Earlier, I’ve written about how high-rises face higher up-front costs, stemming from both lower efficiency and higher construction costs. But the high-rise cost penalty doesn’t just apply to upfront construction costs — their ongoing maintenance expenses are typically higher than for low-rise buildings.
The Institute of Real Estate Management publishes an annual benchmarking report for property managers, showing average operating expenses for 717,000 apartments nationwide. IREM’s 2014 report found that “elevator” buildings (both mid- and high-rise) have operating costs that are 43% higher per square foot.
Frank Schliewinsky, writing in Strategics Vancouver Condo Report, analyzed MLS data to find that “Monthly strata [condo] fees for low-rise projects tend to be less than those for high-rise projects.” Fees averaged 22-25% higher per unit in high-rise buildings across metro Vancouver, both in low- and high-cost markets, and both for new construction and older buildings.
(Factors that may explain the discrepancy between the two figures may relate to definitions — many low-rise buildings still have costly elevators — and/or the smaller unit sizes typical in high-rises.)
Some of these increased costs stems from the upfront construction: high-rises have more materials and bigger systems to maintain, and their less efficient floor plans mean more common areas have to be maintained.
Another curious factor is at work, though. The higher costs for high rises creates a vicious cycle: Higher costs (per square foot, and per unit) mean higher rents are needed to justify high-rise construction. Those higher rents can only be achieved by aiming for that segment of the market which wants to pay higher rents — by definition, the luxury segment, who can be enticed to pay higher costs by adding ever more amenities. Those amenities further increase costs, both up front and in the long run.
None of this is to disparage high-rises, of course: I live in a high rise, after all, and enjoy its sunlight, views, sound attenuation, and proximity to services. (And, frankly, don’t really use the high-cost swimming pool very often.) When I was younger, though, I lived in lower-cost low-rise apartments and aspired to someday live in the sky.
The intrinsically high costs of building and maintaining high-rises makes it dangerous to recommend that high-rises will absorb a large share of housing growth — particularly in metro areas that already suffer from high housing costs, which don’t need even more housing that’s inherently costly.
(Again, to be continued.)