Design for Dollars: Staging, Multifamily & Commercial Appeal

Chapter: design❓ for Dollars: Staging, Multifamily & Commercial Appeal

This chapter delves into the science and strategy behind leveraging design to maximize return on investment in real estate, focusing on staging existing homes, optimizing multifamily housing, and enhancing the appeal of commercial spaces. We’ll explore the psychological and physiological principles that drive buyer and tenant behavior, offering practical applications and insights backed by research.

I. The Science of Staging: Selling Homes in Seconds

Staging is the art of preparing a private residence for sale to appeal to the greatest number of potential buyers. It’s about creating a compelling narrative that allows buyers to envision themselves living in the space. Unlike interior design, which personalizes a home, staging depersonalizes it.

A. Psychological Principles at Play:

• Cognitive Bias: Staging leverages cognitive biases like the halo effect, where a positive impression in one area (e.g., a beautifully staged living room) influences overall perception. Anchoring bias also comes into play – a well-staged home sets a higher perceived value benchmark for comparable properties.
• Emotional Response: Humans are emotional beings, and buying decisions are often driven by feelings. Staging aims to create a positive emotional response:
  • Attachment Theory: A staged home can evoke feelings of security and belonging, fulfilling basic human needs.
  • Color Psychology: Strategic use of color can influence mood and create a welcoming atmosphere. For example, blues and greens are often associated with tranquility, while yellows can create a sense of warmth.
• Visual Perception: Staging utilizes principles of visual perception to create appealing spaces:
  • Gestalt Principles: Arranging furniture to create a sense of order and completeness taps into Gestalt principles, such as the law of closure and the law of proximity.
  • Rule of Thirds: Applying the rule of thirds in furniture arrangement and décor creates visually balanced and pleasing compositions.
  • Spatial Cognition: Optimizing furniture placement maximizes perceived space and improves flow, enhancing the buyer’s experience.

B. The Five C’s of Staging: A Scientific Breakdown

The book mentions five key areas for improving the staging of the house, these can be further analyzed scientifically:
1. Clean:
* Hygiene Hypothesis: A clean environment subconsciously signals safety and health, attracting buyers.
* Microbial Load: Reducing dust and allergens can create a more comfortable and inviting atmosphere, especially for buyers with allergies or sensitivities.
2. Clutter-Free:
* Cognitive Load Theory: Clutter increases cognitive load, making it difficult for buyers to focus on the home’s features. A clutter-free space reduces mental distraction.
* Information Overload: Minimizing visual stimuli prevents sensory overload and allows buyers to process information about the house more effectively.
3. Color:
* Color Psychology: Neutral colors create a blank canvas, allowing buyers to project their own vision onto the space. Example: Light grey walls tend to sell better than loud coloured walls.
* Chromatic Adaptation: Neutral palettes adapt to various lighting conditions, making the house appear bright and inviting.
4. Creativity:
* Novelty Effect: Unique and memorable features capture attention and differentiate the property from the competition.
* Pattern Recognition: Intriguing design elements stimulate curiosity and encourage exploration, increasing engagement.
5. Compromise:
* Pareto Principle (80/20 Rule): Focus on the 20% of staging efforts that will yield 80% of the results.
* Cost-Benefit Analysis: Prioritize staging improvements based on their potential return on investment, weighing cost against increased selling price and reduced time on the market.

C. The “15-Second Rule”: First Impressions Matter

The book highlights that buying decisions are frequently made in the first 15 seconds. This underscores the importance of priming and creating a positive initial experience.

• Sensory Perception: The initial encounter with a property involves multiple senses: sight, smell, and even sound.
  • Olfactory Cues: Fresh scents (e.g., subtle floral aromas) can evoke positive emotions and create a welcoming atmosphere.
  • Acoustic Comfort: Reducing noise levels and adding soft background music can improve the overall sensory experience.
• Experiment: Conduct an A/B test. Stage two nearly identical houses. House A has no extra attention paid to scents or acoustics. House B uses subtle floral aromas and has soft background music playing. Compare the number of potential buyers who spend time in each space, and collect feedback regarding how they felt when in each home.

D. Mathematical Model for Staging ROI

A simplified model for calculating the return on investment (ROI) for staging:

• Let:
  • SPs = Selling Price with Staging
  • SPns = Selling Price without Staging
  • SC = Staging Cost
  • Tts = Time to Sell with Staging (in days)
  • Ttns = Time to Sell without Staging (in days)
  • Cc = Cost of Carrying property per day

• Then:

  • Profit from staging P = SPs - SPns
  • Savings on carrying costSc = Cc * (Ttns-Tts)
  • Total Benefit B = P + Sc
  • ROI = (B - SC) / SC

  Example: If SPs = $550,000, SPns = $520,000, SC = $5,000, Tts = 30 days, Ttns = 60 days, and Cc = $50 per day, then ROI = (($550,000 - $520,000 + (60-30)*50)-$5000)/$5000 = 5 = 500%

II. Multifamily Appeal: Designing for Target Residents

Multifamily housing design prioritizes functionality, durability, and appeal to a diverse range of tenants. Understanding the target demographic is crucial for maximizing occupancy rates and rental income.

