According to the National Multifamily Housing Council, there were more than 385,000 multifamily development starts across the country in 2015. That’s the most since the organization began recording the data in 1992, and many of those communities will begin leasing up in 2017.
While lease-ups are almost always good news for the industry as a whole, it’s a mixed bag for onsite teams responsible for established communities. They face a very real challenge competing for prospective renters with shiny new communities in their neighborhoods.
Many owner/operators of established communities have found ways to compete without rent fire sales or busting the capital expense budget with renovations. According to Ryan Perez, vice president of marketing for CF Real Estate Services, the best place to start is determining whether that new community is actually a competitor.
“Most new construction developments wouldn’t compete in the space of an older community,” said Perez, who is responsible for marketing both new and established communities for CF Real Estate Services. “Let’s say for example that the new community is a merchant builder that produces top of the line interior finishes and full amenities packages and it’s up against your B community that’s 10 to 14 years old. They’re not comps.”
The low rent advantage
Older communities naturally have lower rents and don’t have to reduce rent any further to compete. That lower rent can provide a significant advantage.
“Oftentimes, we’ve found that a new development in the area can be a closing tool,” she said. “Generally, even with their upfront concessions and specials, they can’t compete with pricing. If they try, it’s very short lived until the first term of renewal when rates go right back up.”
Residents who get hit with hefty renewal rates after significant concessions feel like they’ve been caught in a bait-and-switch. They’re likely to voice their frustrations online, severely damaging a new community’s reputation. That fear and strong market conditions have made developers reluctant to use too many concessions during lease-up.
When price isn’t in the established community’s favor and occupancy begins to suffer, Perez looks to customer service. Granite countertops, upgraded lighting packages and a resort-style pool can dazzle a resident, but one encounter with a rude team member is all it takes to destroy the experience.
Older communities can differentiate themselves with more personal and robust service because the pressure for them to lease isn’t as high as it is during a lease-up.
“Slow and steady wins the race,” Perez said. “We are in the business of finding people homes that fit their needs and wants, not negotiating like it’s a garage sale. Selecting a home is one of the most important decisions your prospective renters will make. If you can be an additive part of that process for your customers, then you’ve won half the battle.”
Digital marketing and lead nurturing
To secure the opportunity to win prospective renters with service, Perez recommends upgrading your marketing efforts before the new community begins their lease-up process. If you wait too long, you’ll miss the opportunity to capture prospective renters who want to move before units are available at the new development. It might also take time for your marketing efforts to ramp up and start producing results.
Among the most effective tactics is to reach out to prospective renters who didn’t lease with you the previous year. They just might be up for renewal at their current community.
“Deploy additional digital and outreach marketing strategies,” Perez said. “Go back to your CRM and pull guest cards to start a nurture campaign. If they didn’t lease from you a year ago, but they’re up for renewal in 60 days, start the relationship again—rekindle. Remind them why they were interested in the first place. Court them.”
With the right marketing, service and rents, established communities can compete in a development-rich environment.