The Multifamily Industry’s Return to Normalcy Offers Opportunity
With tailwinds from a wild and wooly ride lingering in some markets, multifamily housing leaders are returning to some fundamental operational principles. Eyes are being retrained on the basics of expense and revenue management, people and portfolio performance now that the industry has taken a collective big breath.
At March’s Crittenden Multifamily Conference in Dallas, leaders from CF Real Estate Services, Post Investment Group and Rivergate KW Residential said the industry’s return to normal means 2018 is an opportunity to strengthen business foundations. Much talk in and out of sessions focused on the people factor and how challenged the industry is with employee and resident retention.
Leaders are resigned to positioning portfolios for operational efficiencies through hiring diligence, resident retention, spend management and high-level asset management.
Ed Wolff, president of LeasingDesk, hosted a panel of executives who said that operations are more critical now than ever before as certain markets start to show softening. Each offered ways they are positioning their properties and portfolios for the future.
Post Investment Group Senior Vice President, Asset Management John Jeter said portfolio health lies within big data and how it’s leveraged. The company with a portfolio of more than 10,300 units has made it a priority to identify and monitor underperforming assets.
“We’re trying to prepare ourselves for when a downturn comes, and we all swear it’s coming one of these days. But we want to be prepared analytically so we can be proactive rather than reactive when things turn south,” he said.
An opportunity to identify property health and stay lean, nimble
The heartbeat of multifamily is still strong, analysts say, although some markets have softened after one of the longest growth cycles in recent years.
Earlier this year, RealPage reported that apartment performance fundamentals in 2018 should maintain the status quo from 2017. Minimal shifts in momentum are expected and apartment demand will remain solid. However, new supply will continue to be delivered at a pace that will keep leasing conditions competitive in the top-tier product niche.
In late March, RealPage data indicated that average monthly rent is a little over $1,300, and annual rent growth is being sustained at 2.5-3 percent. Also, occupancy is hovering around 95 percent.
Leaders say now is the time to identify underperforming properties not only from a market perspective but also how they are meeting investment goals through portfolio asset management.
Jeter said Post Investment has refocused on their “watch list” process for properties that aren’t meeting occupancy and rent goals or may be falling short on investment objectives.
“Across our portfolio, the biggest thing we are trying to focus on in 2018 is to put full eyes on our watch list process,” he said. “It’s formalizing that watch list process that’s allowing us to get more narrowly focused on the properties that need the attention.”
The difficult task of creating employee loyalty
Talk at the conference of watching employee turnover in the industry resonated with CF Real Estate Services President Sharon Hatfield. While the company’s operational strategy this year mirrors 2017, CF Real Estate Services is putting more focus on people.
Hatfield said the property management company is applying a different mindset to investing and hiring employees than in the past, in an effort to not only keep talent, but develop employees who could someday lead the company.
“Millennials tend to stay at their positions a shorter time than previous generations” she said. “It’s a competitive landscape. You have to figure out a way to get your employees to be loyal at both the corporate and onsite level. This shift in behaviors isn’t just a multifamily trend but you see it in all sectors of business.”
CF Real Estate Services is starting with trying to find people who have certain mindsets and fit in with the community they will work at or manage. Also, the company is taking into consideration how younger generations want to work where they feel like that they are serving a purpose and giving something for the betterment of others, Hatfield said.
“If you can figure that piece out, you’re going to attract some loyalty.”
Establishing a memorable living experience for residents
CF Real Estate Services is taking a similar approach with its residents by bolstering resident services to improve retention. Leasing an apartment has become a more emotional process for many, Hatfield says, and connecting with other residents is important.
The company is investing more time and effort on enhancing the resident experience through tailored community related activities. To understand their needs, managers are asking residents through surveys how their living experience can be improved socially.
“One of things we’re focused on our communities is to really make sure we work on programming events at site level that help residents feel like they are part of something bigger,” she said. “We’re letting them be a part of developing that blue print. They want be a part of something that is authentic.”
President Marcie Williams said Rivergate KW Residential has invested significantly into creating a memorable customer experience with the intent of increasing net operating income through more renewals. Earlier this year, all managers and service supervisors, regionals, vice presidents and executives went through training by luxury hotelier Ritz-Carlton.
Rivergate KW Residential, a third-party management company, also created a new resident retention program with more touch points once a resident moves in and moves out.
“We’re creating a culture of anticipatory services and opportunities to create genuine connections with each of the residents,” Williams said. “For the most part, we know that they are staying longer and they have that window of residing in an apartment is longer than ever before. We’re focusing on personalized programming.”
Watching revenue and honing in on spend management
Equally important, leaders say, is getting back to the basics on not only revenue management but spend management. Having checks and balances on purchasing at the site level, doing comparison shopping and buying only what’s needed helps keep costs in line, Hatfield said.
And fix first and replace only when necessary.
“It’s the basics of the business that we’re focused on to make sure that we don’t forget those things and let them slip under the rug, combined with all the people elements,” she said.