Would Seniors Rent Units in a $30 Million Townhome Community Development in Niagara Falls?
This is a story about a Design Sprint. If you’ve never heard of that, you can learn more here or read the book.
Intro
In May 2018, a real estate developer approached me to determine if they should build a $30 million townhome community for active seniors aged 59–74 in Niagara Falls, Canada.
Why?
A year prior, the developer built a retirement residence in a different city but only managed to achieve a 50% occupancy rate.
Why?
A desk research report provided by their bank’s financing partner recommended that 80% of the units constructed be one-bedroom and the remainder, be two-bedrooms.
After constructing and opening the residence, the developer realized that there was significantly more market demand for two-bedroom units.
To avoid making the same mistake, the developer wanted to apply a more rigorous research approach, to inform the real estate development strategy for their new project, prior to breaking ground.
I suggested running a Design Sprint.
Sprint Challenge
Prototype & test a new townhome community concept with seniors in 5 days.
Sprint Participants
- CEO
- Architect
- Head of Marketing & Sales
- Head of Operations
- Designer
- Sprint Master (Jameel)
We also consulted with these experts during the sprint:
- Two local real estate agents, a seniors moving company, a local senior home, a commercial banker, a local senior recreation centre and an urban planner at Niagara Fall’s city hall.
The CEO Wanted these Questions Answered
- Are seniors interested in renting a unit in the townhome community?
- Is the rental price affordable?
- Is there demand for 1, 2 or 3 bedroom units?
- Is the location desirable?
- Is the design, layout and finishings of the units desirable?
How we built & tested the prototype in 5 days
After mapping out the challenge and talking with experts on day 1, each participant sketched and presented their prototype concepts for the townhome development on day 2.
On day 3, the team voted on the winning concept and created a storyboard of the design and features.
On day 4, we built the prototype of the townhome development in one day.
How we Found Seniors to Test With
We asked a local senior recreation centre and bingo hall to post this ad:
We received 10 responses in 3 days and invited 5 seniors that fit our target profile to give us their feedback on the prototype on Day 5.
Customer Feedback
All 5 seniors said they would NOT rent a unit in the townhome community because:
-They didn’t want to climb 4 steps to access the unit
Seniors looking to downsize don’t want to move into a place that has stairs, to prevent the risk of falling in the future.
-The townhome didn’t have underground parking
Winters in Niagara Falls are severe. Seniors wanted their vehicles protected from the extreme cold, snow and ice.
Apart from the issues above, Seniors were happy with the pricing, location, layout, and amenities and preferred the two-bedroom unit.
Sprint Outcome
The seniors’ townhome community concept was an efficient failure.
The 4-day Iteration Sprint
The CEO didn’t want to amend the design of the development because it would materially impact the project ROI, so we decided to test the townhome concept with a younger demographic.
Customer Feedback
All five customers said the rental price was too high for a townhome
NOTE: Customers mentioned they would rather rent a larger detached multi-story home in the same area for a just a bit more money.
Iteration Sprint Outcome
The townhome community concept was an efficient failure because the rental price was too high.
Business Model Pivot
Given the customer feedback, the CEO decided to pivot from offering units for rent to selling condos. See the text message below from the CEO.
Conclusion
The sprint helped the CEO confidently pivot from offering units for rent to offering condos for sale to investors who were priced out of the Toronto real estate market and were looking for a more affordable place to invest.
NOTE: Townhome prices in Toronto go for $1–2 million while the asking price in Niagara Falls was $0.2–0.5 million.
All units in the townhome condo project sold out within six weeks of opening pre-construction sales.
The project completed construction and the owners took possession of the units in October 2022.
Jameel Somji, CFA is the Founder & CEO of SpiNovation Labs, a product design lab that applies a proven methodology for solving problems through designing, prototyping, and testing ideas with customers rapidly to determine if they are worth investing in.
