February 22, 2022 |
Updated March 2, 2022
Numerous outside factors are affecting apartment operations, but leasing remains strong across the board.
Photography courtesy of TCA Architects
The COVID-19 pandemic has accelerated the need for technology and spurred a digital transformation in the rental housing industry. While the need for this transformation might have always lurked beneath the surface, it was the pandemic that accelerated its rise, impacting all sectors of the industry from corporate offices to the onsite teams.
The horrible effects of the pandemic have given way to a technological evolution in the industry that might have never been seen, or at least not for years into the future, and yielded unexpected benefits for multifamily professionals as well as prospective and current residents.
The economic pressures witnessed in supply chain shortages, workforce shortages and inflation have also affected the rental housing industry and operations at the community level. Onsite teams and regional staff have adjusted throughout the past two years to improve business operations and better the lives of their residents. One of the most impacted areas of operations in the industry has been leasing, renewals included.
The traditional leasing interaction has changed dramatically during the pandemic, and it was well on its way to this change prior to the catalyst of the coronavirus. Current and prospective residents have voiced their feedback, good and bad, to owners and management companies about their leasing experiences and their lives in apartment homes.
“Prospects are more concerned than ever with the exact view and placement of their apartment,” says MJ Trujillo, Founder and Managing Partner of PRAXM Property Management. “As more and more people are working from home, the direction the apartment faces and sun exposure have been factors in their decision-making process. Those concerns have been heard, which is why we are offering advanced sitemap engagement and video touring.”
These requests from residents and prospective residents are changing the traditional move-in and renewal experiences, and if the pandemic has taught us anything, it is that nothing is permanent.
“We are constantly evolving our approach to prospects based on their behavior, from how they interact with our websites to how they interact with our teams,” says Tim Hermeling, EVP of Marketing with Cortland. “We consistently solicit feedback and lean into it. In the traditional model, a prospective resident finds basic information on a website then calls to schedule a tour. Over the past 18 months, we have begun to offer a self-scheduling tool and offer richer video content on our website including virtual tours of floor plans. These enhancements allow future residents to be better educated about their options prior to coming into the community.”
Not only have changes affected leasing, but residents are searching for technological advancements in the form of electronic rent payments, service requests, events and more.
HHHunt Apartment Living anticipated the higher demand for self-guided tours, resulting in them partnering with a smart home and home security company in early 2020. “The demand for self-guidtours has certainly been accelerated during the pandemic,” says Lance Goss, Vice President of HHHunt Apartment Living. The use of the smart lock system has allowed HHHunt to “grant a temporary code to specific apartment doors and allow prospects to do a self-guided tour when needed,” says Goss.
Freeman Webb Company is testing and planning to rollout additional artificial intelligence (AI) bots to respond to prospective residents via text, email and social media. During the trial phase, the bot replied to 42% of all inbound emails, saving countless hours for onsite teams.
“The digital transformation that is ongoing has really catapulted our industry to utilize technology in all facets of the business. I believe we will continue to leverage software and digital platforms to enhance the customer experience both internally and externally,” says Christy Rodriguez, Director of Multifamily with Judwin Properties. “Renters expect a contactless way of communicating and doing business with the management of the community they live in. I fully anticipate that we will continue to see huge strides in the technology arena that will enhance business services, employee relations and customer service.”
The pandemic has forced Judwin to rethink its traditional business model. It has focused on a contactless customer experience and finding opportunities to improve this process surrounding leasing practices among other segments.
“Additionally, we internally produced 360-degree virtual tours for every floorplan in our portfolio and launched it on our website and then trained our team members on how to guide a renter through one of those tours via phone,” says Rodriguez. “That enhanced customer touchpoint really catapulted our leasing experience, and as a result, our closing ratios soared. By viewing the technology as a supplemental tool to our business practices, we not only have given more time back to our onsite team members to focus on the customer service experience, but we have reduced operational expenses associated with the more traditional ‘paper intensive’ approach.”
One of the biggest benefactors of the side effects of the pandemic and technology has been community and apartment home tours. The use of nontraditional touring options like self-guided and virtual tours has exponentially increased during the pandemic, despite their availability prior to March 2020.
Multiple touring options are available for prospective residents at communities. Trujillo says they still have people that prefer the traditional guided tour by onsite staff, but they also offer virtual and self-guided tours, which she believes are the future of the industry.
“We anticipate that self-guided tours will continue to be a popular option this year and in the future,” says Goss.
“Renters expect options when it comes to shopping for an apartment and it’s our responsibility to meet them where they are,” says Noah Echols, VP of Marketing and Customer Experience with CARROLL. “However, we have seen that the vast majority of renters still want to come to the community to see it for themselves, and they still want some level of assistance to get their questions answered. We see our leasing team as consultants or guides in the shopping experience and they are trained to cater to the experience our customers’ need.”
Bill Freeman, Chairman and Co-Founder of Freeman Webb, believes self-guided tours are here to stay, but there are limitations. “This is the way of the future, but the logistics are challenging for garden-style communities right now. The current technology works great for high-rises with controlled access, butit is still a challenge for other types of communities.”
