Put yourself in the heads of residents to figure out what makes them want to renew their leases.
Retaining residents is a top priority for apartment operators, no matter the time of year or state of the economy. But with falling rent rates, rising concessions and even the extended homebuyers’ tax credit tempting residents to pack their bags for a better deal at the end of their leases, savvy apartment management firms are honing their retention strategies.
Apartment executives provide their take on what apartment communities can do to convince residents to renew their leases.
Residents want the best value
With rent rates falling—Q4’s national effective rents dropped 3 percent year-over-year and 0.7 percent from Q3, according to Reis—current residents may be put off if they find out they’re getting a worse deal than new applicants. Apartment pricing is readily available online, so shrewd residents can discover the current market rate for an apartment in most any neighborhood. About 20 percent to 30 percent of residents mention those less expensive rents when discussing renewal, says Harlan Krichman, President of Philadelphia-based property management company Resource Residential, which operates 12,000 apartments.
Krichman says that when residents mention the lower prices, community staff tells them that the apartments available at a lower rent don’t offer as good of a view, or have fewer amenities. Nevertheless, he says, “there are people we’ve let go because we wouldn’t drop the rent to the new lease rate.”
Simply turning the focus of the renewal discussion away from price can help provide the resident with reasons to stay, says Mark Fogelman, CPM, President and COO of Fogelman Management Group, which operates 18,500 apartments in the Southeast, Southwest and Midwest. “We’re using tenderness and communication,” he says. “We talk about our resident service, our workout facilities. We focus on other areas to get the focus away from price.”
Another way to address this issue is to minimize any rent hike a resident might see upon renewal. Apartment managers who spread concessions over the term of the lease may have trouble renewing that resident with an increase once the incentives are over, notes Julie Smith, President of Greenbelt, Md.-based Bozzuto Management, which manages 30,000 apartments in the Mid-Atlantic and Northeast.
“Anything you can do to front-load the concessions is better,” Smith says. “When you get the customer back to market rate, you’re renewing at little to no increase.”
Raising new rental rates in markets where occupancy has stayed strong also can help at renewal time, even if it makes converting new leases more challenge, Smith adds. Residents who renew at their original, lower rate will feel like they’re getting a better deal.
Residents want a special deal
Every retail store is offering a sale these days, so renters may feel foolish if they’re not getting a special deal, no matter what the rent rate is.
While they shouldn’t be a community manager’s first option, renewal incentives or concessions can still be an effective closing tool, especially when combined with a sense of urgency for the renter, says Richard Roos, Vice President of Finance and Operations for Houston, Texas-based owner and operator Venterra Realty.
“We try to get everyone to sign their renewal early,” Roos says. “We do it well in advance so they don’t have a chance to start thinking about shopping the market.” Roos, whose company owns 11,000 apartments in the Southeast and Southwest, says his staff has had success with 10-hour sales, in which a community extends the hours its offices are open, and if a resident signs a renewal, they get an additional incentive. Communities also can try offering incentives for the first few renewals in a given time period.
Venterra has had success, for example, with renewal parties or dinners, during which the company provides free food and a positive environment to resell residents on the community and solicit a new commitment. Residents that sign a renewal at the event are told that they are getting a better deal than they would otherwise, and may receive a small additional one-time concession of $50 to $200.
Having residents renew far in advance of their renewal dates is particularly important today because price is an overriding consideration for many residents contemplating renewal, says Thomas Shelton, CAPS, President, Western National Property Management.
“Prior to the economic downturn, renters typically investigated two or three communities before signing a lease,” Shelton says. “Today, most renters look at five or six properties before signing a new lease. It is imperative to contact residents farther in advance of their renewal dates to avoid being out-priced by competing properties before having the opportunity to negotiate renewal rates.”
Residents want flexibility
Apartment providers that can accommodate renters with changing circumstances or needs may be able to retain residents with a few creative tactics. Some residents may be more concerned about flexibility, while others are more concerned about price, so Bozzuto communities offer a three-month extension at one rate, a 12-month extension at a second rate, and a 15-month extension at a third rate, with prices based upon seasonal demand at the time the lease would expire. The community ensures move-outs come at times when demand is higher, but “you look like the good guy because you’re offering flexibility,” Smith says.
Communities also can help retain residents that might otherwise have left because of a job loss by allowing them to change units or add roommates, sometimes even in the middle of a lease. At one community in Jersey City, N.J., that was hard-hit with layoffs, for instance, Bozzuto started a roommate campaign called Bozzuto SmartShare to help residents pair up—and continue living at the community.
Residents want you to work for them
Residents who feel as if a community’s staff is at their service have every reason to renew—especially if that extra effort in service doesn’t occur only near renewal time.
“Our resident retention program starts the first day of the lease,” says Reuven Oded, a Principal Partner of Blue Rock Partners, a Tampa, Fla.-based owner and operator of 4,000 apartments in 12 communities. “We’re big believers that you can’t just switch and be nice and compassionate and understanding at lease renewal time.”
Blue Rock is among the apartment providers giving residents the service they crave by instilling in their employees a concierge-like mentality.
A Blue Rock employee follows up with a resident after move-in with a gift basket and a phone call to find out if the unit’s conditions and the staff’s service met their standards. Blue Rock staff also is trained to relentlessly provide excellent resident service throughout the lease. That training starts at Blue Rock University, where every community team member, from leasing agent to porter, is trained to have a concierge attitude, according to Randy Ferreira, CPM, a Principal Partner.
