RealPage's latest multifamily report revealed that apartment demand registered negative in the third quarter for the first time in 30 years. Typically, the third quarter correlates with most communities' busy leasing season, which makes the news all the more troublesome.
It was also the first time since the fourth quarter of 2019, or essentially before the outbreak of the COVID-19 pandemic and it's substantial impact in record-breaking market conditions, that demand registered negative.
The market constantly changes; we gave subtle warning to such earlier this year with a blog urging multifamily professionals to invest in their community's marketing plan while in a prolonged period of strong occupancy to prepare for shifts in demand. However, the degree to which the market turned for every class of apartments is alarming, especially as we turn toward the winter leasing season.
With the anticipated post-COVID multifamily slowdown in effect, any action taken in your communities now will be consequential in their success over the next few months (or more). We believe there are three specific things you could do to help your apartments navigate this volatile market.
#1. Focus on renewals.
With demand down, you could argue that your communities' most important leads are current residents. After all, they're already customers living in your apartments, and market conditions suggest they are less likely to move when their lease ends.
You would give yourself a better chance to withstand further disruptions in demand if you won more renewals, helping you sustain occupancy levels above target.
Your renewal rate is affected by two primary components: the price and the lease length you offer to your residents when their initial leases expire. Many factors go into both, so we highly recommend downloading our whitepaper to understand how to develop a successful renewal strategy.
In this instance, the best practice for pricing is offering rent that's less than or equal to what current residents had been paying on their previous lease in renewals.
As for lease lengths, be strategic about the terms you offer as you want to incentivize renewal leases that will expire during the times of the year when you know demand will be higher, such as in the spring or summer.
#2. Determine if your marketing strategy is sustainable.
Doing a deep dive into your communities' marketing performance is crucial as this period of diminished demand can expose any weaknesses.
When was the last time you updated your apartment websites? Is your visual content appealing? What is the lead-to-lease conversion rate of each marketing source?
Asking questions like these will help you determine if your marketing strategy gives your communities an advantage as competition increases. Since every community is dealing with less leasing activity now, and fewer prospective residents are in the marketplace, any marketing strategy that isn't competitive isn't sustainable.
You need a website that converts. You need visual content that captures people's attention. You need to ensure your marketing sources are adequate. RentVision's marketing system provides all three solutions for your apartment communities.
If there are any weak links in your marketing system, your communities will fall into the gray while similar properties gain better opportunities to earn new leases despite market conditions.
#3. Ensure that your leasing staff is operating at a high level.
Nearly every community across the United States has enjoyed two-plus years of strong occupancy and record-setting rent prices driven by excessive demand.
Arguably, this prolonged period of success established complacency in some communities' leasing staff. But how will your leasing agents fare now that it's more challenging to lease units?
It would be best if you took this dramatic shift in demand as an opportunity to review leasing agent performance. Are they answering the phone and handling conversations properly? Are they doing the proper following-up with each lead? How do they interact with prospective residents during tours? Check out our blog post for more tips on how to evaluate your leasing agents.
The objective is to ensure prospective residents have a seamless leasing experience with your team.
Everyone knows that multifamily market conditions shift frequently. But the recent news on the record-breaking drop in demand is more troublesome than other historic changes because of apartments' unprecedented success prior to this downturn.
Your apartment community’s success will hinge on how well prepared you are to handle less leasing activity. Your marketing strategies and leasing agents need to work well, and you must also be able to avoid adding excessive vacancies by winning more renewals.
Unlike the past few years, prospective residents now control the apartment selection process. Rather than choosing an apartment simply because it was the only one available and in their price range, now they can choose between many communities. Are you set up to be their final selection?