One of the most critical elements in the spectrum of design is touch. As designers, we think about touch. We argue about touch. Touch is everything. The materiality of fabric, finish, or surface is something we spend a great deal of time troubling over. So, the idea of moving to a touchless experience, though understood, does not come without a subtle sense of loss for us.
However, touchless is the word of the day. Touchless entry, access, dispensers, etc.. Touchless everything. As designers, we embrace the challenge of touchless while looking for ways to add our own touch. Copper is a finish that seems the most resistant to COVID-19, specifically. However, companies like INOX have developed Antimicrobial Door Hardware that keeps microbes at bay between cleanings. We are also looking at antimicrobial surfaces made of quartz, all in recognition of the fact that we were meant to touch the environments we inhabit.
As our understanding of the impact of COVID-19 virus continues to evolve, we find ourselves examining the impact this pandemic will have on the way we work and live in multifamily communities. What has become clear is that professionals that once commuted to work daily will likely find that the office they left in early March will not be the office they return to.
As employers prepare to reopen, many have begun to plan for social distancing by creating less dense open office environments and meeting spaces, which means fewer employees per square foot. In conjunction, a lot of leaders have found that their teams are very productive working from home and happy to avoid rush-hour commutes, at least part of the time.
What seems evident is that more people will be working from home than ever before this crisis. Pre-COVID, coworking spaces had become a critical amenity in apartment buildings. Post-COVID, the demand will be greater than ever. Our job as interior designers is to embrace this work-from-home shift, and through design, we can create safe and healthy environments that draw us back together again.
0ver 1.9 billion people were online shoppers at the end of 2019. By 2021 that number is estimated to reach 2.14 billion. Grocery delivery alone is expected to grow from $111 billion in 2020 to $154 billion by 2023. This trend began long before COVID-19, so you can imagine the impact now. From food to clothing to furniture and sundries arriving by truck multiple times per day, the most significant amenity transformation in multi-family buildings is likely to be the package room. Along with this shopping trend has come the technology needed to relieve operations staff from the burden of managing this onslaught of packages. Package lockers and secure self-serve package rooms have become an operations necessity and a resident expectation.
In multi-family buildings, the space required to provide residents the package service they have come to expect is transforming the way interior designers program, space plan, and design. When so much space is required, why make package storage back of house?
Creating a package experience that looks great and functions well becomes an amenity that is a proud part of the tour and a feature that drives resident engagement.
Just as we got used to living small, the pandemic has forced us to examine how apartment units may need to shift to accommodate “staying home to stay safe.”
Eventually, we will move past the jolting adjustments we have all made over the last months. However, we believe this crisis will be an indelible memory. With amenities closed in multi-family buildings and residents sequestered, how many apartment dwellers are wondering if they need more or different space to accommodate a transformed lifestyle? Paradigm Companies have long been known for designing enclosed balconies in their high-rise multi-family buildings. These separate spaces provide a flex room that can be a roommate bedroom or a den and office. Their vision now appears to have been prescient. In the recently opened Meridian on First, these sunny rooms with glass sliding doors create a work from home experience not found in most apartments.
None of us know for sure how our place of work will change to meet the health concerns of the future. We are confident that more companies will promote telecommuting and that more residents will value an apartment, mindfully designed for times to come.
In this competitive multi-family environment, it’s imperative now more than ever that developers and architects involve an interior design team. I have noticed over the years, that the interiors firm is frequently one of the last critical consultants engaged. Hiring the interior design team at the right time is not just a question of aesthetics, it’s also about the bottom line.
It’s understandable that interior design might not be top of mind for developers in the early planning stages of a new construction multi-family and mixed-use community, as there’s already so much to accomplish in this critical period.
However, many developers now recognize that well-designed public spaces play a leading role in the initial rental pace as well as future retention because their interiors form the all-important first impression for prospective renters and make them feel at home as they live there over time. Statistics tell us that thoughtful and well-designed amenities will outpace those with mediocre interiors. According to the Newmark Knight Frank White Paper, more amenities can lead to stronger project performance, but projects that are well-designed along with more amenities lead to even stronger performance and lease-up pace.
