Want to reduce your turnover rate? Be prepared to employ a mix of personal charm and corporate strategy. At Mark-Taylor Residential, an apartment company based in Scottdale, Ariz., residents enjoy a move-in gift, free upgrades based on their tenure in the apartment, and the use of a full-service concierge for everything from concert tickets to travel arrangements—but only as long as they live at a Mark-Taylor property.
But multifamily firms work behind the scenes on retention issues as well. Sales teams at Memphis-based Fogelman Management Group that renew 50 percent or more of a property's expiring leases in a month qualify for group bonuses worth thousands of dollars if they hit the desired retention numbers. At apartment communities managed by Drucker & Falk of Raleigh, N.C., on-site staffers are encouraged and empowered to do their best to solve residents' problems. “According to SatisFacts Research, the number one controllable reason for moving is maintenance and service, so we just wanted to program our associates to have a ‘yes' attitude,” explains Esther Bonardi, national director of marketing and education for Drucker & Falk, which manages more than 26,000 apartments.
How are these strategies working? Keep reading to find out.
Tell me about your firm's resident retention rates. ESTHER BONARDI, Drucker & Falk: As a third-party fee manager, we manage everything from tax-credit housing to A-plus property. With our higher-end product, we have a high turnover—70 [percent] to 80 percent—but with our B and C communities, we have 55 percent turnover and in some cases even less.
MARK FOGELMAN, Fogelman Management Group: Last year, our turnover rates averaged 59 percent, but they did vary from market to market. It's been very, very soft; in all the Midwestern markets, we've gotten hit hard by the home buyers. But I've looked at our three-year turnover trend, and even though everyone sees home buying as the major competition, our turnover did not go up over three years—it was just that a greater percentage of our move-outs were due to home buying. This is challenging, because I think you can prevent your customers from going to a competitor by providing better service and enhancing the whole living experience, but when someone's going to buy a house, it's really hard to deny someone the American dream.
TINA MAKSSOUR, Mark-Taylor Residential: We probably average about a 60 percent turnover ratio companywide, but we're seeing it a lot lower in Scottsdale (Ariz.). That seems to have a lot to do with the lack of affordable homes. Prices have really skyrocketed, and people have either decided to continue renting, or if they want to buy a home, face an hour-long commute to downtown from neighborhoods at the perimeter. Condo conversions are also contributing to turnover by [reducing] the number of available units for rent. What strategies have you tried? FOGELMAN: Our commission rate for renewals is slightly lower [than for new leases], but we pay very large bonuses for overall monthly capture rates. Our sales people add value when they renew [half or more of the leases that are expiring that month], so we offer monthly bonuses of up to several thousand dollars that are split among the members of the leasing staff if they can get [the targeted] number. That 70 percent retention rate is what allows you to close that back door and even raise your rates. ... The one cardinal rule I've had in our company is that we will not lower rates. We just can't justify lowering rents from $800 to $600 on renewal. ... Some companies send renewal letters that match the new specials. Philosophically, I agree with it, because I think your current customers should get the best deal ... [but] if we were to peel all the rates backward, we'd be in trouble.
BONARDI: One thing we have done is an “I can” customer service initiative. Our associates wear a button that says “I can” in big bold letters and then “help you” below that. ... There are a lot of rules and restrictions in our industry, and it can be easy for an on-site associate to forget that they shouldn't just say no all the time. We want people to think, “How can I help that person?”
What approaches have you tested at individual properties? BONARDI: One property bought a 52-inch plasma TV and had it in their clubhouse, running a movie at all times. For a three-month period, they sent out renewal letters, and everybody who renewed within that time frame got his or her name entered into a drawing for a plasma TV. People were renewing six months before their lease expired so they could get into that drawing. ... In a situation where you think the market's going to improve, you wouldn't want to do that, but in a market that was so soft and so concession-driven, we knew that in six months, we'd be in the same situation. We would rather capture those people now before they could start thinking about buying that house or looking at a property that's giving away three months' rent.
MAKSSOUR: We also have a lot of residents leaving to buy homes, so [several years ago] we started our own realty brokerage: Mark-Taylor Realty. We address what we know is already on many people's minds, and they are more upfront about when they're looking to purchase that home. We tend to keep them longer, and we profit when they decide to leave. ... Many renters want a better quality home. [See “Why Move?” below.] We try to address that at our own properties, particularly those that are five years old or older. They're still high-quality construction, but we know that [we are competing against] brand-new product. So we offer renewing residents a choice of upgrades, which are tiered based on how long they've lived there. It could be new kitchen faucets, shower massagers, programmable thermostats, carpet cleaning, or even an apartment cleaning.