permits when required.

The habits of modern office workers are also influencing multifamily developers’ decisions to open in-house amenities to nonresidents. Galvin believes the next layer will have to do with third party management of coworking spaces and fitness rooms.

“Having third-party operators managing larger amenities will be a revenue driver for the owner, provide more exposure to the building and will not take away from the resident experience,” Galvin said.