Not your grandfather's amenities

Perhaps a decade ago, apartment companies knew their tenants well. They were mostly young people, maybe newlyweds, people just getting started in life. The apartment was just a stop along the way to fulfilling the dream of home ownership.

Times have changed. Apartments now must cater to a wide variety of lifestyles and age groups, including a burgeoning number of “renters by choice.”

By far the biggest segment of the market are the members of Generation X, loosely defined as those born between the mid-1960s and the early-1980s. And these so-called “echoes of the Baby Boomers” are very different from preceding generations.

Surveys, social research and Gen Xers agree that this generation is “all about innovation, speed and themselves,” as one executive put it. They live in the present, like to experiment and are looking for immediate results. “We are selfish and cynical, and depend a lot on our parents. We question authority and feel like we carry the burden of the previous generations,” proclaims a Web site devoted to this generation.

Apartment companies are all too aware of this group, and their task has been to serve them while also catering to other newly emerging demographics such as the “affluent empty nesters” who have given up a house in the suburbs for an urban apartment.

“We spent a fair amount of time in a strategic planning process last year to look at our customer and the implications for our business,” said Bryce Blair, president and CEO of Alexandria, Va.-based AvalonBay Communities. “It really did focus us on the demographics in the rental segment. These demographics are changing, and are projected to continue to change.”

The days of the renter in his 20s with a futon in the corner are over. Today, the market is becoming more polarized between young Gen Xers on the one hand and an increasingly older tenant on the other. For instance, the average age of a renter at AvalonBay communities has risen to 38.

Something for everyone

In order to be successful, apartment companies must understand their market and provide the segments of that market with what they want. Not everything appeals to every group, and sometimes segments within a group may be seeking a different set of amenities.

For example, empty nesters may be looking for larger units because they have spent years acquiring possessions. “They want a well-located, well-designed community,” Blair said. “Compared to the Gen Xer, they want more square footage with a higher level of finish. Gen Xers will be less concerned with the level of finish. They're not necessarily looking for granite countertops. They want the location and the space that meet their needs.”

Most company executives agree that the Gen X tenants are different than preceding generations. Sensing that fact, companies such as San Francisco-based BRE Properties Inc. have invested extensively in research on what Gen Xers want and how they view the company.

“We've adjusted our management focus on how we handle our customer base so that we are more tuned into the kinds of services that those people would want,” said Deirdre Kuring, vice president for asset management for BRE who oversees the company's Seattle, Portland, Ore., and Salt Lake City regions. “A lot of them are fast-moving decision makers. They want lots of conveniences, so we cater to their needs.”

For example, that means keeping a complex's office open longer in the evening for those working later. “We have definitely invested more in terms of understanding what kinds of services they need,” she added.

When tenants move in, BRE collects a vast amount of demographic information, which is fed into a database that stores information by property. “We do physical inspections of our apartments once a year,” said Kuring. “In that case, as we're going through the apartments — determining how the asset looks on the inside — we might put a tick mark if we see a computer. We use things like that to try to understand a lifestyle. We track what kinds of cars people drive. So there are indicators that show us what people's likes and dislikes are.”

Atlanta-based Gables Residential also performs surveys among tenants and even has started conducting face-to-face focus groups in hopes of obtaining more detailed information than might be provided on a survey form. “This year we started doing some focus groups on site with our residents, so we know what to build the next time,” said Joyce Copeland, regional vice president for operations in Gable's Atlanta office. “How can we improve? Do they use the facilities or are we putting stuff out there that nobody's interested in using?”

Gables and other companies have some clear-cut ideas about what the Gen X segment wants. Most observers agree they want amenities that will make their fast-paced lives easier. “They are more demanding,” Copeland said. “If their work order isn't done in an hour they're all over you. They're extremely demanding and want the best deal they can get, the best apartment they can get for the least amount of money. It's just a very different attitude.”

“In serving that particular market segment, you've got to increase service levels,” said James Maclin, vice president at Memphis, Tenn.-based Mid-America Apartment Communities. “That includes day-to-day operations such as dry-cleaning and trash pick up. You've got to increase the quality of life for that particular segment as well as others.”

For this young, innovative group of tech-savvy residents, upgraded telecommunications and high-speed Internet access are services in high demand. Unlike past generations, this group knows how to use technology to get what they want.

As one apartment exec notes, Gen Xers won't spend their time visiting 15 or 20 apartment developments. Instead, they will do their research on the Internet and when they narrow their choices down to two or three, they'll arrive ready to make a fast decision.

