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IRVINE, CA—Not every apartment amenity willwork in every submarket, so it's important to know your audiencebefore incorporating features into new buildings, says BillWilhelm, president of R.D. OlsonConstruction. As GlobeSt.com reported last week, the firm recentlycompleted extensive renovations on 27Seventy Five Apts., a 468-unit garden-styleapartment community in Costa Mesa, CA, owned byUDR Inc., in addition to several upscalerecreation buildings for the Rancho Mission ViejoCo. in its master-planned communitiesSendero and Gavilan in RanchoMission Viejo, CA. We sat down with Wilhelm to discuss theevolution of these amenities and what developers need to know aboutthe latest apartment features.

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GlobeSt.com: Which came first regarding the demandfor the high-style, high-function amenities you've incorporatedinto these properties? Did developers begin to offer them, so themarket caught on and began to demand them? Or did residents beginto ask for these amenities on their own, and developers began tolisten?

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Wilhelm: The market has had a need forsome time now for a change in design amenities. We realized that wedevelopers need to start listening to our tenants. Who is the enduser? Who is our client? What is their need today vs. yesterday,and what can we offer them I our locations? At Rancho MissionViejo, which is geared toward an older resident, we have differentamenities than at 27 Seventy Five Apts., which appeals to theyounger generation. The younger group wants an indoor/outdoorenvironment, nice cabanas, fire pits, large-screen TVs, and anexterior nightclub kind of feel. This drives up the rental cost,but renters in their early 30s who want to go to a wild place arewilling to spend an extra $500 to $1,000 a month knowing they'llhave those amenities. That's money that would have been spentelsewhere, but now they don't have to.

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GlobeSt.com: That's a good point—how are thesehigh-end amenities affecting rental rates or buy-in costs forresidents?

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Wilhelm: What we are seeing is whatthe nicer amenities are doing. They're taking an older existingproperty that might be a C property and moving it up into the B+range, or maybe even an A+ range. The cost increase is based onlocation: in Silicon Valley, renters may expect to pay $1,000 to$2,000 a month extra, but in Orange County that will be less insome properties. In the Orange County rental market, the Irvine Co.has done a phenomenal job with gorgeous properties, but they gethigher rents on the outskirts of the market because of what theyoffer. It justifies the value.

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It can work the opposite way, too. I've seen a couple of dealswhere a property was bought and the renovation process wascompleted with the expectation that it would drive up the rentalrates, only to find that it's not always so. It depends on the zipcode. Developers have gone through a learningcurve and seen that geography plays a major role.

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GlobeSt.com: What's next in the evolution ofamenities?

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Wilhelm: A year ago, I probably wouldhave said having a cocktail bar in a public area was next, but wenow have that at Rancho Mission Viejo. That, to me, was reallygoing outside the box. I think amenities continue to be driven byguest needs. We go through this with the hospitality industry:Where are the Millennials going to take us?

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Culture may also have a little bit of play in this. It alsodepends on what kind of expendable dollars residents have. Can theyafford more of a resort environment? It's definitely going to thatdegree today. In the future, it may mean a spa treatment.

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I think every property needs to be conscientious about who itstenants are, what cultures they come from and what things peoplefrom different cultures are looking for. We have experienced thatconsiderably on the hospitality side of the fence from theperspective of investors, travelers and local citizens, having tomake a change with cultural considerations.

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GlobeSt.com: Does it often happen that thehospitality market leads the other marketsectors?

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Wilhelm: It kind of goes in cycles. Inthe trend we're going through today, multifamily probably took theinitial lead because as unemployment goes down and people make moremoney, they don't go out and buy a home, but spend more on rent.That's what started the process. Hotels were rightbehind as people began to travel more. And there again, that'sgeographic—there might be very little happening in one neck of thewoods, but further south or west, you'd be amazed at the amount ofdevelopment going on right now. Amenities are also drivingsingle-family housing, and there's the communityengagement by the office sector, too.

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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.