Hermeling leaves the touring medium up to the prospective residents. “Our goal is to give prospects the option on how they want to interact with us. They can choose the traditional model, which is to schedule a tour and come in, it could be directly through our website followed by an online application, or it could be a live video tour, or even a self-guided tour. There is a lot of promise with the self-guided option, we just have to make sure that it is well curated, and the prospect can see enough of the community on their own to make an informed decision.”
Convenience and ease often win out when it comes to residents’ leasing needs. Cost is also a vital factor when deciding where to live. “We are seeing record renewal increases, especially in our older, renovated product,” says Freeman. “The new construction is so expensive that residents will take a $200 to $300 increase because the new rent is still lower than the rent the comps are offering down the street.”
Echols says record-high retention rates will continue but will slow. Renewal rent increases will also be less than market rate apartments, which, in turn, “will incentivize renewals.”
While staying focused on customer and resident experience, Trujillo believes retention rates will remain strong going forward. “We truly believe that having a dedicated, engaged staff is an unspoken amenity that pays off with a great retention rate.”
Occupancy typically declines in the winter months; however, RealPage reports 2021 was the first time ever that occupancy grew in the fourth quarter. Furthermore, RealPage states occupancy increased for the first time in January—at 97.6% in January 2022.
“Occupancy rates have never been this high, and for a very practical reason—normal turnover,” according to the RealPage
blog from Jay Parsons, VP, Head of Economics & Industry Principals. “People move out, others move in. There’s usually some time in between leases where the unit is marketed as available. That’s not really happening today. When renters give notice to move out of a unit, another prospective renter swoops in to lease the unit before the current resident even moves out.”
Finding new residents is not an issue right now for Freeman, who is also seeing record occupancies and traffic. PRAXM has built a waitlist for new residents in the event a current resident decides to move.
While occupancy is at record highs, Goss says the impact of it has not had a negative effect on bringing in new residents. “The reality is that demand for all types of housing is very high in our markets. We’ve been able to keep our occupancy so high because if someone moves for a different job or buys a home, we can quickly lease that apartment home to someone else who is searching for an apartment,” Goss says.
Retention for CARROLL hasn’t been an issue either, but Echols believes some markets will ease while others continue to grow. “We will see more mobility in 2022 as rents stabilize and the pandemic begins to subside. However, because we are located in business-friendly markets, we have seen renters from some of the larger coastal markets moving into the Sun Belt, which has allowed us to continue renting to new residents.”
Labor Shortage: Despite the narrative of a labor shortage across the country and in many industries, it is having very little impact on companies’ abilities to fill apartment homes. The labor market has not impacted occupancy at Freeman Webb, but it is affecting the business. “We are struggling to find qualified teams, and this is causing us to offer higher salaries, more benefits, better bonuses and more flexible work schedules.”
PRAXM reviewed compensation and benefits packages for new associates, and there is a correlation between quality customer service and retention. “We believe our biggest asset is having a caring onsite team which translates into keeping and securing new residents,” says Trujillo.
Goss says the labor market has impacted operations, and that it is taking longer to fill the open positions—even with competitive pay and benefits.
Rent Growth/Inflation: Record rent growth was seen across the U.S. in 2021. Despite a slight month-to-month jump in January 2022, year-over-year growth was up 15% on effective asking rents on new leases, according to RealPage. While rent growth, inflation and leasing are intertwined, it doesn’t seem to be affecting companies’ ability to keep residents in their homes or find new ones.
Leasing has not been fully impacted by rent growth and inflation at Freeman Webb. “Even with record rent growth, our stabilized communities are maintaining high 90s occupancy, and turnover remains lower than historical norms,” says Freeman.
PRAXM operates in markets with strong economies, even with high inflation. “We continue to lease strong, maintain high 90s occupancy and favorable retention rates with unprecedented lease trade out rates,” says Trujillo.
While some residents have opted to downsize or find alternative housing, Hermeling says demand remains high. “Given this inflationary environment and the uncertainty it creates, we also see people who want flexibility in their housing, and renting appeals to that segment of the population.”
Rent growth will eventually level off to allow for residents and prospective residents to continue to be able to afford rents, notes Echols.
“Rent growth and inflation go hand in hand,” Goss says. “As inflation rises on virtually everything, rental rates have to increase as well. Both of those items have very little impact on our ability to lease thus far in 2022. I don’t expect that to change this year.”
Internalizing the Leasing Process
Cortland has taken the approach that leasing is an individualistic, unique process for each prospective resident. “We are continuing the rollout of our internal prospect contact center,” says Tim Hermeling, EVP of Marketing with Cortland. “The contact center began taking prospective resident calls 12 months ago with the idea that if we take what was an outsourced operation to an internalized one, we can better find the perfect home according to an individual’s needs.” The contact center employs Cortland staff who can customize the apartment home search for a prospective resident.
“Anticipating prospective residents’ needs and being there during the decision-making process has become paramount. The contact center is one way to do that. We can nurture the lead all the way through the process.” Cortland is also using their CRM system to more effectively communicate with prospective residents “about their needs in a very personal and relevant way.”
Michael Miller is Managing Editor at NAA.