The Institutional Property Advisors (IPA) is forecasting multifamily residential properties will experience a higher vacancy rate at 5.3% in 2023. Unfortunately, that’s not it for the bad news. “There’s a huge block of new supply scheduled to complete at the same time than most expect that demand will be muted by a likely recession and high – but moderating – inflation,” explains Greg Willett, Housing Market Analyst.
Rental Housing Economist Jay Parsons’ post confirms more people moved out than moved in for 2022. A puzzling piece of this is that despite job growth and wage gains, the demand for housing fell. What’s unusual about the situation is that resident turnover was also low. With these things happening, why is demand for housing including rentals low? The problem lies with the lack of new move-ins as more people stayed put.
Parsons believes the root cause of the problem is low consumer confidence. This isn’t surprising when there are signs of a recession and inflation. Consumers don’t know what’s going to happen. Instead of moving into a new place, they lowered their risk by living with friends and family or close to home. Though they landed jobs, the layoffs and economic challenges have them worried about making commitments like signing a lease.
Before housing demand can grow again, consumers need to regain their confidence. The only hope to fix this is for inflation to calm down and lower multifamily residential rent. What do these mean for multifamily residential properties? It reinforces the need to make resident retention a priority, not an afterthought.
Why Resident Retention Must Be a Higher Priority
If multifamily residential properties treat resident retention as something to do when they have time, then they’re in danger of losing residents with little chance of replacing them with a new move-in. Multifamily Insiders indicates turnover costs an average of $4,000 per resident. Based on expert analyses, it will be very hard to fill in vacancies. Retention costs far less and has a greater chance of success than acquiring new residents.
Besides, the article reveals another startling statistic. At 94%, most property management companies have staff focused on managing the resident experience. No doubt, your competitors most likely have employees who devote their full attention to keeping residents happy.
Does it work to have employees focused on managing the resident experience? Data shows the answer is a resounding yes. The longer the company has had this position, the greater the retention rate.
However, it looks like some multifamily residential companies have grown complacent since 2021, when 94% of the companies reported they had a resident retention goal in place. That number dropped to 76% in 2022; poor timing as move-ins have decreased. Those that did not make resident retention a priority got lucky that turnover rates remained low for the industry as a whole. Looking forward, companies should reevaluate, because the market is starting to shift, and move-outs are likely to become more commonplace.
Another reason resident retention cannot be an afterthought is the growing number of online reviews and the effect they have on online reputation. American Apartment Owners Association references a survey by Apartments.com that 80% of potential residents look at consumer reviews when searching for a place to live. More than 75% of respondents state reviews and recommendations are extremely or very helpful in their hunt for a new residence.
Moreover, a GlobeSt.com article shows online reputation research plays a big role on multifamily residential property revenues. The management team can’t control things like inflation and recession. However, they can do something about their online reputation.
Besides, a Multifamily Executive article indicates 64% of residents say they will pay more for a highly-ranked property. It reveals that 93% of residents study reviews before making a decision about a property. Therefore, resident retention must be intentional.
How to Make Resident Retention Strategy a Priority
A good place to start with a retention strategy is to establish and track key performance indicators. They help you baseline where you are and track whether or not your strategy is paying off. The first three items are the KPIs you want to watch.
1. Watch occupancy and vacancy rates closely
This important multifamily residential property key performance indicator provides a snapshot of how much of your property is leased. Trending for move-ins, move-outs, turn costs, gain/loss to lease, and lease trade out should all be top of mind.
2. Calculate the average days to lease
Leasing velocity should be monitored carefully. This will help adjust for vacancy and turn costs. If it shows signs of climbing, then it means your net operating income may be at risk.
Once you determine your average days to lease, use the remaining retention strategies to help keep it low. As soon as the average days to lease numbers begin decreasing, then it’s a good sign your retention strategy is working.
3. Track resident turnover
One of the top rules in marketing is that it’s much cheaper to retain your current customers than to acquire new ones. This is especially true in multifamily residential. Resident turnover KPI identifies how long residents have lived in the building and how many have moved out. Additionally, accuracy around move-out reasons should be very diligently collected and evaluates to explore market conditions as they change.
