How Smart Amenity Planning Increases Property Valuation for Commercial Real Estate Investors

Commercial real estate investors can dramatically increase property valuation with smart amenity planning. It's one of the most undervalued levers in the industry.

Sure, investors who buy in the right markets will always have an advantage. But the investors writing the biggest checks right now aren't just choosing the best markets, they're choosing the best amenities. And one amenity, in particular, keeps popping up:

A pool.

Here's what this article covers — why amenities matter, why pools are the amenity every investor should have, how to hire a commercial pool builder, and how to build a winning amenity strategy for any CRE property.

Why Amenities Matter to Property Valuation

Here's the thing most investors don't understand...

They view amenities as icing on the cake. Something nice to have if the down payment was spent wisely on location and price. But especially in a tight commercial real estate market, that kind of mentality is losing investors money.

Buildings that can provide evidence of utilization, resident satisfaction, and amenity engagement are commanding valuation premiums and lower risk premiums. Properties without this proof are suffering from valuation compression and higher capitalization rates. That's not nuanced. That's easy dollars on the balance sheet.

Recent research from Altus Group found that "newer, higher-quality buildings with robust amenities produced approximately 2.5 times more NOI than lower-quality buildings."

That's a HUGE spread.

And it's not going away. When polled about what amenities they expected from landlords in the next two years, 85% of Cushman & Wakefield tenants said they expected higher-end amenities.

Expectations are rising. And property owners that don't have the amenities tenants are looking for will soon be left behind.

Amenities tenants are valuing the most? Pool access.

Why a Pool Makes the Cut

Not all amenities are created equal.

Just because a bunch of shiny new features get tacked on doesn't mean a property will outperform comparable units without them. Here are four reasons why a pool makes the cut for most commercial real estate investors.

Pool amenities:

• Work with most every property type (think multifamily, mixed-use, hospitality, fitness-focused communities)
• Separate a building from the competition (helps a property become Class A or A+)
• Act as instant branding. They're visually obvious in photos, marketing campaigns, and virtual tours
• Signal to tenants (and appraisers) that a property is operated at a high standard

A study from property management company Greystar found pools were one of the top amenities renters wanted across every major US city — including New York, Chicago, and Boston.

Installing a pool doesn't automatically win tenants. But when done correctly, it puts a property in a better position than those without one.

Why Every Investor Should Have a Pool (Chat With a Pool Builder)

Making sure the right pool contractor is on the team can mean the difference between a money-making asset and a money pit. Pools bring immense value to a property when done correctly, but done incorrectly can lead to some serious budget headaches.

That's why having a commercial-focused pool builder on the team is so important. Speaking of which… let's dig into building the perfect amenity stack.

Building the Perfect Amenity Stack for Your Property

Successful real estate investors don't build random amenities. They have a strategy.

That strategy should start with understanding the target renter. Renting to young professionals? They might prefer a pool over a basketball court. Renting to families? They might prefer a playground.

Once the property type and target tenant are established, it's time to explore amenities that increase 'dwell time' (how long people spend on the property).

A: The most common amenity stack starts with a pool. Then add:

• Deck space around the pool for guests to mingle and socialize.
• A fitness center that compliments the pool.
• A lounge or hangout space near the pool and fitness center combo.

This allows tenants to spend time with friends while taking care of their health. Instead of feeling like something they have to do, working out feels like socializing.

When tenants enjoy the amenities, they tend to stay longer. And according to Cushman & Wakefield's Experience per Square Foot research, those tenants are 40% more likely to grow their lease.

When properties are growing rents and units leased instead of losing them, NOI skyrockets.

Not to mention, it costs three times more to replace a tenant than to keep them. Every day a property isn't vacant is money in the bank. And creating a world-class amenity stack is a surefire way to keep tenants spending more days at the property.