Maximizing Value: How Amenities Can Boost Revenue And Tenant Satisfaction

One of the most difficult challenges building owners and property managers face is providing top-of-the-line amenities to tenants without breaking the bank. This is especially important today, as pandemic-sparked rent disruptions and low office vacancy rates have led to unprecedented financial hurdles. 

The simple answer may be to raise rents, but that could backfire in competitive markets and drive away tenants. Instead, Jae Roe, president and founder of SOVA Real Estate Solutions, and Salvatore Dragone, senior vice president and director of property management at Rubenstein Partners, recommend finding creative ways to monetize amenities, offering tenants an elevated experience while offsetting costs. 

Roe and Dragone both spoke at the Institute of Real Estate Management’s Property Management 360 event, a virtual training seminar covering topics across six key areas of property management, on a panel titled Beyond Rent: Maximizing Income Through Ancillary Revenue. They walked Bisnow through some of the best practices for monetizing building amenities.

A Classic Concept, But Things Have Changed

Dragone said that while the concept of charging for certain amenities is nothing new, what has changed is the regularity with which owners are installing high-quality amenities, opening the door for new financial opportunities. 

“If you go back 20 years, it was rare to have a fully connected conference facility,” he said. “You would have a room that you could have a conference in, but you had to bring all your own equipment. Today, the conference rooms already have the equipment, ready for all the tenant's needs, and you can charge more for that convenience.” 

He added that while some buildings used to offer the use of their fitness centers for free, these centers have become much more sophisticated and the addition of higher-tech equipment has enabled owners to charge a higher fee. The rise in popularity of electric vehicles has also led to a new financial opportunity. While buildings used to only have one or two chargers that tenants could access for free, owners are now installing dozens and charging for their use.

Think Realistically About Revenue

The key for most building owners is to view these additional charges primarily as ways to offset the cost of providing higher-quality amenities, not as added building revenue. 

“This is where it becomes very important for property managers to understand a building’s goals,” Roe said. “You may be lucky enough to have a higher-end property that stayed fully leased during the pandemic and you can view these upcharges as revenue, but for many, the goal is to offset the cost of providing excellent services.” 

This can get particularly tricky when dealing with a real estate investment trust, Roe said.

“Managers should consult their financial or asset management teams when considering service-related revenue strategies for REIT-owned properties because there can be significant tax implications in some instances,” she said. 

Get Creative With Amenities 

While fitness centers, EV charging stations and high-tech conference rooms may seem like obvious amenities to charge for, there are many more options to consider. Roe gave the example of a rooftop or other underutilized space that could be rented out for events or as additional storage. Another option is bringing a coffee cart into the lobby. Multifamily properties, in particular, have many ways to get creative, including offering cooking classes or even a pet DNA testing service to determine once and for all who isn't picking up after their pets. 

“Not only can they recoup the costs of the maintenance for cleaning the pet waste, they can charge a little premium on that as well,” she said. 

Keep The Importance Of Activation In Mind 

A beautiful amenity program does a building owner no good if no one is using it, Dragone said. By charging these extra fees, owners and property managers can not only help offset the cost of providing a luxury amenity but also incentivize people to actually use them. This becomes particularly important when trying to bring in new tenants. 

“When I show the office building to somebody, I want them to see there are people in the gym, people in the conference room and people using amenities throughout the building,” Dragone said. 

Decide How To Charge 

Once owners start charging for an amenity, they need to come up with a simple way for tenants to pay the fees. Dragone said options include charging through credit cards or using a tenant engagement app. These apps allow tenants to reserve and pay for amenities from their phones. They also offer property managers insight into who is using which amenities and how frequently they are getting booked. 

Owners can also charge a flat rate yearly or quarterly that they collect through checks, though this isn't as convenient. 

Don’t Overcharge 

The final key to monetizing amenities is to be smart about what you are implementing and to look at it holistically, Roe said. Building owners and property managers should map out a plan for what they are going to charge for, what they hope to achieve from doing so and whether it is truly beneficial for tenants. 

While there are opportunities to monetize amenities, it shouldn't be done at the expense of tenant and resident satisfaction, and managers shouldn't be overzealous, Dragone said. The main goal should be to reduce overall costs and, in turn, the tenants' operating expenses, particularly at office buildings.

“You can’t charge for everything,” Dragone said. “You need to carefully pick and choose what you’re doing and stick to the things that people would reasonably expect to pay for. Otherwise, things could get out of hand.” 

To learn how to further boost tenant satisfaction, take the course to earn IREM's Customer Service and Renter Loyalty Skill Badge. 

This article was produced in collaboration between the Institute of Real Estate Management and Studio B. Bisnow news staff was not involved in the production of this content.

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