Market-rate apartment owners who participated in an annual National Apartment Association survey acquiesced $900.6 million in revenue in 2006 to vacancies, concessions, and collections. Taken in a lump sum, the near-billion-dollar hit might blight multifamily operators. But revenue losses in the industry are actually getting better, according to the 2007 Survey of Operating Income & Expenses in Rental Apartment Communities, released to non-NAA members September 2007.
NAA's response rate—survey results incorporate data from 850,155 units, or nearly half of the estimated national inventory—also serves to make the revenue loss an easier pill to swallow. “You have to look at those losses on a per-unit basis, and the number is no longer that large,” explains study author and NAA consulting economist Robert Sheehan. “Over the past several years you have also had improvement to NOI, and occupancy rates are going up.”
On a per-unit basis for both individual and master-metered properties, combined losses in vacancies, collections, and concessions amounted to $2,279. On average, revenue loss as reported by survey respondents has declined to 10 percent of gross potential rent in 2006 from 12 percent in 2005 and 14 percent in 2004.
Operators in the survey also recouped an average of $543 per unit in “other” revenue in 2006, including receipts from on-site laundries, cable and telephone systems, parking fees, and other charges for services and amenities.
Though Sheehan was quick to point out these positive trends, he also encouraged firms to leverage the macro data for corporate improvement.
“You've got to compare yourself to the market, and if you are underperforming compared to the market, you want to figure out why,” he advises. “In any business, you have to keep things going and try to control costs. The multifamily firms that can keep the operating intensity level high will ultimately be the superior firms.”