My experience tells me that when interior designers join the team early, and all the parties are involved in the initial concepts and branding, the process and end result is more successful and cost-saving. If we’re in from the beginning on a new construction project, we can help to avoid unnecessary redesign and provide critical coordination with all consultants.
So When is the Best Time to Hire Your Interior Design Team?
The ideal time to engage the interior design team for a new construction development is before the city approves the final building exterior and while the architect is in early schematic phase.
At this point in the project, relocation, expansion, and/or reconfiguring of amenities can be easily be accomplished. Fenestration and building entries can be reconsidered to work better with the interior spaces; ceiling heights can be raised and structure adjusted to allow for more impactful volume and better space usage, and the team can collaborate most effectively on how best to connect the interior to the architecture.
If the interiors team hired late in the process (especially after the city has approved the exterior), we often hear groans in the room as it becomes clear that improved interior spaces will require a change to the outside of the building and thus another round of city approvals. Consider the cost of the redesign and the time lost that could have been avoided by hiring the design team early on.
Thoughtful Interior Design Takes Time
Residents are willing to pay higher rents if it means living in a resort-style setting, according to Multifamily Executive: “A great way to start meeting the expectations of today’s resident is to place the resident at the center of your business model,” its report says. “One of the most effective ways to appeal to residents is through thoughtful interior design.”
There is a process to interior design and interior architecture that is similar to the architectural phases of design. While the interiors team has a different scope, the phases required are the same. Most consultants have experienced unrealistic deadlines. When this occurs, the team will always strive hard to deliver on time. However, a more successful project with fewer revisions will come from thoughtful, planned design and a coordinated process.
Case Study: The Signature at Reston Town Center:
HDG joined the team while the plans for this new apartment building were still in the early schematic phase. As a result, all consultants worked closely to assure that the building was coordinated from the outside in and the inside out.
For example, the HDG team had the opportunity to provide input on the exterior brick selection, which was so handsome that the team chose to wrap this metallic, textured brick into the lobby as well as other connecting amenity spaces. Further accentuating the indoor-outdoor connection, the team worked closely to design a river rock trough that borders the entry of the building both from the exterior and the interior.
Because the building had not gone through final approval, the fenestration was collaboratively designed to seamlessly support the interior. Anchoring seating areas both inside the lobby and outside on the terrace, a two-sided fireplace was located on an exterior wall. Having the opportunity to closely coordinate structure, MEP design, and optimal ceiling heights made all the difference in the design of this highly successful project.
Renovation vs. New Construction
By contrast, the HDG team is usually the first to come in when a multifamily project involves the renovation of an older building. We drive the design, the space plan and work with the owner’s team to determine the budget, branding, and the best design approach. A cohesive team is important. Once the conceptual design is complete it is time to engage all necessary consultants, which might include an architect of record, MEP and structural engineers, and a landscape architect.
Case Study: Instrata Pentagon City:
HDG led the design for a substantial lobby-and amenities renovation that involved the complete re-positioning of this 1990s-era apartment building. In addition to creating a high-end boutique design that would shine in Crystal City’s competitive marketplace, the goal was to open up all amenity spaces for a visual connection with the outdoor terraces, to provide for service amenities such as package lockers, an expanded package room, a concierge desk with views to the entry, a pet spa and a complete redesign of all social amenities and public spaces.
At the completion of conceptual design, the architect of record, landscape architect, MEP and structural engineers joined the team. Forming the team at this phase allowed for the most efficient use of the consultant’s time as they had a basis of design from which to begin their work. A cohesive and collaborative team, together, completed the highly successful repositioning of The Instrata Pentagon City.
Conclusion:
Whether new construction or renovation, interior designers who think holistically about a building add more value to a project the earlier they are involved.
As markets evolve, in response to changes in business form and economics, they leave countless structures in their wake as one manner of doing business gives way to another. Consequently, the built environment must make changes to accommodate these changes. The great question of our time is what to do with obsolete buildings—especially so many office buildings. Tall and boxy, they do not tend to be architecturally memorable, but to replace them would be wasteful—and in many cases cost-prohibitive. That is where the multi-family industry is stepping in.
