In today’s apartment landscape, let it never be said that apartment operators lack access to data.
Whether it’s a community’s own data, revenue management data, marketing data or market surveys of competing communities, or metro area/submarket reports produced by third parties, there has been a serious uptick in the availability of metrics and business intelligence during the past few years. And apartment managers are finding themselves awash in an overwhelming amount of statistics and numbers.
All this information can be useful in understanding how an individual community is performing and if rent pricing and occupancy are being optimized. But at the end of the day, operators say, it’s all about making sure a community has accurate comparative performance data from its competitive set.
“Market knowledge fuels informed decision-making,” says Mary Herrold, Senior Director of Marketing for Redwood Residential. “That’s the kind of data needed to make sound decisions about whether to raise or lower rents, create additional demand or seize an opportunity.”
Even numbers about the overall submarket surrounding a community aren’t particularly helpful when it comes to pricing, adds Blerim Zeqiri, founder and CEO of Radix, a cloud-based business intelligence solution and market survey platform.
Operators often rely on submarket reports compiled by third parties. But these reports aren’t targeted enough for operators—plus, by the time in an operator’s hands, the data contained in them is 30 to 60 days old.
“Let’s suppose a third-party calculates an average submarket rent by gathering information from communities within a certain three-mile radius,” Zeqiri says. “In urban areas, a three-mile radius may contain between 200 and 300 communities. If you’re in that submarket, your prospects aren’t considering those 200 to 300 communities before deciding where to rent. So, does it really help you to know what's happening at them in terms of rent and occupancy?”
In the final analysis, the comp data contained in market surveys is what operators need to focus on. The problem, however, is that many communities don’t gather this data efficiently or accurately.
Bad Process, Bad Data
Apartment communities typically use an unwieldy and ineffective process to compile market surveys and comp data. In this procedure, overworked and underprepared onsite associates conduct time-consuming phone calls to comparable communities to ask about rents, concessions and occupancy rates. Inevitably, this necessitates the need for more time-consuming follow-up calls, because associates usually are not able to speak with the person whom they need to on the first call.
Unfortunately, associates are frequently ill-equipped to ask the kinds of questions that will ensure the data they get back is accurate and reflects a true apples-to-apples comparison to their community and other competitors.
Once the data is finally gathered, associates put the information from their comps into Excel spreadsheets. However, this part of the process is filled with problems as well. That’s because rushed team members may enter the information incorrectly—assuming the data is correct to start with. There’s also the considerable difficulties and confusion that ensue once a market survey in Excel is passed along for review and study, as team members begin saving and emailing each other different versions of the same spreadsheet.
Herrold says she’s had more than enough experience with the chaos and hardship of the traditional market-survey compilation methodology.
“I’ve conducted in-depth training with onsite associates, written step-by step instructions about the questions they should ask and still ended up with data that I couldn’t trust,” she says. “The method of using spreadsheets is unruly. When it comes to building the spreadsheets, it’s too easy for busy site associates to forget to go back and complete information they may have missed inputting during the first pass. And then there’s confusion about the review process by other team members. That can be like a game of telephone.”
Several years ago, when Redwood Residential was launching, the company began using a cloud-based market-survey solution. The technology streamlines the data collection process by allowing communities to automatically exchange true apples-to-apples information with their comps.
The market-survey tool’s centralized online database enables different team members to see the same data and analytics in real-time, eliminating the need for Excel spreadsheets—and doing away with the confusion they cause.
Just as importantly, by limiting the role of onsite teams and standardizing the information submitted by comp communities, the cloud-based solution produces more accurate data and enables Redwood Residential to conduct precise comparisons with comps.
“Having this kind of insight really allows us to make sure we’re staying competitive, and it enables us [to] push the envelope with pricing much faster,” Herrold says. “That’s invaluable to any apartment operator, especially one that is just starting to establish itself in the market.”
In some instances, Redwood communities have been able to raise their rents by as much as $40 without adverse impacts on occupancy because of its access to accurate competitive performance data.
Sares•Regis Group has also shifted its market survey practices to one that delivers more visibility, transparency and accuracy into its comp set. According to Heather Wallace, Senior Vice President at Sares•Regis, the system not only makes the company better at pricing its apartment homes, it helps associates perform their jobs better.
To start with, associates have more time to handle other responsibilities because they aren’t saddled with calling other communities to compile market surveys. Additionally, because they now have access to more accurate comp data, they can be better salespeople, according to Wallace.
Plus, today’s associates want to work for an operator that embraces technology, Wallace notes.
“They want to know they’re at a company that’s forward-thinking, and they want less friction in performing their jobs,” she says. “To complete a market survey with Excel is time consuming, and they need more time.”
A Helping Hand in Acquisitions
Sares•Regis also uses its market-survey provider to study communities the company is considering acquiring. The technology allows the company to gather the historical rent and performance data of the community’s competitors to better assess its market performance. The company is now better positioned to determine return on investment for community renovations with more robust intelligence into a potential new competitive set.
“This shows how accurate market surveys can benefit apartment owners and operators in multiple ways,” Wallace says.
Being an apartment operator can sometimes feel like you’re experiencing information and statistical overload. But when it comes down to it, there’s no data better suited for fine-tuning your pricing than the performance data from your comps.