Happy new year everyone! Now that the holidays are over, we turn to resolute goal setting for the year to come. My gift to you is a big box of unrealized revenue - if you can make it your 2019 resolution to find it.
The source of this revenue is unit amenities. This is nowhere near a new concept, and I’m sure you are currently utilizing amenity pricing on your assets as most of the industry now is. However, the amount of revenue we’ve uncovered in our client work from doing amenity analysis is always surprising (maybe even stunning) so much so that it’s hard to remark that as an industry, we’re managing amenity pricing well. There aren’t many ways to dig up that much value so quickly, which is why I’m always shocked that more people aren’t regularly doing this exercise.
Let’s stay in the holiday spirit a little longer and use a famed story about reformation to figure out how we can resolve to change our old ways and get better.
First, fix the basics
We start with the Ghost of Amenities Past. Take a look at any asset you’ve owned for a long time, pull a list of all the amenities that exist at that building, and you’re sure to find some of these amenity “ghosts” lurking. You may come across oddly-named amenities so dated that no one on site can remember what they mean. Or perhaps a once glorious “mountain view” amenity has since been eclipsed by the brand-new-high rise building across the street?
Seasonally speaking, you may also find amenities that commanded a high value in the summer (e.g. balcony, pool view) are now less desired by consumers since winter has arrived; yet your units with fireplaces or attached garages are leasing much more quickly. Doing a cleanup of all the amenities that exist and getting rid of any that no longer make sense is the first step to any full-scale amenity review.
On to the Ghost of Amenities Present. The amenities that fall into this category are a huge source of hidden revenue, and all you need to do to uncover it is find out where the inconsistencies lie. Does every unit on the 1st floor have the “1st floor” upcharge, or are a few missing? Does every unit facing that lovely greenbelt have the “park view” assigned to it, or did one building get left out? What about all of the units in a particular stack? We often find the units above and below a unit both have an amenity upcharge, but the one in the middle is missing. Given the way most buildings/floorplans line up vertically, this is usually an indication of a missing amenity.
Another sign that your amenity strategy has some holes is what you see when you examine your longstanding vacant units. Take a look at the amenities attached to these units in conjunction with a sitemap to help put them in context (if visiting the property isn’t an option). Are all of the amenities listed accurate? Are there any double dips (view premiums, in particular, are notorious for getting stacked up on units)? Is there anything that doesn’t make sense- like a negative value for location, followed by a location premium?
And now, drive to the next level
Simply doing some analysis on the currently assigned amenities and finding the holes usually dredges up enough additional revenue to make this worthwhile, but if you really want to get better….
Examine the Ghosts of Amenity Future. Once you’ve dispatched the other ghosts, it’s time to look to the future and make some positive changes. This one requires signing your brain up for a workout class to do some deep analysis on what the right value is for each amenity, resulting in a more accurate price for your future units. Getting this right will mean units lease faster, spending less time on the market and helping you enjoy a higher, more stable occupancy.
By looking at historical leasing data, you can analyze average days on market to determine which amenity values are correlated to slow-moving units and fast-moving units, and ultimately discern which amenity values should be dialed up or down slightly to improve leasing velocity. It may not surprise you to learn that corner units lease faster, but you may be surprised to learn that there is a $0 premium associated with the “corner unit” amenity.
I hope these examples have inspired you to take a deeper dive into your amenity pricing in the coming year, and if you’d like our assistance, we’d be happy to help you painlessly uncover this hidden revenue. Cheers to all you accomplished in 2018 and all that you hope to accomplish in 2019!