The apartment industry continued its robust performance in Q1 2022. As a result of surging demand and occupancy rates, the demand for multifamily talent stood strong. In this edition of NAAEI’s Apartment Jobs Snapshot, job openings in the apartment industry totaled over thirty-eight thousand. Maintenance professionals were the most sought after during the first quarter, accounting for 37.7% of total apartment job postings. Dallas, Los Angeles, Seattle, Denver and Phoenix were the top-ranking markets for apartment job demand.When you neglect to publish, you create a domain effect of despair that begins every time you look at your followers. And when you post, you don’t get any likes or comments, making you feel like you’re just posting empty content.
Of all roles in multifamily operations, few have changed more radically in the last year than that of the leasing agent. The COVID-19 crisis has forced change on leasing behaviors and processes, but as we have described on this blog, most of these changes were already underway before the pandemic. Self-touring was gathering pace, and companies like Avalon Bay were already pioneering the use of artificial intelligence (AI) leasing and declaring that they have cracked the “1 for 100” staffing model.
The COVID crisis hasn’t changed the destination; it’s just turbo-charged the pace at which we are getting there. It’s important to consider what this rapid change means for leasing agents and how their role adapts to this rapidly-changing environment.
A leasing associate’s job has always been unique, with its focus on sales in a service-oriented environment. But since every interaction with a potential prospect or resident is, by definition, unique, agents must also be highly adaptable. Most aspects of what makes for a good leasing agent haven’t changed (after all, sales is still sales). But the emphasis of some skills and some key processes are changing.
Leasing agents still must be easy to get along with, have attention to detail, be good at administrative work and always be ready for a prospect to walk through the door or phone in. However, prospect behaviors have changed. Many have already scheduled their tours (whether through a call center or an AI bot), some have self-toured, and most are advanced in their decision ……
As a landlord or property manager, setting rents is a high-stakes exercise. Set them too low, you might get a tenant but you are leaving money on the table. Set them too high, you could be unnecessarily extending your vacancy loss. And it is with this backdrop that rent setters employ various strategies and technologies to help with pricing. Finding that equilibrium point is not easy, especially in a dynamic market like New York City.
Amenity-based pricing is a common way to set rents, and this article is mainly in reference to such models. Amenity-based pricing is a methodology in which a base rent is set for a unit type of some kind, then various amenity prices/values are added in, creating the all-in rent that renters see and pay. Individual amenity prices are set by a variety of factors, including the cost of developing the amenity, the desired payback (to the landlord), and perceived value to renters. The percentage of amenity value to total rent varies a lot, but consider it to be about 5-10% of the total rent.
Aside from landlords and property managers, renters also have a vested interest in how rents are priced, because they want to know they are getting a fair market deal, and because, naturally, it is a lot of money.
So we wanted to provide a few thoughts on how rents can be set and to encourage landlords and property managers to re-think the exercise in ……
It happens, from time to time, that we spend a lot of time trying to solve a problem, only to find that we have been looking at it the wrong way. Victorian London provides one of the starkest examples. Under conditions of a persistent cholera epidemic, it emerged that the disease was water-borne, not airborne, as the wisdom of the day had held. The solution was a massive project to build more than 100 miles of sewers under the city. Life was immeasurably improved for all of the generations that followed.
We can see parallels in many walks of life. When people and industries misunderstand cause and effect relationships, they waste resources on solving the wrong problems. It is becoming increasingly clear that multifamily is falling into this trap in the way that it approaches unit amenities and, in particular, how companies price them.
An as-yet unsolved problem
Let’s start with the basics. Unit amenities are a hugely important part of any community’s sales, marketing and revenue management strategy. When you add the right amenities at the right price, you attract more demand for your units, increasing rent and, ultimately, valuations. They are often expensive, which means that operators must secure the revenue uplift that justified the amenities in the first place.
The trouble is that amenities – including square footage premiums – are not always part of the unit’s base rent, which means they are not part of the revenue management system (RMS) process. For the almost 20 years that RMSs have……
I started watching Selling Sunset because I wanted to see all the amazing houses, and while there might be a bit more reality TV drama than I would like, it’s still a fun show that easily draws you in. So in that vein, I stumbled upon an interview with Jason Oppenheim that completely applies to leasing apartments! This might be a fun clip to share with new leasing consultants who happen to be a fan of the show. (Skip to 7:58 for the part that aligns with leasing apartments)
I love how he proactive he is about asking prospects about what other locations they have been to. Don’t be afraid to dig into what their process is to find out what you are up against! And while you don’t want to bash the competition, knowing how to highlight less-than-ideal features that their leasing consultant surely tried to gloss over is a fantastic strategy.
I also love asking about where they live now. Do they like their current place and unfortunately need to move somewhere else for work, or are they trying to escape because they hate their apartment? That back story is critical to understanding their needs.
If you skip to 13:38, I love how he talks about memorizing the map of the area and knowing every street. Maybe you need to give directions for someone coming in and they may be coming from north, south, east, or west. Maybe you want to give restaurant recommendations to someone who just moved in.&n……
More than six months into the health and economic crisis, most operators and revenue managers have been focusing on finding ways to defend rents. While this energy and time spent to combat declines as high as (in some urban high-rise even higher than) 10-15% are well worth it, we thought we’d take some time and talk about a place where almost every operator could gain revenue, and gain it quickly.
