When the economic crash sent managers into a frenzy to keep occupancies from falling further, concessions were flying fast and furious.
Jeff Barnum says the market forced most managers to offer discounts on rent and keep people coming through the doors. However, Barnum, a property director at Edward Rose & Sons, says today’s market tells a very different story. The Farmington Hills, Mich.-based company is no longer offering concessions and Barnum doesn’t foresee it happening again, at least not this year.
In fact, 53 percent of property managers responding to a Rent.com survey indicated they haven't needed concessions or other compromises to fill units. The 2014 Property Owner and Manager Report, which was released Sept. 30, surveyed managers overseeing more than 250,000 rental properties and 2.2 million units, nationally.
Some markets that were slow to bounce back from the economic downturn may still be offering concessions, Barnum says. South Bend, Ind. has been concerning for the Edward Rose team because it has been struggling to recover, he says.
“I don’t think that reducing rates would change the occupancy there,” Barnum says. “It’s just a matter of supply and demand and jobs.”
The industry thrives on demand and there’s plenty to go around, according to Albert Berriz. Berriz says he isn’t thinking about concessions either, especially in the Michigan markets where McKinley, his Ann Arbor, Mich.-based company, operates.
“Mainly because if you lose your apartment in Ann Arbor right now, you don’t have a place to go,” he says.
Across the McKinley portfolio, Berriz says his properties are more occupied now than they were at this time last year, eliminating the need for incentives. The same trend is being seen in Central Florida and Indianapolis, Berriz says.
California markets are singing the same tune.
Properties managed by Folsom, Calif.-based FPI Management Inc. haven’t been using concessions this year either, says Kim Kisilewicz, senior director. The evolution of revenue management programs has virtually eliminated the need since rents are rising without help, Kisilewicz says.
“Three years ago, people were losing jobs and their homes and the rents did not increase, they stayed level. There was definitely some competition amongst the markets where they would need to generate concessions," she says. "The majority of my rents have increased [up to] 10 percent in the first six months of this year [in Sacramento]."
However, if the economy were to plummet again, Barnum could consider offering incentives, but doesn’t prefer that method, he says.
“We would use our marketing advertising as a tool before we start offering concessions if possible,” he says. “You hate to give up rent if you don’t need to. It’s not always about price. We like to have our residents get used to paying market rate and we’re reluctant to reduce that.”
Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.