Walking the Line Between Occupancy and Pricing in Multifamily
Finding and maintaining the perfect balance of occupancy and pricing is crucial for multifamily communities to achieve revenue success. In Multifamily Real Estate (MFRE,) it is considered a best practice to train employees to understand that the value of an asset comes in the form of it being a healthy, stabilized asset. That, by definition, is an asset that has not just achieved high occupancy, but that has achieved a balance of maximizing rent growth while maintaining/achieving stabilized occupancy.
Anyone can achieve “high occupancy.” In fact, it would be really easy to get to 100% occupancy if a property simply dropped rents 20% below market rate. That, of course, would not achieve the true goal of a property, which is rental revenue. In order to have a truly performing real estate asset, you must push an asset’s rent growth while also increasing occupancy. It’s a balancing act.
This balancing, today, is hard. Pricing algorithms in revenue management systems will suggest how much a property can push on renewal rents and new rents. But, really, it is the job of a property manager — and all those that support that role — to understand what the market can truly handle in new rent. And this can only come from knowing the market.
THE BIG RUB
When a property is high occupancy, there is sudden tension between work needing to be done to manage residents and their needs, versus all the other things that get done out of the leasing office. It’s difficult to know what leasing will look like in the next quarter and availability will remain unknown until you are sending out renewal offers. This difficulty leads to unawareness of what units will be open and how they should be priced. When occupancy isn’t at risk, multifamily teams often end up not realizing how much they are shifting their attention away from maintaining this balance in the future.
The logic behind the decision seems sound, but this is a big mistake that puts both the occupancy and the pricing elements at risk. The loss in visibility of the market economics affects a property manager’s ability to properly price units. And, being out of market for new renters can make it nearly impossible when you need them.
SMARTER PRICING BASED OFF DEMAND
Engaging with the market during those high occupancy times helps your team better understand market trends. When you keep your leasing activity alive, you gain visibility into:
- Future demand for specific floor plans
- Volume of active future leasing activity
- Budgets of active future leasing prospects
This kind of actionable data empowers you to make smarter decisions on rent growth and price your units based on demand and what renters are willing to pay for specific units. Not only will you know if your units are underpriced, you will also understand if they may be overpriced. As a result, you will better understand your prospective renters’ budgets months before they make the move.
But how do you get this visibility if you’re not actively marketing and looking for renters?
FUTURE LEADS ARE LOOKING NOW
We all know the pandemic had a considerable impact on the MFRE industry. But it also had an impact on renters. To find the property they seek to call their home, they need to begin looking earlier. Data collected by PERQ shows that over 22% of rental prospects are looking to move 6 months out from when they begin searching. So, while your property may be high occupancy, the leads that are coming in during these high occupancy months are still serious about renting at your property, but they aren’t ready to move for months.
It is becoming a best practice for PMC’s to continue with their marketing and leasing activity during these high occupancy months. Therefore, if the current resident in an apartment chooses not to renew, you already have a list of qualified leads who are ready to move in. This leads to quicker turnover of vacant units as well as the added benefit of pricing your units based on demand.
While each property is different and property management companies can have portfolios of varying sizes, 20 – 30% of your marketing budget needs to go to lead nurture and automation. According to DemandGen’s reporting, companies that have lead nurture campaigns show an average 20% increase in sales opportunities than non-nurtured leads. Cutting out lead nurture while you have high occupancy will make it harder for onsite teams to be successful with leads further down the pipeline.
But how does the leasing office manage all this activity as well as the added work of managing high-occupancy properties?
HOW PERQ CAN HELP
PERQ was built to solve this problem. With PERQ, you can maximize the effectiveness of all your marketing and leasing activity, and minimize the need for the team to do more work. PERQ uses AI to manage your top of funnel activity; managing communication, nurture and digital experiences for rental prospects before they are ready to speak with a leasing agent.
PERQ works with leads and pulls them down the pipeline, so when a vacant unit does open up, your team has a list of prospects who are qualified and ready to move. It nurtures all of those quality leads that have stated they are over 90 days out from moving, without adding more work on your leasing teams. PERQ’s proprietary solution of assistants, interactive online experiences, and cross-channel lead nurture keeps those prospects engaged, while also capturing important insights that help to qualify prospects and personalize their experience.
Without a technology like PERQ to pick up the work, these important leads are at risk of falling through the cracks. And, knowing how many leads are in your pipeline lets you more precisely budget marketing spend during your busiest leasing months.
CONCLUSION
High occupancy now doesn’t guarantee high occupancy in the future. Just because you’ve found a good balance now doesn’t mean there isn’t work to do to maintain that balance.
Lead nurture tools can help fill the talent gap, giving your prospective renters a consistent, engaging experience without the need for a leasing team member. And, it can help you understand the balance between occupancy and pricing by giving you more insight into demand, renter budgets, and improve your operational efficiency year round.
That’s a concept that’s good for everyone.
PERQ integrates with your existing website and lead sources to engage, nurture and convert every lead, improving the multifamily leasing journey for everyone. Learn how it works or request a demo.