Over the past three years, Hartman Design Group (HDG) has teamed with developers to convert aging office buildings in DC and Baltimore into Class A apartments, and this experience is part of a sweeping national trend. In the past 10 years, 18.1 million square feet of office space in New York and L.A. have been converted to residential units 1/. The DC region is following suit: The Downtown DC Business Improvement District released a 10-year forecast report in 2017 that includes a goal of encouraging the residential redevelopment of at least 400,000 square feet in outdated office buildings, 2/. and DC City Council members are considering legislation to provide tax abatements for developers to move in this direction. In Baltimore, The New York Times reported that 1.9 million square feet of office space has been converted to residential use just since 2013.
1. Case Study: The Historic Adaptive Reuse of 2Hopkins Apartments, Baltimore, MD
“I’d love to see the development community do more projects like this,” says Kevin Berman, the partner in charge of development for Berman Enterprises, which had the vision to convert the midcentury Mercantile Bank and Trust Building in Baltimore’s Charles Center into 2Hopkins, a Class A multi-family high-rise apartment building. The historic society required that the outside of the building and certain public-space features retain the original design, yet the design team (BCT Architects and HDG) had a free hand in the unit designs and the newly built amenities, such as laptop-friendly co-working spaces in the lobby and clubroom, electronic storage lockers for package deliveries, and a pet spa and indoor dog walk.
The lobby in particular helped set the tone for our team. “It was a tremendous architectural statement with this two-story volume with a coffered ceiling,” BCT architect Scot Foster says. HDG used that envelope to inform a newly multifunctional space with a concierge desk, coffee bar, and lounge/work area under dramatic custom chandeliers. The design team sourced furnishings for the lobby and 21st-floor clubroom in a palette of neutrals with accents of orange and turquoise—midcentury hues that hearken back to the building’s origins. A vintage 1960s clock display is another pleasant nod to the past in the thoroughly modern fitness area.
Many office buildings pose challenges for adaption to residential apartments, especially unit layouts, but 2Hopkins offered the perfect footprint for this endeavor. The floor-to-ceiling windows on all sides of the building, paired with 10-foot ceiling heights on every floor, created views of Baltimore that would be difficult to attain in a new-construction high-rise.
2. Case Study: The Non-historic Office Conversion at Legacy West End Apartments, Washington, D.C.
Many office buildings pose challenges for adaption to residential apartments, especially unit layouts, but 2Hopkins offered the perfect footprint for this endeavor. The floor-to-ceiling windows on all sides of the building, paired with 10-foot ceiling heights on every floor, created views of Baltimore that would be difficult to attain in a new-construction high-rise.
The Legacy West End at 1255 22nd Street NW is an example of a past-its-prime office building perfectly located for residential conversion. The existing, late-70s-era office building would not qualify as Class A office space today, says architect Michael Foster of MTFA Architecture, who drafted the Legacy’s new plans. Its interior spaces are smaller than modern office buildings, but those smaller dimensions are preferable for a residential setting, and its location between Washington and DuPont circles makes it an ideal place to live. MTFA gave it a stunning modern facade, plus three upper floors and a rooftop pool.
A new wing was added to increase the unit count. Yet the original structure, parking garage, and elevator core remain intact. As the HDG design team sought to transform the interior, we had to get creative with elements that could not be changed such as the elevator-core location and a slab that lowered a portion of the ceiling in the lobby.
The two-story lobby required significant renovation to transform the stark “office” feel into a residential vibe that expresses its luxurious address in the thriving West End. Lacking the expansive amenity space found in newly constructed residential properties, the design team looked for opportunities in every nook and cranny to add new features, like the open second-floor elevator lobby that we enclosed to create booths, small conference rooms, and co-working spaces. The main lobby area was too small to carve out an enclosed leasing office, so we designed a communal table where agents work by day that converts to a coworking area for residents after hours. The rest of the space is devoted to comfortable seating areas around a linear-flame fireplace, while broad window seats offer views of the streetscape. The top-floor addition—a glass box in the sky— offers a clubroom on one end and a library and outdoor terrace on the other. The sun-filled clubroom, which connects to the pool deck, enjoys sweeping views of the city, the National Cathedral, and Rock Creek Park.
Conclusion:
Due to changes in the way tenants use office space, some traditional office buildings are becoming obsolete. In some cases, this situation is incurable, and owners face a tear-down or conversion decision. A building in the right location with the right footprint offers an excellent opportunity for conversion to a multi-family residential property. A qualified design team will ensure success.