“One of the first questions potential tenants have when they step in to rent an apartment is, ‘Who is your high-speed data provider?’” said Scott Templeton, director of ancillary services for Denver-based Archstone Communities. “So putting somebody in place who can provide a good quality service is an instrumental part of renting an apartment unit in today's market.”

In a Gen X apartment, a computer is often a prime piece of furniture. In fact, it is often an important business tool as well.

“We're finding that they want the ability to work from their homes by having those types of benefits that are already built in,” said Copeland of Gables. “We've gone as far as building in desk areas where they can put their computer with all the lines cable-ready, and modems readily available.”

Some of Gables' larger floor plans even have computer rooms that are more than just a nook. These areas are a recognition of just how computerized and high-tech this segment of the population has become.

While just a few years ago a host of start-up companies crowded the market, offering to wire communities and provide generous cuts of their revenue to apartment complexes, those days seem to be over. Many providers are now gone, and multifamily firms say they are now cutting deals with some familiar names, such as BellSouth or AT&T. The deals aren't as lucrative now, and many apartment communities say they don't really expect to realize any substantial ancillary revenue from signing their tenants up with these companies.

Taking a different tack, BRE created its own start-up service provider, called VelocityHIS, which has already connected many of the properties throughout the company's portfolio. “In markets where we don't have Velocity, we are generally tied into the phone provider or the cable provider,” said Michael Crow, divisional vice president for BRE's Southwest region.

Companies such as Gables also are providing many other, albeit less high-tech, services. These can include monthly customer appreciation weeks, in which renters may get free tax help during April or even free phone calls to mom in May.

“Our biggest thing is to provide them with a service that we don't have to spend money on,” said Copeland. Those strategies include recruiting financial planners and tax experts to come on site and provide free financial advice to tenants.

Home sweet apartment

In the more upscale developments, companies are providing their tenants with a higher level of finish than a few years ago. These are renters by choice, not by circumstance, and they want an apartment that has an upgraded look and feel.

Units now have larger kitchens and bathrooms with ceramic tile floors. Instead of an oven, perhaps there will be a cook-top and a built-in microwave. A pot rack frequently hangs over the kitchen island.

“There's much more emphasis on doing the sort of thing you'd see in a custom single-family home,” according to Stephen Sweet, senior vice president of development and acquisitions at Gables. “In the master bedroom you try to create more of a master-bedroom suite, where there is a master bath that is really a combination of a bathroom and a giant closet. When you consolidate those two functions into one space, you end up with a lot more usable space.”

Different lifestyles

In past years, all of the apartment complexes a company built in a certain city featured the same amenities. However, the days when you could generalize about a particular market have passed. Now, nothing can be taken for granted.

“We look at a demographic of a marketplace and then we drill down to the individual asset,” said BRE's Kuring. “We may have assets that are within 15 to 20 miles of each other in the same general market, but we will have a completely different resident profile base.” For example, she added, one tenant base may demand computer-related services, while another might require a completely different set of amenities.

Two BRE apartment complexes located fairly close to each other in Seattle aptly demonstrate the differences that can be found in a single submarket. One is a mid-rise development in an urban market. Here, residents are treated to underground parking and a well-equipped business center that includes a library, kitchen area, computers and a conference center.

About 20 miles away, BRE has a brand-new community that doesn't feature such an elaborate business center. “We don't anticipate that profile is going to utilize the business center the way the other product does,” Kuring said. Both developments attract tenants that could be characterized as “business professionals.”

“We're anticipating that at the mid-rise the customers are going to be more inclined to step out of their apartment, go down the elevator and lounge around in the business center,” she explained. “They'll use computers down there, have meetings with friends, versus the other product where, because their apartments are bigger, tenants wouldn't use that amenity as much.”

In other words, the design of the property influences the kind of tenants who will rent there, as well as how they use their space. The mid-rise complex, for example, is characterized by a large number of one-bedroom and studio apartments.

“We would expect that the people living in those studios or one-bedroom units are going to be utilizing the facilities, which are fully self-contained,” Kuring said. “In the mid-rise, they'll hang out in the business center for a while and then go have something to eat at a restaurant. We would expect some kind of lifestyle differences between someone who would choose that product versus those down the street where they're buying the view and it's more of a garden style.”

Apartment builders can no longer take the easy way out by building cookie-cutter, three-story garden apartments and equipping them with identical pools and racquetball courts. Precise research is required to find out just what tenants in a particular location really want. In the apartment industry, they're listening very closely.

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Randy Southerland is an Atlanta-based writer.