February 27, 2023 |
Updated February 28, 2023
Inflation and rent growth have cooled slightly, but the demand for renting quality apartments has not. Here are some leasing trends multifamily executives have seen—some new, some already well-established.
The first quarter of 2023 is nearly closed, and the rental housing industry is ready for another spring leasing season. From year to year, there are some changes and some items that remain the same in the leasing realm.
It’s expected that new trends emerge every year—whether they move from fad to trend to industry mainstay remains to be seen with some. These trends include new leasing techniques as well as new in-home options—think work-from-home (WFH) spaces—and requests from residents.
Technology has been implemented at a heated pace since the pandemic began three years ago. Some of this tech was glue holding processes together during the most difficult times. Other technology expanded and enhanced experiences that prospective residents were looking for in a community.
Here’s some of what the rental housing industry can expect this spring leasing season.
Communication and interactions with prospective and current residents can be a huge difference-maker. “One of the emerging trends resulting from the pandemic is the importance of connecting with residents as quickly and efficiently as possible,” says Phillip Boatwright, Executive Vice President of Property Management with The NRP Group. “Creating two-way platforms for management to send information and updates to residents, ensuring that residents have that same opportunity to easily access the information they need, is just as essential now as it was during the pandemic.”
These interactions must be seamless. Prospective residents no longer want to wait for what they desire. They have the ability, now more than ever, to be able to research communities and companies beforehand, and are prepared to make a living decision. “What we continue hearing from our customers is that their time is valuable. They are more informed than ever before, and we’ve seen the expansion of the use of chatbots or some form of virtual leasing assistance when they’re researching apartment communities,” says Samantha McQuown, Senior Vice President of Operations with Morgan Properties. These websites and chatbots have become so interactive they can send prospective residents information about the community as well as schedule tours. “They are looking for a frictionless sales experience,” says McQuown.
Some of the trends witnessed in the industry are unrelated to residents. Those focus on rental housing staff. “New trends include moving toward a Monday through Friday workweek, ultimately helping us attract candidates to our industry. While self-guided tours and AI experience technologies can now assist prospects on the weekends,” says Sherry Freitas, Executive Managing Director of Property Management with RangeWater.
Debi Wherry, Senior Vice President of Operations with Fogelman Properties, says self-guided tours have been popular since the start of the pandemic because prospective residents can visit the community on their own time and at their own pace. “[Self-guided tours] also help with the challenge of short staffing because the leasing process can continue even if the office is closed,” she says.
Touring continues to be a hot topic, but it’s just the tip of the iceberg when it comes to what the rental housing industry can do when using technology to its advantage.
“Everything from the leasing process to resident experiences has shifted toward a digital world. AI chatbots, fraud alerts and prospect identification screenings are all integrated systems that have recently supported leasing processes,” says Freitas. “Similarly, smart home technologies including smart locks, leak detection devices and smart thermostats have been integrated into more communities.” Her personal favorite is the online scheduling assistant.
Technology & Techniques
“Automation is the key. The tools that caught on during the pandemic, including self-guided, video and 360-degree tours, are now a permanent part of the leasing process,” says Teresa DeVos, Executive Vice President with RKW Residential. “The use of AI to augment leasing efforts and offer 24/7 availability is another important component.”
DeVos explains further what automation can achieve for the industry: “Automation is giving us data that helps us make decisions that can be implemented quickly. Our internal CRM technology stack also gives us the ability to even centralize leasing activities and have someone work remotely to support multiple communities. It is a more resident-centric platform, as opposed to property-centric.”
Another trend that has continued during the pandemic is wanting to have that extra space to WFH. “Residents want more space and work from home amenities like work pods. Mobility has become easier, and more prospects are willing to relocate,” says Elie Rieder, Founder & CEO of Castle Lanterra. “Future trends we foresee include short-term leasing and more roommate arrangements, so we expect two- and three-bedrooms to outperform.”
Stephanie Johnston, Executive Vice President of Operations with RPM Living, says the combination of technology and touring resulted in residents signing leases sight unseen since they were able to potentially view their exact apartment home via a virtual tour on their mobile device.
Rieder does not expect renting sight unseen to be a lasting trend since it has slowed, but the “virtual tour tools” aren’t going anywhere.
FirstService Residential is using fintech to help property managers and residents with security deposits. They no longer need to worry about physical checks and tracking down former residents to return security deposits.
Artificial intelligence (AI) has been a positive implementation for Boatwright, who says: “AI in lead management can include many tactics including chatbots, mobile texting, outbound calls and email. Leveraging these AI tools can lead to higher tour conversions, creating a better experience for the prospect-turned-resident, ultimately letting the onsite team provide exceptional resident service. The speed and accessibility of information during the leasing experience are critical, and AI aids in creating the best experience possible.”