What could possibly be an “easy” source of rent gain in the middle of recession while heading into the slow season? It’s a renewed focus on unit amenities, an area of pricing that most of us will acknowledge does not get the same attention as base rents. In 2018, with the winds of growth in the industry’s sails, we reported seven common mistakes with amenities. Below are five “Amenity Fails” that everyone should focus on in today’s market.
Fail #1: Amenity “holes”
“Holes” are missing amenities. For example, if units 105 and 305 both have a pool view assigned to them, but unit 205 doesn’t, then that’s a “hole.” The reference comes from a method and application we’ve created that makes it easy to look at amenities by floor and stack. In such a grid, the lack of a pool view in unit 205 looks like a clear “hole” when the visualization clearly shows the amenity assigned to units 105 and 305.
Amenity holes are by far the most common error we find and also the easiest to correct. Whether the opportunity comes from mere……
It’s that time of the year when we are all deep in the process of budgeting. Most years, budgeting is hard enough, and this year the backdrop of the COVID-induced recession was already making it harder. Last week’s announcement of a federal eviction moratorium that will last through the end of the year has added another layer of uncertainty.
We find ourselves in a situation that is unique in our industry’s history. Without a clear precedent to guide us, we must examine the factors that are likely to affect 2021 performance and decipher what it all means as we budget for next year.
What’s happening with occupancy, rent growth and collections
Occupancy is holding thus far in most markets though I expect we will see unusual challenges fall through winter. We normally see small occupancy reductions in 4Q, though many operators budget otherwise. This year is likely to be worse than normal. If you want to be aggressive, you could budget for early 2Q occupancy recovery to normal occupancy levels, but we advise a more likely return in 3Q just based on our reading of likely timing for approval and distribution of a COVID-19 vaccine.
Rent Growth is the most challenging component, as it’s likely to be the most volatile. Also, with widespread and growing concessions (mostly forced to be upfront), there’s a growing difference between cash and GAAP revenue. Some markets may get by with flat or very small declines, but many are already experiencing double-digit declines in net effective rents ……
As we begin to enter a lower season while still dealing with the effects of the COVID-19 pandemic and concomitant recession, we thought it would be a good idea to take some time and focus on renewals.
With new rents declining in new markets even during this past summer and thus almost sure to decline more at least until next spring, renewals and renewal rents are even more important than ever. So when is it ok to keep renewal increases flat versus giving minimums? And are there times where we would actively offer rent decreases in our renewal offers?
In normal times, most operators implement a 1-2% minimum increase. At the start of the recession, most operators went to flat renewals. But now that we’re almost six months into the recession, what should we do?
As with most strategy questions, there is no one single, “right” answer. The choice depends on owners’ objectives, operating culture and sensibilities around where rents are likely to go. That said, here’s what D2 Demand is recommending to its clients.
The case for renewal increases
If you haven’t done so already, we do recommend going back to renewal rent increases where market conditions justify them. In past recessions, renewal rents outperform new rents; however, this time, early renewal rent freezes, coupled with the surprising maintenance of demand in many secondary and tertiary markets resulted in the reverse. Most operators we know have gone back to renewal increases, albeit often with lower caps than before. We strongly supp……
Much has been written about our industry’s remarkably good performance since March, including several pieces of our own. The NMHC rent payment data has been particularly encouraging, with August 1st collections essentially on par with April through July numbers compared to last year.
We also see good news in the overall economic recovery pace despite an increase in reports around challenges with college campus openings and other event-driven spikes. At the time of this writing, the 7-day average of new cases is the lowest since early July (though still almost double April numbers). And STR reported last week that nationwide hotel occupancy is back up to 50% occupancy for the first time since March.
Why the Fall Remains Unpredictable
As we have written before, there is good reason for trepidation over what will happen September 1st…and again on October 1st. While our crystal ball is no less cloudy than anyone else’s, it does seem clear that there are three key principles at play in any forecast for this fall:
Whether or not Congress acts in a material fashion
No matter what, seasonality will be a headwind
The wild card is the pandemic itself along with how good or bad a flu season we will have
First, let’s talk about the wild card. The aforementioned decline in infection rates is certainly good news though we need at least an additional 80% reduction to get down to numbers anywhere near Europe. As for the flu, another piece of good news is that South Africa reported an almost non-existent ……
That’s more like it.
After the week ending on July 12 brought with it a bevy of bad stats, the following week showed a nice upturn.
In general, the apartment market has shown fairly steady improvement since its low points early on in the pandemic. Last week, I cautioned that one bad week can be just that: one bad week. I urged readers not to worry too much until we saw leading indicators like traffic and leases continue to decline over several weeks in a row.
Fortunately, during the week ending on July 19, we saw moderately positive uptick across most data points and most markets, according to Radix.
Nationally, leases and traffic increased on a week-over-week basis, with the former also increasing when compared to the same time last year. The national occupancy and leased-percentage rates were up slightly from the preceding week, and the metrics also closed their year-over-year gaps that were so large in the initial stages of the pandemic. Impressively, even the average net effective rent in the U.S. rose 10 basis points from the week before.
To be sure, these were, overall, not outsized gains. But when we consider the July 12 data, it certainly is a positive to see the declines of that week come to a stop. We will continue to monitor the data to see if the gains morph into a longer-term positive trend over the next several weeks.
Below are some of the specific takeaways from the week ending on July 19:……