So I have a finance background. I come from HFF and 4 years as a dev associate. In my opinion, my strengths are managing a job and managing a team of consultants efficiently. My philosophy is drive rents and spend as little money as possible. My current shop has a team of former architects by trade and I constantly feel like I am doing a poor job because I am not able to answer the detailed design questions that come from my principal. I recognize the design is important, but the fact that we spend 8 weeks designing a lobby drives me a bit crazy. Lobbies do not drive rents, units, amenities, and location drive rents. My project is on schedule and budget. Do top tier developers really need to know the architectural details to be successful? I feel like my principal gets frustrated that I don’t spend the time on the design details. Do most development shops care this much? I absolutely want to learn design but I feel like the fact that I can keep a job moving on budget is more important. Thoughts?
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No lol merchant build
Design is important because it actually does drive revenue. The lobby is the first thing tenants experience when they walk into your building. Do you need to be able to explain intricate design - probably not. But you work with architects and that is important to your bosses - so in your instance yes. At other firms - maybe. For example, my boss and I spend a lot of time on design because we are the only ones paying attention to it. It is important in a respect. Bad design = bad experience = less revenue.
This. The whole thesis behind our fund is that design + experience = outpeformance. especially for hotel product. We have the track record to prove this theory as well. If you're a merchant builder looking to flip garbage product then by all means design not that important.
As an architect switched to development I also second this. There is a huge gap between trying to cut all corners possible, and just letting an egomaniac spec the craziest unnecessary things on your project, and it does help to know how to tell the difference. You don't need to be literate of every detail, but you do need to know enough to judge the consequences of the choices you make.
For instance on a 5 star lobby - do you need the marble to be sourced from Italy, if there is a cheaper solution that is just as durable and looks the same? Probably not.
Is it worth spending a few extra thousand dollars to ensure you do not have something not centered stare at your soul and give you nightmares? On a luxury property absolutely, on affordable housing, no, cut all the corners to stay on budget.
Is it worth spending extra money on something that will last 20 years instead of 5? Depends on if you're holding the property or not.
Beyond knowing how to answer some questions like this, your decisions should be something along of the lines of "build what the drawings say and nothing else", all extra knowledge beyond that is probably gravy.
I'm glad I'm not the only person who scoffed at the lobby comment. We have pretty similar YOE and I'm mostly on the LP side, but at least in my experience the lobby absolutely drives rents lol. Doesn't matter if it's office, multi, or hotel
I have the same background as you and feel the same way lol
Come from a similar background. Fortunately have former architects on the team that handle the deep details on design.
I mean, I think it's pretty weird for you to think that design has no impact on asset performance. Especially given the group of peers you're describing.
There is a lot of data out there that shows what drive rents: units and amenities. When was the last time you rented an apartment because you liked the lobby?
If you’re gonna ask the question and not be happy when people tell you what you don’t want to hear, can’t really help you.
It's literally the first thing you see when you walk into a building. It doesn't necessarily drive rents, but it absolutely drives absorption.
We've spent months designing the amenties + lobby for our latest resi project. Lobby + amenities = point of sale for potential renters. Whether or not they will ever use them, its a key selling tool to get them to sign on the dotted line after their tour. Every heard of resi brokers putting fresh cookies out? Cmon bro, this ain't rocket science. Not sure why you having a hard time grasping this.
Also. The lobby is the first thing you see in an apartment building. If you don’t like the lobby, you’re “feel” of the building will be off. People make decisions based on first impressions.
You don't base that decision on one particular design factor like extra millwork in the lobby which makes it hard to quantify. The decision gets made based on an overall feel that is made up of many, many different design decisions.
Architecture typically plays a bigger role in multifamily, slightly less in office, and a whole lot less in industrial.
The focus on architecture is also very shop specific, some development shops (esp. those started by those with architecture backgrounds) care a lot about design, for other developers it's just about the numbers.
If you're really not keen to learn the ins and outs of design, you might just need to switch firms. You'll be expected to have basic knowledge of the design & const. process but not to level it seems your shop is expecting.
Pudding is entirely correct. I think the reason this is tough for a lot of developers who come from finance to grasp is because they're too close to the model. You need to be able to step back and think about the apartment from a renters perspective, they aren't thinking about amenities as a box check, they are thinking about their daily experience, what's it like to walk in and out of the building multiple times a day, for the next 365 days (at a minimum). If the lobby sucks, people are going to intuit that. Plus, for new builds your dealing with a less price sensitive consumer who will want the best and expect a good experience physically interacting with the space.
To give an example of how design can directly affect revenue, I was looking at a comp today and they had some very spacious Jr 1 beds, to the point it didn't make any sense. Maybe it stacked nicely with the utilities below or something and saved money in construction, but if you thought about the design you easily could have rearranged the rooms to a traditional 1 bed and get another $300/mo in rent. That's a real cost to the project because the developer didn't think about design and didn't push the architect to lay out the most optimal unit. I'd be happy to post images if anyone wants to understand this better.
This is a great example - another simple one would be unit sizing. If you just tie out unit sizing to the market norm, but you're tailoring the rest of your project to a different demographic that wants larger units, you're gonna have a bad time.
Would love to see the images to understand this better
This Jr 1 that they posted, it's 700 SF with no obvious reason why it needs to be a Jr unit:
And I don't even need to mark it up and show how to rearrange it, they do it for me! This is a 664 SF 1 bed in the exact same building:
There is zero reason to include that Jr 1 unless you think for some reason that it's a desirable unit (it isn't) and that it will rent better because it's cheaper (just wait the extra two months to rent the pricier, better unit). Granted there could be something totally weird with the building that is forcing that, but I can't imagine what it could be. Maybe they're code limited in their unit mix and needed to scrap a bedroom (legally a Jr. 1 is a studio because the "bedroom" doesn't have a window, so it's not technically a bedroom)? I don't know. But these are the kinds of design things you need to understand to be a good developer.
Right - a renter isn't thinking to themselves "hmm that one building was really cool but the rent PSF was 8% higher". They're thinking something along the lines of "I could choose between these two buildings, I know that one had slightly smaller units and is $100 a month more but it's a really cool building and I can't wait to show it off to my friends when they come over to my apartment".
To take that a step even further - they may not even know the unit is slightly smaller. They just took home two leasing folders from the two buildings, and the plans may not even have dimensions. But one felt way cooler and that's what they take away from it.
Yes knowing design drives rents. You should be targeting best possible design for the budget you are underwriting to. Building as cheap as possible and driving rents actually are at odds with one another. The lobby is the first experience a resident has in your project—you can make or break your ability to drive rents pretty quickly by screwing up the lobby. We spend a considerable amount of time evaluating the entry experience, the prospective resident tour route, and yes the units. For our ultra luxury rental assets, the amenities actually sell the opportunity—the units are more or less checking the box that you’re in line with the comps.
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There is definitely a tendency for multifamily developers to get way more into the aesthetics than necessary, and I can see that in the comments here.
More often, more dangerously, they build it too nice for the submarket and overshoot/miss their rents.
Surprised seeing architects and other people not mention this. Design also drives cost and implementation. Too many pieces requires too many installers, and if expensive and breakable, wont work well if it's a high touch area. The longer I have been in the industry the more I realize you are either meant to be more finance or meant to be more development/design. Nobody likes/is extremely strong on both. Good development people need extreme attention to detail as the specs/installation/details are so important to both the cost, but also the overall design and need to cognizant of the gc's management of them actually getting done right.
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