RPM is using lead management software to help onsite teams. Having this software allows the leasing team to focus more on current residents’ needs among other things. The company is also using its business intelligence platform to highlight areas of improvements to make real-time adjustments.
“We have found there to be much improvement in the integration of various proptech software and data providers, which has streamlined the use and made them much more user-friendly and efficient,” says Jeff Klotz, CEO of The Klotz Group of Companies. “Our operations and properties have benefited from lead
generation/management tools, market data and pricing tools, resident interaction/communication apps, and other various proptech applications that have improved our efforts.”
RKW wasted no time taking advantage of technology. “In 2022, our virtual system had a 73% handle rate [percent of prospects who engaged with the AI at least once] and sent 24,887 messages. Based on a ratio of three minutes per message, that equates to approximately 1,245 hours of leasing agent time saved,” says DeVos. That’s roughly three weeks of saved time.
Recently, Fogelman Properties has made several changes to remain focused on the resident experience. “Over the past couple of years, we’ve implemented an initiative to move all leasing activity to electronic, i.e., lease contracts being signed digitally, electronic payments, WIPs, service requests and communication through resident portals. This has led to efficiencies that allow our office staff members to focus on what we feel is important: The resident experience,” says Wherry.
RPM has also seen positive results from its electronic leasing process, “eliminating the need for any paper files (applications, lease agreements, etc.) and allowing prospects the flexibility of signing all needed documentation remotely,” says Johnston.
What Residents Desire
The desire to WFH continues for many residents, so they are in need of a place to have that ad hoc office space. “More and more prospective residents are looking for office/flex space within their home, as well as clubrooms and co-working space in common areas, that can be utilized for their WFH efforts,” says Johnston. “Prospective residents also continue to push for more technology-driven options both in their homes and in common areas. Smart locks and thermostats and EV charging stations sit among the top-most in-demand amenities.”
Having the end goal in sight is important; it gives communities the ability to meet different checkpoints and aspirations along the way to give residents a special living experience. “Ultimately, creating community engagement and experiences driven by the needs and interests of residents is fundamental in new communities,” says Boatwright. To create this community atmosphere, Boatwright and The NRP Group find ways to enhance resident quality of life with solutions that include kitchen upgrades, larger living areas, etc. “We also know that telecommuting spaces, both in-unit and within the community, are important for residents who continue to seek flexible work options.
“Additionally, prospective residents seek seamless connectivity from phones to living spaces. The convenience of opening doors, adjusting the temperature, requesting maintenance orders, receiving package notifications and more, all from a mobile phone, are vital amenities for new communities,” says Boatwright.
It’s not all about work, however. “Amenities that cater to pets are also a big draw, such as concierge services, dog parks and wash stations. We are currently working with a developer on pet centers on the property grounds that will allow for daycare and grooming,” says Wherry.
RangeWater has taken community connection to another level with its artist-in-residence program, which adds that extra experience for residents in communal spaces with the potential of a visual or augmented reality, culinary or architectural immersion. The program was designed “to create impactful experiences that would connect with current residents and attract potential residents, creating a stronger community,” says Freitas.
Residents are also searching to get the most out of their rent payment. “Residents are always looking for more value for their rent check, and that value comes from a seamless experience powered by the technology they use to interact with brands and each other,” says DeVos.
Another approach is with “live-work-play.” This is a developer term used to describe properties where residents,
theoretically and realistically, never have to leave. This describes a community where residents can live and make the transition to WFH in their own apartment or in a shared, co-working space before heading up to the rooftop deck and pool or workout center. “The idea is that a property is most attractive when there’s no real need for a [resident] to leave the building to support their lifestyle,” says Calynne Oyolokor, Senior Vice President, Multifamily Rental Division at FirstService Residential.
For The Klotz Group of Companies, “I think prospects are looking for more of a sense of community and uniqueness.... With so many new communities recently opening, I think prospects are looking for true differentiating factors outside of price. The ability to deliver a property that offers something that no one else has in the market is still top of mind for developers.”
In addition to all the smart technologies and WFH spaces, residents want the ability to escape outdoors. “Residents appreciate access to outdoor space and communities need to respond to trends like pickleball. By converting under-
utilized tennis or basketball courts into multi-sport courts, you can offer added value to a wider age range and appeal to those seeking active lifestyles,” says McQuown.
The rental housing industry has not been immune to record inflation, but it’s finding ways to limit the damage.
High inflation continues into 2023, albeit at a slower pace than in previous months. Inflation hit multi-decade highs during the summer months, reaching rates not seen since the early 1980s. But it has since cooled slightly with a 0.1% decline of the Consumer Price Index in December 2022, placing inflation at 6.5% year-over-year.
