So, what are the leading metrics that become predictive of future rent movement? Everyone has their favorites, and different KPIs provide different lenses into performance. Here are my go-to metrics to track apartment market conditions, and how I use them:

Apartment Leasing Traffic: You might call them leads or guest cards or traffic. Whatever the term, this is a great metric for monitoring future demand patterns. Shopping will always precede lease signings. I remember watching this metric with amazement in May 2020—still during the height of pandemic lockdowns for most of the country—and seeing this remarkably rising tide of future demand. It turned out to be a tremendous early predictor of lease signings. And one great quality of leasing traffic is that it's not artificially capped by availability, unlike absorption (net leasing), so you get a fuller view of demand.
Lease-Over-Lease Rent Trade-Out, aka replacement rents: This one is a bit controversial, but since I'm picking my personal favorites, I'm including trade-out as my go-to rent metric. Trade-out is the best apples-to-apples measure of right-now pricing – what rents actually sign for compared to the previous lease for the same unit (new or renewal). New lease trade-out has proven to be remarkably predictive of future asking rent growth. Stat heads tend to love this metric, but I also talk to executives who aren't fans. Some will downplay trade-out due to its volatile nature.
Rental Revenue (Revenue / Available or Total Square Footage): Cashflow is a big part of the game for owners and operators, and revenue provides that measure. Revenue (sourced from rent rolls) captures all the operational input metrics – rents, occupancy, vacant days between leases, renewals, etc. Revenue is, of course, an outcome and not a predictive KPI. I like to watch the timing between early, leading KPIs translating to bottom-line revenue.
Resident Retention and Average Vacant Days Between Leases: I intentionally combine these because I like to look at the two next to each other. Retention tells us what percentage of the existing resident base chooses to renew their lease in the same unit. Retention skyrocketed in 2020 when renters couldn't or wouldn't move, and now we're seeing some normalization. In 2021, moderating retention has been a big win for operators because units are not sitting vacant long, and they're usually capturing much higher rents on the new leases than they would on the renewals. Balance is key here. Many operators still overweight retention. In a high-demand market, you need churn to capture higher market pricing and boost rent roll value. In a low-demand market, you need more retention in order to protect rent roll value. By watching average vacant days and other KPIs, you can better set renewal goals.
Real Renter Incomes: That data (sourced from renter applications among those signing leases) is much more telling than the publicly available Census income data. Renter income trends tell us about affordability and rent growth runway. The good news right now is that incomes are climbing, and rent-to-income ratios remain fairly stagnant. This metric now displaces rent collections (which appear to have stabilized) as the go-to KPI on affordability.

Whatever metrics you prefer, choose data sources that supplement traditional asking rents with metrics pulled directly from rent rolls and financials. Data from internet listing websites and surveys play a supporting role, but in a volatile market, you need the most precise and predictive KPIs to stay ahead of the game.

Instant Insights /

My Favorite Metrics to Track Apartment Conditions in 2021's Crazy Market

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