Rents Up, Concessions Down in MF

IRVINE, CA-A hot multifamily market has greatly influenced rental rates and concessions for tenants. In Part 2, of GlobeSt.com's exclusive interview with Laura Khouri, president of Western National Property Management, Khouri explains how these factors have affected each other and how her firm stays competitive.

GlobeSt.com: Multifamily has been a hot product type for investors over the past 12 to 24 months. How has this activity affected property management?

Laura Khouri: The increased investor activity over the past year has had a major impact on the way in which rents are established and concessions are applied. The key is that multifamily property owners who want their communities to be considered for sale are focused on being able to demonstrate the greatest possible return for potential buyers. With that in mind, as a property-management company, we are working with owners to ensure that each property can reflect the highest possible overall income and NOI in order to increase the value of each community. As a result, rents have been increased to help reflect a higher profit margin for each property, and concessions have become less common when closing leases.

In addition to rents and concessions, the recent surge in investor activity has also affected properties using rent maximization software, such as Yieldstar and LRO. These software programs are designed to fluctuate rents based on several preset parameters. Typically, the programs are very helpful to multifamily communities, but they are not always equipped to provide the best immediate tools to accomplish the short-term goals of an owner or investor. Instead, this software can sometimes force additional upfront discounts for new residents, which really shouldn't be necessary with the revenue-management programs currently available today.

GlobeSt.com: What strategies does your firm use to attract renters as the multifamily market becomes more competitive?

L.K.: The most important element in attracting renters is understanding what renters need. By understanding our residents, we can more easily identify the right marketing tools to reach them. We conduct annual reviews with our residents to assess what sets us apart from our competitors. Factors such as property amenities and our customer service are at the forefront of these surveys. In our more than 40 years in the industry, we have found again and again that a company's reputation speaks volumes, not only to current residents, but to future residents as well.

Today's renters are savvy. They have access to what they need in order to research each option before making a decision on where they choose to live. In response, we work diligently to ensure that each of our current residents has a pleasing experience while living in our communities, which will usually translate into positive reviews and referrals, whether in person or online.

GlobeSt.com: As the economy rebounds, how do you meet your renters' needs while still delivering profit to your clients?

L.K.: While rents are steadily increasing both for new leases and renewals, Western National continues to invest in our communities to establish the highest value possible within each market niche. Within each community, we develop a 10-year capital plan, which is then updated annually to ensure that profitability and resident satisfaction are optimized.

As a rule, protecting an asset is the best way to retain current residents. The combination of caring for a community and retaining residents provides the right balance to meet renters' needs while delivering profits. Residents experience a community that is properly cared for and maintained at the same time that they experience a rise in rental rates, so the overall feeling is positive.