Retention Revolution: How to Increase Resident Lease Renewals
With new supply set to flood the rental market this year, keeping residents at existing properties is more important than ever. Here’s how to create a community residents will want to call home year after year.
In 2016, the apartment industry will see the most new units delivered to the market since the post-recession cycle began around 2010. Axiometrics, a Dallas-based real estate research firm, says more than 300,000 new units will come on line this year, which is well above 2015’s plentiful 265,000 total. Some markets, such as New York and Houston, will gain more than 20,000 new units alone.
With this influx of new inventory, occupancy levels are expected to fall, though evidence of declining rates has not yet materialized. Kingsley Associates, a San Francisco–based real estate research firm, reports a steady decline in renewal intent since 2013, with a new low of only 51.5% of renters saying they “probably would” or “definitely would” renew their lease in the first quarter of 2016, according to Kingsley’s Multifamily Industry Trends report for the first quarter of 2016. That share is down from 54.9% at the end of 2013.
So much new product coming to the market could ultimately make switching properties an easy decision for unsatisfied residents. So, how can property managers ensure that their property stands out among the competition and is the right fight for residents?
“Most of us have already figured out what to build and how to build it, and so we all look a lot alike,” says Laurie Lyons, partner at Cardinal Group Management, a Denver-based firm that owns and manages apartment communities across the country. “So, instead of trying to go head-to-head [with the competition]—because residents are only going to go out and get something the same again—we try to get them to fall in love with where they live and make it become their home.”
With retention quickly becoming a top priority for property managers this year in the face of a booming rental market, Multifamily Executive looked at the critical components of apartment properties that compel residents to renew their leases. Click through the menu above or the next pages below for a start-to-finish time line of how managers should handle each pivotal stage of the retention process. Read the articles below for ways to deal with the factors that pose a threat to lease renewals and how to best staff properties so that residents feel at home.
The retention process begins before prospective residents have even stepped foot inside a property. First impressions can make or break a resident’s living experience, and in today’s digital age, that first impression is more likely to occur on the Internet than anywhere else. If your property doesn’t have a good website, then you’re losing a large chunk of potential renters— mostly millennials—who prefer to start their housing search online.
“We truly have an educated and mobile customer who can find and secure multiple nearby housing options with a simple Google search,” says Mark Fogelman, president and CEO of Memphis, Tenn.–based Fogelman Management Group.
In some extreme cases, apartment hunters don’t even need to see the property before leasing, and they feel comfortable with the entire process taking place electronically. The process of leasing, therefore, needs to be as easy and accessible to potential customers as possible, which is more often than not the factor that initially attracts a resident to a property.
“Especially with millennials today, who are our primary customers, it’s really about being able to meet them on their level and meet their needs where they want them to be met,” says Fogelman. “That starts with technology and really being able to give them the entire leasing experience, if they so want it, from the mobile side.”
And while closing the deal is the primary goal when interacting with potential leads online or through tours, it can also affect retention down the line.
“Your renewals start the first time you meet a prospective resident,” says Janet Riddlebarger, senior vice president at Blacksburg, Va.–based HHHunt Apartment Living, which manages apartment communities in Virginia, Maryland, and the Carolinas. “So our customer service focus begins that day.”
Cardinal Group Management also believes that the renewal process starts on day one and has replaced a traditional leasing office with a concierge service that provides individual attention to residents starting with their leasing process and on to their move-in day.
The concierge stands and greets prospective residents in the reception area, which is furnished with soft seating instead of desks. He or she engages the residents in a conversation about what kind of amenities, services, and, ultimately, lifestyle they’re looking for and then figures out how their needs can be met through Cardinal’s housing options.
Lyons says the company’s closing ratio has improved with the concierge approach, compared with a traditional sales pitch. But the concierge’s job doesn’t end once the lease is signed—during residency, the concierge will o er services based on the resident’s profile, such as pet care, grocery delivery, bike rentals, or dining, similar to the attention a guest would receive in a high-end hotel.
“We didn’t add an additional position at our properties, just a change of titles and responsibilities,” she says. “We shifted the lease renewals to this position since we are more likely to get a renewal with someone we have developed a relationship with through our service and engagement.”
Property managers will agree that one of the most important days of the retention process is day one of a resident’s lease—move-in day. Move-in day is one of the few days a property manager is actually going to be able to “touch” the resident, and first impressions are everything.
As Steve Hallsey, president and CEO of Chicago- based AMLI Management Co., has seen, if someone is happy on their move-in day, they’ll have a higher propensity to renew when their lease is up.
“There is an 84% greater likelihood of renewal if the move-in process goes well [based on surveys and research done by Kingsley Associates],” he says. “We’re revamping our entire move-in process: everything from how people are connecting their utilities to how they’re being accompanied to their unit, to how orientation meetings go after their first two days of move-in.”
Move-in day can make or break a resident’s experience and affect retention even as long as a year later.