In the previous issue, we discussed how to know when your multifamily property should be renovated and what level of renovation was appropriate. Once you have determined this, you will need to set a budget.
How much should you budget for your renovation?
Too often the renovation budget is set by an underfunded escrow account or is a result of mere guesswork. If the budget is set prior to a comprehensive understanding of the building’s existing conditions, the amount of space to be renovated, and the marketing challenges, the number will be inaccurate. Either method can set the owner up for disappointment.
Determining a budget is a task that should take place long before the renovation is to begin. The budget for repositioning a property is frequently determined in the year preceding the expected renovation. Depending on the level of the renovation planned, the budget may need to be determined farther out and the dollars allocated across multiple years. Collaborative discussions to prioritize the work will provide the best possibility for accurately setting the budget and obtaining future ROI. To assess the market, understand the conditions of the building, and develop a budget that is based upon real conditions, consider a team approach from the beginning. Involving your design professional, management/marketing consultant, building engineer and asset manager before the budget is set will help to alleviate unrealistic expectations.
Depending on many factors that cannot be controlled for your plans, construction pricing can vary from year to year. Even with the best planning, actual bids may come in higher than anticipated. It is best to have a phasing and VE plan in place in the event that this occurs.
Phasing of the construction can be a great way to manage a budget that needs to be spread over a few years. However, it is important to consider that there usually is a premium cost to phasing which will need to be considered in the budget.
360 State Street Before Renovation
Renovation Funding
Many owners frown at earmarking funding for renovation projects. They require management to meet the funding requirements from operational cash flow. This can be problematic for a variety of reasons. The cash flow requirements for renovation projects are frequently substantial, and the funds are, in most instances, required at the early stages. Professional and permitting fees, deposits, and advances need to be paid out before materials are procured and the contractor begins work. Additionally, during the renovation process, the property will not show at its best. This creates a tough selling situation for the marketing staff, which could mean a decline in revenue during construction. This will further limit the operational cash flow available for the renovation. To successfully meet your budgetary needs, you should consider setting aside funding specifically for the renovation. A well-thought-out budget that includes a construction timeline will help to manage funding and decrease strain on operational cash flow.
360 State Street Lobby After Renovation
Realizing ROI
A cosmetic renovation may be considered an expense as it will serve to refresh and to maintain the look of the building for a period of time. A more comprehensive renovation will actually increase the life of the asset, so it would generally be considered a capital expenditure.
Keeping in mind that the core purpose of renovation is to improve revenue streams, it is important to consider that this will happen effectively only when the life of an asset is increased.
Owners and stakeholders will demand bang for their buck. Any renovation project is going to be tough to sell if there is uncertainty related to the return for the investment. Consequently, part of planning a renovation includes doing the math to obtain the estimated ROI.
So many variables impact rents – such as the age of the building, its location, the surrounding competition, and the tenant profile – that ROI will vary widely from market to market and from property to property within the same market. As a result, nationwide data is difficult to come by for multifamily housing renovations.[1] However, skilled property owners say it’s reasonable to expect a 10 to 30% ROI on their renovation projects, with wood floors, kitchen upgrades, and improved interior lighting as some of the top ROI generators.[2] For purely cosmetic renovations, a 25 to 30% return should be the target.[3] It is important to analyze typical ROIs in your market before setting a budget and determining what upgrades to include in your renovation. The life span of your renovation will also have an impact on your ROI, so be sure to include this in your calculations.[4]
By addressing these considerations, you can have a successful renovation that will increase the life and profitability of your property.
360 State Street Lobby After Renovation
[1] Jason Van Steenwyk, Rental Property Renovations that Pay Off, (Sep. 2, 2015), http://www.allpropertymanagement.com/blog/2015/09/02/rental-property-renovations-and-improvements-that-pay-off/.
[2] John Caulfield, Rehab ROI: Which Upgrades Cause the Biggest Rent Bumps?, (May 28, 2014), Multifamily Executive, http://www.multifamilyexecutive.com/design-development/renovations/rehab-roi-which-upgrades-cause-the-biggest-rent-bumps_o.
