One of more than a dozen new multi-family projects under construction or planned in Louisville, the new Claiborne Crossing apartment complex is in and of itself a big deal.
Construction at Claiborne Crossing, though something of a stealth project, is scheduled to wrap next month. The sprawling, $33 million investment will put 242 luxury apartments on 22 acres off Old Henry Road in far eastern Jefferson County.
But after getting a tour of the nearly complete Class A complex, I came away struck by how sharply expectations have moved upscale for apartments since the 1990s. It’s almost like an arms race, with developers and builders getting ever more inventive, moving way beyond granite countertops.
In an interview earlier this week, Kevin Cogan, Jefferson Development Group managing partner, told IL Claiborne Crossing’s fit, finish and amenities – from granite kitchen countertops to an infinity pool – are what home shoppers would expect to find at a new upscale condominium development, not apartments.
We were skeptical.
Yesterday, Sally Judah, Jefferson Development COO, and Ellen Harten, Claiborne Crossing property manager, gave us the tour.
“You can get four walls anywhere. I challenge anyone” to match Claiborne Crossing’s design and amenities, Harten said. “We want (tenants) to say, ‘I didn’t even know I needed this.'”
Harten and Co. are trying to anticipate the subtle details that now define upscale apartments, as well as what people coming to Louisville from other markets are likely to expect.
For example, the stainless steel-finish appliances are not smaller “apartment grade” in the industry vernacular, but full-sized, high-end appliances.
Refrigerators are 23-cubic-foot models, not the 18-cubic-foot models standard in most apartments, she said. The latest colorful glass tiles that debuted a few years ago in Dwell magazine is the back splash in the kitchen.
Kitchen cabinets are also full-size contemporary, and include under-cabinet lighting. There are coat nooks as you enter the apartments. Walk-in closets in bedrooms. Nine-foot ceilings with subtle built-in lighting and molding throughout.
There are 20 units with wine coolers built into the kitchen island. At the pool, each cabana has a docking station for iPods and iPhones.
Bittners, the 160-year-old interiors company that has served Louisville’s Blue Bloods for decades, is the designer for the clubhouse and model apartments.
If you want more privacy, Claiborne Crossing has 18, two-bedroom carriage houses in nine buildings, Harten said. One and two-car garages are available.
“We wanted to make a statement,” Judah said. Competitors “are telling us, ‘You all raised the bar.'”
Claiborne Crossing is up against a wave of new Class A developments, said Reed Weinberg, president of PRG Investments, a Louisville-based commercial real estate brokerage and investment firm.
A number of new Class A apartment complexes are coming online at the same time, including Columbus-based Lifestyle Communities’ Idlewild development near Claiborne Crossing, and Indy-based Watermark’s $30 million complex on North Hurstbourne Lane.
All have roughly comparable products in a market driven by Millennials moving up and, to some degree, Baby Boomers and Generation Y looking to downsize, but have the same level of luxury, Weinberg said.
“Developers are totally banking on the Millenial Generation as being the real driver of demand for new apartment growth,” he said.
Coming up with the right amenities is crucial to Claiborne Crossing differentiating itself from the competition, Weinberg said.
Harten, a veteran of multiple Louisville apartment operations, was candid: Claiborne Crossing execs are all too aware of what other apartment developers are up to in an increasingly competitive multi-family sector.
Watermark, the Indianapolis-based developer, got its 270-unit complex on Hurstbourne Lane open first. “We broke ground second,” Harten said, with Meridian on Shelbyville and Idelwild scheduled to be finished this year.
“Timing was on our side,” with Claiborne Crossings signing tenants daily while others are still coming out of the ground, Harten said.
All this comes at a cost, of course. One-bedroom apartments with about 850 square feet of space start at $1,000 per month. Two-bedroom units start at $1,250 per month and go to $1,350 per month, with three-bedroom units with up to 1,500 square feet and sun rooms going for almost $1,700 per month.
And they are going. In an interview Monday, Cogan said Claiborne Crossing is 60-percent leased, and it’s not even finished. Yesterday, the sales office was buzzing with people signing leases or pondering their options.
The complex, which started leasing in December and still has a building to complete, is leasing an average of 40 units per month, Cogan said. He predicted Claiborne Crossing will be 90-percent leased by August.
Some of the people coming to Claiborne Crossing are busy executives from other states, who are taking apartments sight-unseen, Harten said. Those clients want the whole relocation experience to be seamless, with their simply walking into a new “home” where everything is already perfect, Judah said.
The known unknown is, absorption rate, Weinberg said. That is, when will the number of new units coming online outpace Louisville’s population growth, or demand for new units?
“Multi-family real estate is driving the real estate resurgence in Louisville and across the entire nation,” he said. Much of the momentum is Millenials renting because they can’t meet requirements for mortgages.
“Many are just now looking for their first dwelling, which is most likely to be an apartment,” Weinberg said. “Also it’s just the mindset of that generation to want to continue renting.”
Playing a role are executives and blue collar workers coming to Louisville for jobs, people who decide to rent for a year before buying, or before moving on in their careers, Weinberg said.
He noted building in Louisville is somewhat less risky than in other cities because we’re regarded as something of “sheltered market,” with both white collar and blue collar people protected from sharp economic fluctuations in other markets.
Overbuilding is a concern in some markets, but some national experts believe Louisville will be able to absorb new units, mostly because our job growth will be steady, he said.
But as developers add amenities and adjust rents to reflect those costs, Weinberg said, “how high do the prices go before people start saying, ‘That’s equal to a mortgage payment?’ ”
“(Apartment) owners will need to start being very price sensitive on their rents.”