Demand may dwarf supply; the economy may show signs of life; holders
of cash may be falling all over themselves to invest it in new and
improved multifamily communities; homeownership may even lose its
dominance as the American Dream incarnate. Still, as any smart property
manager can tell you, a good year is made, not born.
Like early
2011, this year’s onset has shaped up like gangbusters—fundamentals,
sentiment, and economic drivers are kicking in nicely. However, also
like last year, property managers are going to have to navigate some
tricky, possibly treacherous, waters to bring in the payload owners and
stakeholders expect.
Caution? Last year, the pros called for
average rent growth of more than 4 percent nationwide. Properties here
and there achieved that kind of growth. Most didn’t. Overall
effective rents grew by an average of just 2.3 percent last year.
.
What’s
more, the gremlins that bedeviled 2011 haven’t gone anywhere. Economists
still worry about a debt crisis in Europe and conflict in the Middle
East. Politicians fight in Washington—and it’s an election year. What if
the “recovery” this year turns out to be as mediocre as last year?
Some
property managers succeeded in last year’s up-and-down environment,
plodding along in the toughest real estate markets and winning strong
rent growth in the nation’s growing number of solid markets. Many
interviewed for this story saw average rents grow by 4 percent or more
throughout their portfolios. Here are five critical tactics that helped
the winners overcome market obstacles, and what other managers and
owners should do to optimize their property out-performance in 2012.
Power Up Your Rents
The
decision to raise rents can be fraught with worry—especially in tough
economic times. Residents can always look for other options, resulting
in more empty apartments. But computerized revenue management systems Lease Rent Options are helping to dispel
the anxiety. The programs, designed to help property managers set rents,
employ industry-standard variables such as vacancy rates to help make
the rent decision.
This year, in most markets, low vacancy numbers
will lead landlords and their revenue management systems to push rents,
despite the cloudy economy, with a promising fourth quarter 2011
revealing that the average apartment vacancy rate nationwide had fallen
to 5.2 percent. That’s the lowest it’s been since
2001.
And it’s not just a majority of markets that improved. Every
apartment market tracked had fewer vacant apartments and higher
average rents over the year ending in the fourth quarter of 2011.
With
trends like this, managers can trade slightly higher
vacancies for higher rents—and still improve revenue overall.
Go Young
Experts
say roughly a million young people graduate from college every year,
and these ex-students are doing surprisingly well despite the tough
times: The unemployment rate for college-educated people in their mid-
to late 20s is now less than 5 percent. It’s become a cliché that
walkable urban neighborhoods are more likely than nonurban properties to
appeal to these young renters, who are increasingly dominating the
rental market. After all, it’s easier to rent an apartment that’s within
walking distance of amenities—say, a good cup of coffee.
To attract the Facebook
generation, property managers are also focused on social media. TMG
maintains a Facebook page in part to create opportunities for residents
to make connections. And all the property managers we spoke to monitor
any mentions of their communities on websites from Google to Twitter,
acting quickly to fix any service problems the sites bring to their
attention.
Sell the Service
Property
managers succeed, even in the toughest apartment markets, in part by
focusing on service.
We try to
attract the best tenant we can. That means, in addition to following strict
qualifying criteria, maintaining lots of interaction with residents, to
continually gauge their needs while building a reputation as a
customer-oriented management firm.
Up the Ante
Many
landlords are raising rents based on upgrades to their properties—often
beginning with highly visible work on the common areas.
The number of new apartments opening
will rise in 2012, and rise higher in 2013. Certainly, the number can’t
get much lower. Only 37,678 new apartment units came on line nationwide
in 2011, the lowest annual figure for new completions in 31 years. Still, new construction is returning, starting with
the healthiest apartment markets, and managers of existing apartment
communities will have to compete.
Post by Joanne
Vanderhoef
Marketing and Media Specialist