The rental housing industry is being asked to do more with less across the board—in leasing offices, maintenance and other onsite staff. “As inflation continues to rise, operators will be expected to deliver solid results with fewer resources. Multifamily owners across the country are focused on trimming back expenses in 2023, but expect income to continue to grow, or at the very least to remain stable,” says Stephanie Johnston, Executive Vice President of Operations with RPM Living. “I expect that onsite management teams will need to get creative in driving traffic and solidifying leases with a smaller marketing spend and fewer concession at-hand.”
Visible inflation, such as higher grocery and gas costs, is typically the higher prices impacting residents, but there’s more beneath the surface. “It would stand to reason that with inflation increasing, people will become more stretched in their financial situations,” says Debi Wherry, Senior Vice President of Operations with Fogelman Properties. “A resident may have moved in under one financial scenario, then as gas, grocery and utilities increase, we might see higher delinquencies on our properties.”
Construction is its own animal as well. “On the development side, we’re locking in construction contracts earlier, and we’re taking advanced positions of materials, buying items in advance and trying to hold it and not get strung out where you’ve bought land and can’t afford to build on it. We try not to hold land we end up not using,” says C. Torrey Breeden, Executive Vice President of The Breeden Company.
The de facto middle ground between apartment renting and homeownership is not as simple as it looks.
Stephanie Johnston, Executive Vice President of Operations with RPM Living
RPM got into the build-to-rent (BTR) game about three years ago in Dallas-Fort Worth and has been managing this product type for a number of developers ever since. The biggest challenge in marketing this product when it first hit the scene was determining how to differentiate it from single-family housing. Initially, our strategy was to advertise BTR product where single-family rentals are advertised, but we learned quickly that this approach isn’t effective. The typical BTR renter is looking at other luxury garden/mid-rise communities in their search for housing, so advertising in the same manner as this comp set is the best bet for driving prospective residents to the community.
Sherry Freitas, Executive Managing Director of Property Management with RangeWater
We have a large build-to-rent platform of 20,000 homes. We use economies-
of-scale when and where appropriate in the build-to-rent space, but we never sacrifice service and experience. We partner with multifamily advertisers who have adapted their platform to accommodate single-families while layering traditional for-sale platforms has proven effective. This allows us to cast a wider net and capture prospects who may be looking to rent an apartment or buy a home, providing them with the best of both worlds.
Challenges? The smaller staff initially caused concern about how we would maintain our service standards and personal touch; however, technology has allowed us to streamline once-manual tasks and introduce centralization.
Here's what rental housing professionals have to say about keeping residents happy and in their apartment homes.
Jeff Klotz, CEO of The Klotz Group of Companies
Maintenance seems to be the number one issue causing resident dissatisfaction with cost being number two. A well-maintained property, priced well, with modern amenities and proper resident maintenance service seems to drive resident retention the best. You couple solid maintenance with polite and professional leasing staff, then your property will truly be set.
Debi Wherry, Senior Vice President of Operations with Fogelman Properties
I wholeheartedly believe it’s good customer service and a feeling of community that keep residents with you. It also has to be noted that with the work-from-home movement, people get situated and settled into their everyday routine and tend to stay longer.
Sherry Freitas, Executive Managing Director of Property Management with RangeWater
There are several factors that drive resident retention, the top two being excellent customer service and maintenance services.
Elie Rieder, Founder & CEO of Castle Lanterra
While pricing is often the ultimate determining factor, creating a bigger sense of community through resident events, outreach and programing makes a big difference in resident
decision-making. Management responsiveness is also a key differentiator. If residents don’t feel like their needs are being responded to, they are not going to stay longer than they need to.
Samantha McQuown, Senior Vice President of Operations with Morgan Properties
Over the past decade, a home purchase has been the number one reason residents have chosen to move. So, the current housing market has really helped drive our retention rates; as the markets in which we operate have seen some of the largest increases in home values and demand, making purchasing either unaffordable or inaccessible due to a supply shortage in homes. Ongoing retention is driven by the exceptional service our teams provide to our residents.
Phillip Boatwright, Executive Vice President of Property Management with The NRP Group
Creating value through connection in every aspect of the resident experience remains the number one factor in driving resident retention.
Stephanie Johnston, Executive Vice President of Operations with RPM Living
In 2022, customer service reigned supreme in regard to resident retention. Nearly every community [witnessed high rent growth], so price played a smaller role in the decision-making
process, and residents focused on the care and attention they received from their onsite management team. That said, I do expect price to rise back to the top of the list in 2023 as residents are looking to either renew their lease or find new accommodations.
Michael Miller is the Managing Editor with NAA.