In this issue of thinking like a developer, we focus on the product, the people, and the place you’re building. Are you creating the right inventory for the right area to satisfy demand and maximize your return? Let’s put on our urban planning hat for a moment and ask ourselves, Who’s moving here and what are they looking for? Three-bedroom apartment with large bedrooms in Bed Stuy or Bushwick? Mistake. At MNS, we’re seeing greater demand from people interested in these neighborhoods for shares, where the expectation is an eight-and-a-half to nine-foot wide bedroom, while non-shares require a bedroom that’s at least 10 foot wide. Smart planning helps us avoid wasting space and losing money. Are there exceptions to the rule? Yes. In less attractive neighborhoods, you might want to lure people with bigger apartments. Maximum ROI comes from efficient layouts—a split 2 bed is far more efficient than side-by-side, and not because of the additional privacy. The real advantage comes from not sacrificing valuable square footage to hallways. A couple other provisos: conversion projects always have less efficient layouts, and the most efficient type of a building is long and narrow, as opposed to square.
Finishes can go a long way to maximizing the rent. While any renter is going to be turned on by granite counter tops, high ceilings, and beautiful baths, in some neighborhoods, like Williamsburg, it will make the difference between $45 and $65 a square foot, but it won’t work everywhere if the tenants simply can’t afford it. A high-end appliance package from Bosch can yield higher rents in an already desirable neighborhood, but in more emerging areas, there’s a harder ceiling on what you can charge.
Amenities can turn a building on an average block into a destination address. Look at the Castlebraid building at 114 Troutman, a 140-unit building in Bushwick—the perfect example of a developer investing in a community. As a result, he’s getting 25% higher rent than his neighbors. I always say, your building is going to be here for 50-100 years, so try and make it great. If you build a nicer building, people will pay more for it. So how far do you need to go to attract those tenants? Most buildings in the 40-100 unit range don’t need a full time doorman. A part-time, one-shift a day setup is plenty to achieve rents for most folks who want the convenience of a doorman building. Less negotiable for most Brooklyn buildings is a bike room. Parking, on the other hand, is rarely used in Brooklyn, making it a liability to the developer. Currently, any development that has over 10 units requires 50% parking. The developer still has to build underground and it’s not cheap to excavate. The developer will not recoup their investment on what they spend on excavation.