Leasing Redefined: The Power of Renter Segmentation
Uncovering new leasing strategies through renter segmentation data
The information supplied by prospects and residents during the leasing and lead processes can be like striking gold. Apartment leasing teams panning for new residents can gain insight into how to attract, secure and retain residents by digging into the mounds of renter-provided information and key demographics available.
Renter segmentation data, whether generated organically through property management systems or from public demographic information, is redefining how multifamily marketers lease apartments in a far more complex market than 20 years ago.
In November, Greg Willett, chief economist at RealPage, led a panel of industry experts on renter segmentation at the 2016 National Multifamily Housing Council’s OPTECH Conference and Exposition. The panel concluded that marketing to today’s renters requires greater demographic data than that used in the past.
“Here’s the big message,” said Willett. “Everybody thinks about their resident base, but what you hear them talking about is age. It’s a lot more than age. Your residents’ behavior goes beyond age.”
Market diversity is changing leasing approaches
Differences in income, lifestyle and amenity tastes among apartment hunting baby boomers, Generation Xers and millennials have complicated the model leasing approach, with some companies already spending countless hours trying to understand available demographic information.
Years ago, younger single adults and newly married couples comprised the bulk of ideal apartment residents. As incomes grew, residents moved out and into new homes.
All that changed with the Great Recession and the evolution of generations who seek urban lifestyles or simply don’t want a mortgage. The resulting mix of young and old have varying marital statuses, and they don’t always enjoy the same amenities. The only thing they may have in common is where they want to live.
“It’s an incredibly more diverse market than those days when you knew exactly who you were targeting for your properties,” Willett said. “There’s no individual segment that is overwhelmingly dominant. That’s an important thing to think about when you’re operating your community or doing the marketing plan. You’re not going to be serving just one core audience; you’re going to have two or three of these segments that are going to be important in a given community.”
While millennials and baby boomers have garnered much of the attention, one demographic that nobody talks about – lifelong renters – deserves consideration.
Willett says “perma-renters” make up a large piece of the pie and shouldn’t be ignored by developers who market generationally. At last count, the group made up about 16 percent of all apartment households.
“(Perma-renters) are the second biggest group,” he said. “Think of those young adults to whom we market all the time. What happens is these people got older, and that’s kind of all that really changes. Their income goes up a little bit, and they have a little bit more spending power. But lifestyle doesn’t look a whole lot different than the case when they were in their 20s. On average, they are in their 40s now.”
Willett also pointed out that each demographic may have multiple segments. For example, millennials in their early 30s won’t necessarily have the same renting habits as student millennials.
Obtaining and analyzing data reveals renter preferences
Interpreting the data starts with obtaining information supplied by residents and prospects during the lease process. Data safaris extend from property management systems to the vast availability of public and private information sources such as the Bureau of Labor Statistics and the Census Bureau. From there, operators can market their communities by drilling down to shopping tastes, school preferences and even the kinds of cars renters like to drive.
National multifamily companies such as Pinnacle gather a wide range of demographic data to plan and market for existing and future communities. In many cases, they internally create a library of renter personas to develop a flexible marketing strategy that appeals to multiple renter generations.
Such personas help Pinnacle establish apartment designs, sizes and amenities that attract multiple types of renters.
“There is real diversity among those who live in our apartment communities, and you can’t just get stuck on presenting yourself to only one demographic like the millennials,” said Pinnacle Senior Vice President, Marketing & Training Jennifer Staciokas. “In the past we’ve always just looked at the facts of the data, and now we’re taking it more into the buying habits, where they shop (and) their intentions for moving.”
Renter segmentation data will continue to play a big role
Staciokas and Willett, who have nearly 40 years of multifamily experience between them, highlighted how the evolving apartment renter has made it more difficult to develop multifamily properties that appeal to many tastes and preferences while maintaining uniform standards in design and service.
Willett remembers that targeting renters was more defined early in his career when he was a research consultant specializing in feasibility evaluations of new apartments and property acquisitions. He knew exactly what audience should be pursued whether for a new development or an acquisition of an existing property.
Nowadays, it’s not so easy.
“It makes it difficult to plan a community, particularly when you take into consideration the lifespan of an apartment community is decades,” he said. “So, for what’s appropriate right now, you have to think about how to have flexibility to reposition that. How is it going to look in 10 years?”
Staciokas is having those conversations already with developers while striving for the right formula that appeals to multiple demographics.
Unit types generally desired by Millennials, Gen X and Baby Boomers will be fashioned with subtle nuances that appeal to each. For example, studio and one-bedroom apartments might have new, trendy white quartz countertops, favored by Millennials. Two-bedrooms and townhomes preferred by Gen X and Baby Boomers could have darker cabinetry and granite countertops.
“It’s looking at how you finish out those apartments and amenities, things we can control, while trying to create differentiators that allow us to market those to particular segments,” she said.
The same goes for striking a balance with amenity spaces so that as renter demographics or demands change they can be repurposed without a big cache of money.
Staciokas says renter segmentation data will continue to play an important role in how Pinnacle builds communities to attract and retain residents as digital technology continues to evolve.
“As the market weakens, we’re going to see how important it truly is,” she says. “We’re all trying to use a lot of the same avenues to market to our renters, and we need to figure out how we’re going to stand apart from each other in that digital landscape.”