Mark Fogelman sees one upside to the market turmoil of the past few weeks-it's now become much easier for the president of Fogelman Management Group to cut costs, while finding new employees.
"We're seeing easing in the labor market," Fogelman said at the "Be Nimble, Be Quick" session at the 2008 Multifamily Executive Conference. "Our phones are ringing more than ever with people looking for work."
That's not taking into account the number of contractors and other former construction workers out there looking for work. So Fogelman, who knows occupancies could be stressed over the next year, is looking for cost savings. He thinks he can save $2 to $3 per hour for every new hire over the person he or she replaced. And, he's asking for a 10 percent price cut from his contractors.
Fellow panelist A. David Lynd, COO for The Lynd Cos. in San Antonio, also sees rising unemployment as a potential advantage: It gives him an opportunity to replace his weaker employees. But, he admits that there are some places where you can't cut. "We really are a global market," Lynd says. "You are truly competing with everyone, everywhere, over everything."
Budget cuts alone can't save apartment owners. Like his fellow panelists, David Schwartz, managing member of Chicago-based Waterton Associates, is trying new things. In the hard-hit market of West Palm Beach, Fla., Schwartz is trying to rent pools of apartments to a local college (at heavy discounts) to juice occupancy. "There are no bad ideas in these types of markets," Schwartz says.
Lynd is generally in good markets as well, with one notable exception-Phoenix. In that market, with unemployment rising because of weakness in the construction industries, he's taking some bold steps. He'll go to his renters 120 to 160 days before leases are up, offering them a bonus to renew.
Lynd is also adjusting his credit worthiness checks to allow foreclosed-upon homeowners to rent. Schwartz and Fogelman haven't done this yet. "It's a very slippery slope," Fogelman says.
Even after you cut costs and try harder to entice new renters, there's not a lot an apartment owner can do when unemployment grows and occupancy softens. The economy is ultimately an uncontrollable element. "I don't think there's a magic wand you can wave," Lynd says.