When property management companies open and lease-up their newest apartment communities, there's usually one goal in mind: meet the occupancy target as quickly as possible.
It's an obvious and worthwhile goal. In fact, it's one of the three indicators that we believe define whether or not a lease-up is successful:
1. You've met your occupancy target in a healthy time frame relative to your community's size.
2. Residents are paying at or above market rent.
3. You've significantly reduced your marketing budget at its end.
The problem with setting all of your hopes on achieving a fast apartment lease-up is that you can incidentally weaken your community's revenue potential. A specific example of this could be letting new residents sign leases at below market rent just to occupy more units. You may meet your target quickly by doing that, but doing so comes at a cost.
Your focus should be on making sure all of these indicators are true at the end of your lease-up. Here's three actions you can take to achieve a lease-up that ends in a healthy time frame, has residents paying above market rent, and allows you to lower your marketing spend:
Video: 3 Indicators Of A Successful Apartment Lease-Up
Actionable No. 1: Set Monthly Lease Targets For Each Floorplan
There's no real definitive industry standard for how long a lease-up should last. Completing it in less than a year is an exceptional benchmark, but we also know that this isn't always possible—especially for new construction lease-ups.
One challenge in particular is not having all of the units available on time, meaning one building on a property may be ready for new residents to move in to, but the construction team is still working on finishing the other building(s). Simply put, larger, new properties will have longer lease-ups than a 15-unit building. Hence, the truest indicator of success is being able to achieve your desired occupancy target in a time frame that's relative to your community's size. So how do you ensure that happens?
Setting monthly lease targets is a helpful action to take for two reasons: these milestones keep you accountable for staying on track, and they may also help diagnose any potential pricing or marketing problems. (More on that in a later blog post.)
Let's say, for example, that your new apartment complex is set to open on January 1st. On that opening day, you know that you'll have one of the buildings ready for move-in. This building has approximately 100 units, including 50 1-bedrooms and 50 2-bedrooms. Of the 1-bedrooms, there are 30 units in Floorplan A and 20 units in Floorplan B. The 2-bedrooms are made up of 15 units in Floorplan C and 35 units in Floorplan D. Here's an illustration to break it down, which is the first place to start when setting monthly lease targets:
| Building No. 1 | |||
| 1-Bedrooms (50 Units) | 2-Bedrooms (50 Units) | ||
| Floorplan A (30 Units) |
Floorplan B (20 Units) |
Floorplan C (15 Units) |
Floorplan D (35 Units) |
Now is when your property management team needs to set a goal for how fast you can lease-up this first building. In this example, we're going to try to do this in one year.
With this deadline set, you're able to set targets for how many units you need to be leased in each floorplan every month to meet it. Here's how that could be charted out:
|
Month |
Building No. 1 | |||
| 1-Bedrooms (50 Units) | 2-Bedrooms (50 Units) | |||
| Floorplan A (30 Units) |
Floorplan B (20 Units) |
Floorplan C (15 Units) |
Floorplan D (35 Units) |
|
| Lease Target | Lease Target | Lease Target | Lease Target | |
|
January
|
2.5
|
1.6
|
1.3
|
2.9
|
|
February
|
5
|
3.2
|
2.5
|
5.8
|
|
March
|
7.5
|
4.8
|
3.8
|
8.7
|
|
April
|
10
|
6.4
|
5
|
11.6
|
|
May
|
12.5
|
8
|
6.3
|
14.5
|
|
June
|
15
|
9.6
|
7.5
|
17.4
|
|
July
|
17.5
|
11.2
|
8.8
|
20.3
|
|
August
|
20
|
12.8
|
10
|
23.2
|
|
September
|
22.5
|
14.4
|
11.3
|
26.1
|
|
October
|
25
|
16
|
12.5
|
29
|
|
November
|
27.5
|
17.6
|
13.8
|
31.9
|
|
December
|
30
|
20
|
15
|
35
|
It should be noted that this scenario doesn't take into account seasonality. There will be some months where you exceed your lease targets and others where you're falling behind. It's also worth pointing out that, of course, you can't lease a fraction of a unit. For example, in Floorplan A the goal is to have 2.5 leases signed by the end of January. This should be interpreted as signing only two leases means you're below target while signing three would be ahead of target. Setting these targets is a great way to ensure you're completing your lease-up in a healthy time frame.
Actionable No. 2: Find your pricing sweet spot.
Occupancy expectations in a lease-up shouldn't be met by offering lower than market level rent rates. If this is the case, then you may have mismanaged your lease-up entirely.
When setting your rent levels in a lease-up, start with market rent as your minimum. Our recommendation is to actually start your pricing higher than usual to match the higher demand that occurs when opening a new apartment community.
Then as you go through your lease-up, be flexible with your pricing. For example, if you are exceeding your lease targets, like the ones displayed in the example above, you can safely raise your rent. Meanwhile, in months where you're falling behind, you can slightly lower it.
Finding the pricing sweet spot that delivers consistent leasing rates for each floorplan can help ensure that residents are paying at or above market rent by the end of your lease-up.
Actionable No. 3: Cut unnecessary marketing sources when you've reached your occupancy target.
Remember, on opening day your occupancy is 0%, and in order to earn leases you need to generate leads. In order to generate leads, you need to hire a developer to create a website as well as a media specialist to take photos and videos of your units and amenities. In order to generate traffic to that website, you need to buy digital advertisements on Google, Facebook, and potentially even a few Internet Listing Service subscriptions.
It's clear—meeting your lease-up deadline in a healthy time frame requires a significantly higher than usual marketing investment. But once you've hit all your lease targets, it would be wasteful to spend the same amount on marketing as you did when you had 100% vacancy. That's why the last action you should take when your lease-up ends is to lower your marketing budget by cutting underperforming sources.
As you keep track of your signings throughout the lease-up, be sure to also have a method of tracing them back to their original marketing source. Measuring the lead-to-lease conversion rates of each of your marketing channels will help you see which ones worked, and which ones didn't. You can safely cut the sources that didn't deliver as many leads after you've successfully ended the lease-up.
Last Actionable: Download our ebook.
For more helpful insights like this, download and read our ebook How To Execute A Successful Lease-Up by completing the form below. It's structured this ebook to match the same strategic timeline we use when helping our clients navigate their own lease-ups.