“When a resident comes in and any one of our staff sees them, they stand up, approach them, call them by name and find out if they have any issues that are bothering them or troubling them,” Oded says. The staff member may advise the manager, regional manager or one of the partners to resolve the issue. “By the end of the day, that resident is happy, whatever it takes,” he says.
Resource Residential also has launched a pilot program in which a leasing agent at its communities is turned into a resident concierge, tasked solely with making residents happy. The employee follows a renewal process that begins before move-in and continues throughout the term of the lease, contacting the resident at set intervals so that the community’s service is fresh in the resident’s mind throughout the lease and at renewal time.
Residents want to feel like you care
Ever heard the old axiom that the opposite of love is indifference? If residents feel that their community’s staff is indifferent about their happiness, they’re likely to feel the same way about staying at their community. Training employees to go out of their way to show residents that they care can be the key to helping those residents find reasons to stay, instead of reasons to leave, says Venterra’s Roos, whose company launched a campaign called “Customer Service Excellence” last year.
One way communities can show they care is effectively handling resident problems or disputes. Even if a dispute is gray, Roos says he directs his employees to err on the side of the resident.
Before the Customer Service Excellence theme was launched, if the HVAC was out for an extended time, a staff member may have tried to offer the smallest possible concession that would end the conversation with the resident. “Now,” Roos says, “if residents have no air conditioning for two days, we’ll put them up in a hotel, no questions asked.
“We’re trying to avoid only dealing with situations when people are really angry. Even if they’re not angry, they may just decide to leave if a staff member didn’t handle a problem well.” The company is encouraging employees to be proactive, empowering them to make most decisions more quickly on their own, rather than bringing them to the executive level. Roos says the number of complaints that he’s personally handled has dropped significantly.
Venterra also incentivized employees with a “WOW” contest. Taking an idea from retailer Zappos, the company published a book for internal use with a collection of stories from employees who went out of their way to serve residents. Employees posted stories about themselves or their colleagues on a Web site; the best were published and the team members won small cash prizes.
Examples include a community manager who took it upon himself to schedule a weekend’s worth of activities for a new resident celebrating her birthday with out-of-town guests (the resident actually followed the itinerary and had a blast), or an employee who bought a month’s worth of diapers for a family with a newborn.
“We encourage staff to create memorable experiences for customers,” Roos says. “Employees who create extraordinary experiences get their names in print, and it becomes a cool training tool for us.”
Residents want to feel special
While residents will always appreciate exceptional customer service year-round, sometimes a thoughtful or unexpected gesture at renewal time can go a long way. Smith suggests offering a free weekend for a guest in a community’s guest suite, a complimentary function in the clubhouse or free housekeeping services to show residents they are valued.
A well-timed capital improvement also can keep residents in a positive mood about their community at renewal time. “A lot of people just want their carpet replaced,” Smith says. Such improvements might need to happen anyway if the resident leaves, so it may be worth the expense to keep the current resident in place, if the owner approves it.
How a resident’s security deposit is handled during renewal can make a positive impression. “If you’ve had a resident for a year and they pay their rent on time, you can say, ‘I’m just going to go ahead and give that money back to you,’ ” Smith says. “It’s an easy thing and it doesn’t cost you a nickel.”
A personal touch with the renewal offer is a low-cost way to connect with residents, Roos adds. If the resident has a pet, present the renewal offer with a treat for the dog. If they have a favorite sports team, wrap it in a team T-shirt. If they have a green thumb, provide a plant for the balcony. Residents notice and appreciate special treatment.
Residents want a sense of community
Don’t underestimate the power of community-building events to bring residents closer together, keep them happier and make them feel more welcome, Krichman recommends. He says his communities have had tremendous success offering “dive-in” movie nights with inflatable 9-foot-by-12-foot TV screens floating in the pool. Such events really hit home with residents, especially at a time when they’re spending less on luxuries or special nights for themselves.
Finding the right kind of resident events depends greatly on the specific property, Roos says, driven by demographic factors such as age, ethnicity, region and whether the community is urban or suburban. Roos says his underlying philosophy with events is that they should create an emotional connection between the community, its residents, and their neighbors—and that more events are better.
“The relationships you build are the things that hold you to a community,” Roos says, adding that a community’s feel is a factor that can prevail over the price of rent. “Would you take $20 less per month and roll the dice on worse neighbors? Some might, but we’re betting that many people will stay.”
Ensure that the facilities offered at a community cater to its demographics as well, suggests Western National’s Shelton. Well-chosen amenities can keep residents happy and unlikely to move to another community in the area. “For example,” Shelton says, “apartment communities with a high concentration of families with young children may offer afterschool programs or day care services, which residents may be unlikely to forfeit for the sake of slightly lower rent.”
Residents want to feel secure
No matter how effective an apartment provider’s customer service and retention efforts have been, some residents simply fear commitment and worry they might lose their job and be stuck in an apartment they can’t afford. Executives agree that a lease assurance program is a low-risk, effective tool that puts those concerns to rest.
Fogelman Management calls its program an employment interruption program. Once a resident has paid three consecutive months of rent, the resident can exit the apartment without penalty if they lose their job, Fogelman says.
“We’ve had 24 people take advantage,” he says, “which was nothing. We’ve probably retained hundreds of residents who were nervous. It’s great public relations for our company and our industry.”
These programs are of little risk to the management firm, Krichman notes. “If people lose their jobs, they move out anyway,” he says, “and they might stay even if they have the option to leave.”
Jeffrey Lee is NAA’s Staff Writer. He can be reached at jeffreylee@naahq.org or 703/797-0647.