[3] Harrison Willis, Repositioning a Multifamily Asset, (2016), Cornell Real Estate Review, 14(1), 62-69, http://scholarship.sha.cornell.edu/crer/vol14/iss1/12.
[4] Donald M. Davidoff, Rehab ROI: Do the Math, (Oct. 28, 2014), Multifamily Executive, http://www.multifamilyexecutive.com/business-finance/commentary/rehab-roi-do-the-math_o.
There is no hard and fast rule about when to renovate a multifamily asset. However, the objective is to complete the renovation before a property begins to have negative reviews on social media and to lose residents to its competitors. Awareness of what competitors are implementing will also help guide the timing of renovation.
A visually tired asset is challenged to keep pace with market rents. Waiting too long to renovate can draw a manager into a vicious cycle. A property that has begun to show signs of wear will most likely begin to show a decline in income because residents will move to newer, trendier properties. As income goes down management tends to pull back on spending. But delaying a much-needed refresh ultimately costs more. The longer the property is in decline, the greater the risk of losing residents and missing out on rent increases. And the longer it is in decline, the more money it will cost to bring it up to speed.
Proper timing for budgeting, planning, and executing a renovation is critical to getting ahead of the tired‑building syndrome. To stay current with lifestyle and design trends, most multi-family properties are looking at a 7- to 8-year cycle for the public spaces. This will naturally vary depending on location and competition. In most cases, at least a cosmetic renovation is required on this schedule. Due to the cost of unit renovation, it is unusual for a property to upgrade before 10 to 15 years. It is, of course, wise to budget with a healthy capex well ahead of the need for renovation.
What Level of Repositioning Is Right for A Property?
Repositioning is a broad term. It could encompass a minor upgrade all the way to a complete gut of units and public spaces. Or perhaps even a new structure. The level of the renovation selected by management will be budget-driven, optimized by return on investment. Age of the building, the amount of wear-and-tear, and market trends are important factors to consider. Prioritizing the upgrades becomes an important piece of the planning to adhere to budgets. For more on the budgeting process, see our article in the next issue of this report.
The “lipstick and rouge” approach: If a property is 3 to 7 years old (or was upgraded 3 to 7 years prior) and is showing wear or beginning to look dated, a minor upgrade may be all that is needed. This approach may involve some new furnishings, art, and accessories and perhaps some new finishes. The idea is to spend just enough to provide a lift without “breaking the bank”. Allow 4 to 6 months for this type of renovation.
A mid-level upgrade: A mid-level upgrade takes the “lipstick and rouge” approach a step further and could involve the full replacement of FF&E. This level of renovation would not normally involve moving walls. A mid-level renovation can do much to improve a property and will help to keep it viable for several years. Allow 6 to 9 months for this type of renovation.
A full renovation:
If a property has held up well, the time to consider a full renovation of the common areas, amenities, and corridors is likely at the 10-year mark. This is generally the point in a renovation cycle where design, lifestyle, and operation trends have shifted noticeably. Waiting too long to begin the process will negatively affect the competitive advantage in the marketplace. All too frequently, old buildings (built in the 1960’s to 1990’s) have had the common areas and amenities renovated for some time. To keep rents on track, stay competitive in the market, and maintain a happy resident base, a more extensive renovation is recommended for these properties. In a full renovation, expect to have more construction – including building new walls, reshaping spaces, or changing the room usage. This level of renovation will increase the planning time, overall investment, and resident disruption. The new design will likely require MEP changes. Allow 9 to 18 months on average for this type of renovation.
Factors To Consider In Determining The Level Of Renovation Needed
The program – how do the spaces need to function to meet the current resident expectations and management needs?
What is the existing condition of the building – a little out of date or very tired?
How old is the building, and when was it last repositioned?
Is the building energy efficient? Do the mechanical and lighting systems require replacement or retrofit?
How does the property compare with the current competition, and what new construction is in the pipeline?
What are the residents and prospects saying on social media?
What does management expect to achieve by renovating? For instance, is the building to be repositioned from a C to a B, a B to an A, or is the goal to make the property the best B in its submarket?
Will the renovation involve only finishes and furniture, or will spaces be re-arranged?
What is the expected completion date?
Is there a fixed budget that cannot be exceeded?
By keeping these considerations in mind, management can keep the property in the best shape to compete in the marketplace.