“I think first impressions are everything, and most studies have shown that if the initial reaction to the apartment is negative, even though you can get some great margin for overcoming it, it still starts things o on a bad foot,” says Fogelman. “It’s really about refining your make-ready process, and having checks and balances in place to ensure the apartments are in the correct condition and look the best they can be.”
Creating an environment that residents will love and want to call home is a two-pronged strategy. First, it involves keeping communication open and responding to resident feedback to ensure your customers are satisfied. Second, managers must craft a resident lifestyle around a sense of community that will make tenants feel attached to the property.
Listening to what residents want is key, and the easiest and most direct way to find out what residents like, or think needs to change, is through surveys.
“Feedback for us is the most important part of ensuring that we are creating opportunities for residents to want to stay with us in our community,” says Riddlebarger. “We don’t want people to leave because they are dissatisfied with the service, so if it’s something we can handle in advance, we try to make sure we don’t have any surprises when we offer the renewal. We try to stay in touch throughout the entire process.”
HHHunt uses Yardi Matrix, an apartment information database service based in Santa Barbara, Calif., to automatically generate surveys when maintenance requests are completed, which allows residents at their properties to let managers know immediately if they were satisfied with the service—one of the crucial issues to monitor, since positive interactions with maintenance staff and a speedy response time to service requests are at the top of the list for what residents want.
“We feel there is a direct correlation between maintenance request response and completions to satisfied residents and retention,” says Jamie Teabo, executive vice president and head of property management at Atlanta-based Post Properties Apartment Management, which manages luxury communities nationally.
Other properties send out monthly surveys to residents to complete about their experience at the property and keep constant communication going to stay on top of what works, and what doesn’t, in real time.
Cardinal Group has found that the best way to stay up-to-date with resident opinions is to monitor social media conversations surrounding their properties, which Lyons says is like having a “24–7 live survey” that provides the company with immediate feedback and a timely measure of customer satisfaction.
Another key component of the retention strategy during residency, and perhaps the most important, is to build a lifestyle and experience that residents won’t want to leave behind for a new option. Beyond having standard amenities and attractive lounge spaces, managers need to create an experience around those physical components of a building that will engage residents in a community and turn their apartment into a local hot spot. In other words, sporadic pool parties no longer do the trick, and managers now have to provide events that will become an integrated part of a resident’s routine, something they’ll look forward to that they know they can only get at a specific property.
Noticing that people had “go-to” spots on certain weeknights based on deals—think $5 glasses of wine at a local bar or half-priced wing night at TGI Friday’s—Cardinal took a cue from the restaurant industry’s popular “happy hour” trend and created similar weekly social events, like happy hours or recurring parties tailored to the resident demographic at each property, that make a resident’s building, instead of the place down the block, the place to be on a Thursday night.
Whether it’s a weekly happy hour on the rooftop deck and wine tasting events that turn the property into the “go-to” place to hang out, cooking competitions or demonstrations, or local community service events, the end goal at every property is resident interaction that revolves around how people engage with the apartment property, the amenities, and each other.
“We’re not big believers in just having amenities; we’re believers in what we call lifestyles. A swimming pool is an amenity, but what’s the lifestyle that it creates?” asks Lyons. “That’s how we get people engaged with us, and they won’t want to move, because they’ll think they’re giving something up."
Once a manager has done all of the things that make renters fall in love with their apartment, the time comes when you have to get residents to sign the dotted line and commit to your property for another term.
This often occurs two or three months before the lease is set to end, and in some cases managers will push the time line up even farther to get ahead of the competition or catch residents’ attention before they’ve begun to think about the year ahead.
“We try to get out there and engage in the renewal strategy prior to residents starting to look somewhere else,” says Lyons. “So if the industry is trying to get renewals 60 or 90 days out, we go 90 or 120 days out.”
Offering incentives can help managers lock in the renewal early. Offers can be small—gift certificates or restaurant deals—or more enticing, like a free month of rent. Incentives that encourage residents to sign at that time should make them want to renew as soon as possible, and help them feel like they are getting something they won’t find at a new property.
Staggering those offers at different times and with exclusive time frames also can get tenants to re-sign faster, as they know they’ll miss out on the extra perk if they wait too long. Post Properties gives even a better deal to those who renew.
“We program-in a reduction to the going rental rate for our current residents on renewal so that they get a break over our new residents,” says Teabo.
Again, open communication, resident feedback, and a responsive staff are key elements at this moment in the renewal time line as well. Teabo says Post sends out a pre-renewal survey 120 days before a resident’s lease is due to expire, and it continually reaches out to residents who haven’t yet re-signed.
“We feel it is very important to make frequent con- tact with our residents once they have received their renewal offers, to answer any questions they may have, and to discuss options and concerns.”
The key word is happy. A happy tenant is a good ten- ant, and a good tenant is better than a new tenant.