For over two decades, the US apartment market has been defined by its focus on amenities. Developers have sought to outdo one another with increasingly elaborate offerings: rooftop pools, state-of-the-art fitness centers, pet spas, coworking spaces, and more. However, a recent trend in the UK towards “Amenity Lite” build-to-rent (BTR) schemes offers a fresh perspective that could fundamentally reshape how we think about apartment communities in the US.
The Rise of "Amenity Lite" in the UK
In the UK, investors and developers are moving away from amenity-heavy models to focus on a more streamlined, cost-effective approach known as “Amenity Lite.” This model reduces the range and number of amenities provided, instead prioritizing the core features that most directly enhance the quality of living for residents.
Several factors drive this trend. A study cited by BTR News reveals that many investors prefer “Amenity Lite” schemes due to lower operational costs, reduced capital expenditure, and a faster time to market. Fewer amenities translate to a lower initial outlay and decreased ongoing maintenance and operational costs, resulting in improved net operating income (NOI).
This model also recognizes a shift in resident preferences, particularly among younger generations like Millennials and Gen Z, who prioritize affordability, flexibility, and functional design over access to extensive amenities that they may not use frequently. As more investors recognize the value of this streamlined model, we must consider how it might influence the way apartment properties are developed and managed in the US.
Amenity-Heavy Communities: The US Status Quo
In the US, amenity-heavy communities have long been the norm. The appeal of multiple amenities has been seen as a competitive advantage, a way to attract a diverse range of tenants and command higher rents. The logic is straightforward: more amenities equal more perceived value, which can justify premium pricing. However, this traditional model has its drawbacks.
High Development and Operating Costs: Amenities are costly to build and maintain. Fitness centers, pools, game rooms, and outdoor spaces require significant investment in terms of construction, equipment, utilities, and regular upkeep. In a period of rising construction costs and labor shortages, these expenses only escalate further.
Limited Utilization Rates: Despite the wide array of amenities, many are underutilized. A survey by the National Multifamily Housing Council (NMHC) found that while fitness centers and outdoor spaces are popular, other amenities like game rooms, wine storage, and theater rooms see limited use. This raises a question: Are developers investing in amenities that don't significantly enhance the resident experience?
Impact on Rent Affordability: The cost of these amenities is typically passed on to residents in the form of higher rents. In markets where affordability is a growing concern, particularly in urban centers, this could limit the pool of prospective renters.
Given these challenges, could the "Amenity Lite" model represent a better approach for the US market?
Why "Amenity Lite" Could Work in the US
1. Enhanced Focus on Core Amenities
One of the key advantages of the “Amenity Lite” approach is the ability to focus on a few high-quality, core amenities that residents truly value. For instance, in the UK model, instead of providing a wide array of amenities, developers focus on creating high-quality communal areas and offering flexible spaces that can be adapted to residents' needs.
For US developers, this could mean investing more in multipurpose spaces that serve as coworking areas during the day and social hubs in the evening or weekends. By consolidating functions, they can create dynamic spaces that foster community engagement without the overhead of maintaining multiple underutilized amenities.
2. Cost Efficiency and Faster Market Entry
With fewer amenities to construct and maintain, developers can reduce initial capital expenditure and speed up construction timelines, leading to faster project delivery. This is particularly beneficial in high-demand markets where time to market can be a critical factor. Additionally, reduced ongoing maintenance costs mean that properties can achieve better NOI, which is particularly attractive to investors seeking predictable returns.
3. Appeal to Cost-Conscious Renters
As affordability continues to be a concern in the US, especially in major metropolitan areas, offering a product that focuses on essential amenities and lower rent could attract a broader tenant base. The “Amenity Lite” model can appeal to renters who prioritize affordability over luxury and are willing to forgo a pool or a high-end gym for lower monthly costs.
4. Aligning with Lifestyle Trends
There is a growing trend among younger renters toward minimalism and sustainability. Many Millennials and Gen Z renters prefer experiences over things and are less interested in paying for amenities they don’t use. The “Amenity Lite” model aligns well with these values by reducing waste, focusing on essentials, and promoting a more sustainable lifestyle.
5. Operational Flexibility
The reduced operational complexity of managing fewer amenities allows property managers to focus more on providing high-quality service, maintaining the property’s core features, and fostering a sense of community. Additionally, flexible spaces can be easily adapted to meet changing resident needs or market trends, offering a future-proof solution.
The Potential Impact on Revenue and Leasing
Adopting an “Amenity Lite” model does not necessarily mean a reduction in revenue. On the contrary, it could offer several financial advantages:
1. Lower Rent to Attract Higher Occupancy Rates
By focusing on essential amenities and lowering rents, properties could achieve higher occupancy rates. High occupancy rates often lead to more stable cash flow and can reduce the marketing and turnover costs associated with frequent tenant churn.
2. Improved Resident Retention
When residents feel they are getting good value for their rent, they are more likely to stay longer. High resident turnover is costly, so by aligning the offering with resident needs and expectations, properties can achieve higher retention rates, further stabilizing revenue streams.
3. Higher NOI Through Reduced Operational Costs
With fewer amenities to maintain, properties can benefit from reduced operational costs, directly impacting the bottom line. This model also allows for easier management and lower staffing costs, contributing to a leaner and more efficient operation.
4. Attractive to a Broader Tenant Base
The "Amenity Lite" approach can attract a more diverse range of renters, from young professionals looking for affordable urban living to retirees seeking a simple, maintenance-free lifestyle. This broader appeal can create more demand and potentially allow for greater pricing flexibility.
Rethinking Community Building in an Amenity Lite World
One concern that US developers and property managers may have is whether reducing amenities will impact the sense of community within an apartment complex. After all, many amenities are designed with community building in mind. However, the “Amenity Lite” model encourages a shift in how we think about community.
Focusing on Quality Over Quantity: Instead of offering numerous amenities that spread resident engagement thin, the focus can be on a few, well-designed spaces that actively promote interaction. For instance, creating a single, inviting communal space that serves multiple purposes—socializing, working, or hosting events—could foster deeper connections among residents.
Leveraging Technology for Engagement: Technology can also play a significant role in an “Amenity Lite” environment. Digital platforms can facilitate resident engagement, offer services like community boards, event calendars, and booking systems for shared spaces. Additionally, smart building technologies can enhance convenience and security, creating a modern and appealing living environment without relying heavily on physical amenities.
Programming and Events: Even with fewer amenities, property managers can enhance the sense of community through curated events and programming. Instead of a gym, host outdoor fitness classes. Without a dedicated event room, leverage the multipurpose space for social gatherings, workshops, or pop-up markets.
A New Path Forward
The “Amenity Lite” model presents a compelling opportunity for US apartment owners, operators, and developers to rethink their approach to multifamily living. By focusing on core amenities, reducing operational costs, and appealing to a broader base of renters, this model could provide a more sustainable and profitable path forward.
As the market continues to evolve, the ability to adapt and embrace new trends will be crucial. For those willing to take a fresh look at the amenity arms race, the “Amenity Lite” model could offer a new paradigm—one that aligns with modern living preferences, addresses affordability concerns, and still fosters a vibrant community atmosphere. By rethinking how we define and deliver value in apartment living, the US market can innovate and thrive in a rapidly changing environment.
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