A. Demographic Analysis and Design Implications

• Age: Tailor amenities and design features to specific age groups (e.g., senior living vs. student housing). Example: Senior living would have a focus on accessibility, while student housing would focus on study spaces.
• Lifestyle: Cater to the lifestyle preferences of target residents (e.g., families, young professionals). Example: If the target resident is a young professional, including an in-building gym or other recreational spaces would be smart.
• Income: Align finishes and amenities with the affordability level of the target market.

B. Key Design Considerations for Multifamily Housing

1. Curb Appeal:
   • Ecology and Biophilia: Incorporating green spaces, plants, and natural elements can enhance curb appeal and improve resident well-being. This taps into biophilic design principles, which promote a connection with nature.
   • Fractal Geometry: Studies have shown that humans prefer patterns found in nature (fractals). Integrating fractal patterns in landscaping or building facades can enhance visual appeal.
2. Accessibility (ADA Compliance):
   • Universal Design Principles: Apply universal design principles to create spaces that are usable by people of all abilities.
   • Anthropometrics: Use anthropometric data to ensure that spaces and fixtures are appropriately sized for a wide range of users.
3. Location Analysis:
   • Walk Score: Consider the walkability of the location, as this is a major factor for many renters.
   • Proximity to Amenities: Assess the proximity to essential amenities such as grocery stores, schools, and transportation.
4. Security and Safety:
   • Crime Prevention Through Environmental Design (CPTED): Apply CPTED principles to minimize crime risk by maximizing visibility, controlling access, and reinforcing territoriality.
   • Lighting Design: Adequate lighting can improve security and enhance the perception of safety. Note: there is a sweet spot with lighting, too much light can lead to glare, making the residents feel insecure.
5. Durable Finishes:
   • Life Cycle Cost Analysis: Evaluate the life cycle costs of different materials, considering factors such as initial cost, maintenance, and replacement.
   • Material Science: Select materials that are resistant to wear and tear, moisture, and pests.
6. Neutral Finishes:
   • Color Theory: Neutral color palettes are versatile and appeal to a broad range of tastes.
   • Lighting Design: Neutral finishes reflect light, making spaces appear brighter and more spacious.
7. Common Area Aesthetics:
   • Social Psychology: Well-designed common areas promote social interaction and a sense of community.
   • Ergonomics: Choose furniture that is comfortable and supports good posture.
8. Views:
   • Environmental Psychology: Views of nature can reduce stress and improve mood.
   • Urban Planning: Consider the surrounding environment when planning the layout of the building to maximize views.

C. Model Unit Strategies

Similar to home staging, a well-furnished model unit can significantly enhance the appeal of a rental property.

• Space Planning: Optimize furniture arrangement to showcase the unit’s functionality and perceived size.
• Virtual Staging: If physical staging is not feasible, utilize virtual staging to create realistic renderings of furnished units.

D. Senior Living Considerations

• Accessibility: Prioritize accessible design features, such as ramps, grab bars, and walk-in showers.
• Wayfinding: Use clear and intuitive signage to help residents navigate the building.
• Cognitive Design: Incorporate design elements that support cognitive function, such as memory cues and visual contrast.

III. Commercial Appeal: Designing for Productivity and Profit

Commercial spaces must balance functionality, aesthetics, and brand identity to attract tenants and support their business operations.

A. Understanding Target Tenant Needs

• Industry Analysis: Consider the specific needs of the target industry (e.g., technology, healthcare, retail).
• Workplace Trends: Stay informed about current workplace trends, such as flexible workspaces and collaborative environments.

B. Key Design Considerations for Commercial Spaces

1. First Impressions:
   • Brand Identity: The design should reflect the brand identity of the building and its tenants.
   • Architecture: The architecture of the building should be visually appealing and convey a sense of professionalism.
2. Functionality:
   • Ergonomics: Prioritize ergonomic design to promote employee health and productivity.
   • Space Planning: Optimize space utilization to maximize efficiency and minimize waste.
3. Acoustics:
   • Sound Masking: Implement sound masking systems to reduce distractions and improve speech privacy.
   • Acoustic Materials: Utilize sound-absorbing materials to minimize noise reverberation.
4. Lighting:
   • Circadian Lighting: Implement circadian lighting systems that mimic natural daylight patterns to improve employee well-being and productivity.
   • Lighting Levels: Provide adequate lighting levels for different tasks.
5. Sustainability:
   • LEED Certification: Pursue LEED certification to demonstrate a commitment to sustainability.
   • Energy Efficiency: Implement energy-efficient lighting, HVAC systems, and building materials.
6. Flexibility:
   • Modular Design: Utilize modular design elements to allow for easy reconfiguration of the space.
   • Adaptable Spaces: Create adaptable spaces that can be used for a variety of purposes.
7. Amenities:
   • Break Rooms: Provide well-equipped break rooms with comfortable seating and refreshments.
   • Fitness Centers: Offer on-site fitness centers to promote employee health and well-being.
8. Accessibility:
   • ADA Compliance: Ensure that the space is fully ADA compliant.
   • Wayfinding: Use clear and intuitive signage to help visitors and employees navigate the building.

C. Cost-Benefit Analysis for Commercial Design Improvements

• Quantify the potential benefits of design improvements, such as increased productivity, reduced absenteeism, and improved tenant satisfaction.
• Compare the costs of design improvements to the potential benefits to determine the ROI.

By integrating scientific principles and data-driven insights, real estate professionals can leverage design to create spaces that are both aesthetically pleasing and financially rewarding, ultimately maximizing their return on investment.