DALLAS—Many of today’s property managers and leasing agents have been only exposed to strong leasing demand if they entered the industry during the last decade, that is, after the meltdown of 2008 and 2009. But now, that has all changed and they’ve been thrown into the deep end of the pool very abruptly.
Specifically, measuring same-store change on a rolling seven-day average, traffic to multifamily property websites are down 15% year-over-year and guest cards are down nearly 3%. Lead volumes will likely plummet further as more cities adopt shelter in place ordinances, according to a new report from RealPage, provider of software and data analytics to the real estate industry.
Even after the virus runs its course, the economic fallout could translate to sustained job losses and weak demand for housing. It will be more important than ever to prepare for the future of the multifamily market, says Greg Willett, RealPage’s chief economist. He recently shared some tips for property managers and leasing agents that may be helpful during this time of uncertainty.
Avoid panic. It’s always important to take emotion out of pricing and it’s even more important in a downturn. Build a pricing strategy with a balance of science and operational expertise. Protect rent rolls in order to capitalize when markets improve. Simply slashing rents won’t necessarily buy demand if that demand isn’t there.
Revenue management outperforms in a down market. In 2008 and 2009, revenue-managed properties didn’t necessarily avoid rent cuts–few properties did. But those adjustments came earlier and were not nearly as deep as other properties.
“We also observed revenue-managed properties maintained higher occupancy rates and deployed strategies that enabled them to come out of the recession earlier,” Willett says. “There are case studies available supporting those results.”
Aligning pricing strategy with investment strategy is critical. For example, NOI or cash flow versus focusing aggressively on rent level appreciation.
Lock in renters on longer lease terms. Every asset is unique, but many benefited in 2008 and 2009 from pushing longer lease terms to reduce churn and minimize vacancy.
He says when drilling down into specific geographies, the major Texas metros are a tale of opportunities and challenges.
“Composition of the local economies suggest that Austin and Dallas/Fort Worth look better than Houston and San Antonio for near-term apartment demand potential,” Willett tells GlobeSt.com. “The big role that energy plays in Houston creates challenges. For San Antonio, the downsizing hospitality sector will be a problem. Government and tech job concentrations should help Austin. The industry breakdown in Dallas/Fort Worth looks a lot like what you see in the nation as a whole, although Dallas/Fort Worth does have some downside risk due to the importance of a transportation sector that notably includes headquarters operations for both American and Southwest Airlines.”
Dallas/Fort Worth and Houston are the country’s number one and number three markets for ongoing multifamily construction, says Willett.
“Dallas/Fort Worth has about 43,000 apartments on the way while the total is about 26,000 in Houston. With so little net demand expected in the next few months, it’s going to be tough to get that new supply through initial lease-up. Look for lots of rent discounts in the luxury product,” he tells GlobeSt.com. “On the other hand, resident retention when existing leases expire has lots of room to improve across all major markets in Texas. Renter churn in these metros tends to run above the national norm, reflecting more job opportunities and choices of available housing.”