This will give you an idea of who is leaving, and most importantly why. A high number of long-term residents or short-term leaving can signify a few things. In some cases, there’s nothing you can do to retain the resident. For example, they may move out due to a life change whether it’s a death or job loss. If it’s the short-timers who are leaving, then it may be an issue with the community, retention strategy, pricing, or economy.
4. Communicate regularly with residents
Communication can make a difference in the experience of living in the community. When residents don’t hear from the building’s employees, they may feel neglected and disconnected from a place that’s supposed to be their home.
Residents who regularly receive updates and learn what’s happening will feel like they’re part of a community. Effective communication requires offering them multiple options to hear from the company managing the community. Some may prefer electronic communications such as an online community, a platform like Slack and Discord, or emails.
Others may want physical communication like receiving a printed newsletter. Do you have communal spaces or locations that everyone passes on a regular basis? It may be useful to have a bulletin board with communications or a place to pick up copies as they pass.
5. Cultivate a community
Property managers who successfully cultivate a community make residents feel like they’re at home. The advantage of creating and maintaining an online community is that residents can access the content when it’s convenient for them. They may have working hours or a schedule that doesn’t allow them to attend community events. Or they simply don’t like to do that. This is why it’s critical to find ways to communicate with them.
Another advantage of an online community is that most residents probably have at least one connected device. They can access the community through the device. Whenever you get a new resident, share information on how they can receive updates and be part of the community.
As for the physical community, hold events to encourage residents to get to know each other. Do a survey to find out what kind of events they’d like. Trivia? Watch sports on the giant TV? Encourage and welcome feedback from residents, good or bad. Any feedback is better than nothing because it helps you make the place better for them.
6. Provide the right apartment amenities
Apartment amenities can make a difference in retention. Again, this is why communication is important. You can’t know what they want unless you ask them. A fast, reliable network is one of the top amenities. But it has become more crucial with the rise of remote working.
7. Implement a staff retention strategy
It’s not just residents you need you to retain. You also want to ensure your employees are happy. When they enjoy the work, it shows, and the residents will notice. Multifamily Insider says employee retention affects resident retention. The article states that a 10% employee turnover results in a 3% of resident turnover. So, if employee turnover hits 33%, then the resident turnover will be 10%. Therefore, staffing retention boosts resident retention.
8. Add video security with remote monitoring
There’s one amenity that’s a must-have. It’s video surveillance with remote monitoring. According to the National Apartment Association, Baby Boomers and Gen X want security. Schlage and Wakefield Research indicates 61% of Gen Y wants security.
Live video monitoring involves installing cameras in strategic places around the multifamily residential property, including the parking lot or garage, common areas, mail rooms, laundry facilities and offices. Trained monitoring operators partner with video analytics to watch the property. Everything can be saved as recordings.
When video analytics or the monitoring operator spot a potential problem, they can take action. They don’t wait until a crime has been committed or damage is done. The operator may use an on-site speaker to issue a verbal warning. If this doesn’t stop intruders, then the security personnel can call the police while tracking the intruders’ movements. Because the activity is being watched in real time, police know there is a real crime occurring, so they typically elevate the priority level of the call.
Most traditional security technologies are reactive. They don’t do anything until after something happens and the damage is done. This security goes a long way in a retention strategy. The savings from retaining residents can more than cover the security system.
Check out these videos from multifamily residential properties to see what remote video surveillance can do:
- Parking garage lurker busted
- Mailbox rummager caught
- Midnight brawlers spotted on camera
- Person with firearm arrested
- Sleeping transient cleared out
To optimize video surveillance technology for a multifamily residential property, find a partner that has experience working with apartments and multifamily residential properties.
Be sure to check out Stealth Monitoring. In working with Stealth, you’ll receive a customized security plan for your property. A team of experts designs a security system that meets your requirements and budget. Here’s a video surveillance checklist to help you in your search. Learn more by picking up this Complete Guide to Securing Your Apartment Building or contact us.
Texas Private Security License Number: B14187
