Renewals are one of the easiest ways multifamily owners and operators can ensure continued business success, but retaining tenants isn’t always that simple. Over the past several quarters, renters' renewal intentions have continued to drop. In Q2 2016, only 51.4% of residents who were three to four months out from the end of their lease intended to renew.
John Falco of research firm Kingsley Associates points to several reasons for this trend but primarily blames rising rents that are making residents feel they’re not getting what they paid for anymore. Falco has heard his clients quote the cost of a nonrenewal as anywhere from $2,500 to $5,000 based on the effort and lost revenue of trying to fill the vacant unit.
At the MFE Conference in Las Vegas last month, Falco and other experts discussed various ways to keep tenants from leaving. Dave Ferszt of Village Green Management Co., Laurie Lyons of Cardinal Partners, and Cris Sullivan of Gables Residential shared the ways they’re trying to keep residents in their communities longer. They all agreed the key is creating a sense of place and community.
Lyons said Cardinal Partners is currently introducing a "renewal specialist" role to the firm's on-site teams that will act as more of a concierge. “The hospitality industry has a guest-to- employee ratio of four to one, while the apartment industry has a ratio of more than 25 to 1,” she said. “Hospitality has only a few days to convince a guest to come back; we have usually a full year, but we don’t truly take advantage of it.”
The renewal specialist, said Lyons, will focus on engagement via community events and personalized customer service. This staff member will also start a renewal discussion 90 days out from lease end to discuss the resident's options for renewing.
Gables Residential is rolling out a customer loyalty program that will enable residents to earn points by participating in community events and posting to social media. Those points, said Sullivan, will be redeemable for certain gifts and amenities, though she wouldn’t be too specific, because her team is still defining the specifics.
Ferszt is focusing on a value-add program at Village Green, where the on-site teams will ask residents what they’d want in their apartment that they’re not getting now, like better flooring, a technology upgrade, or nicer closets. Ferszt said the simple upgrade makes residents feel they’re getting something out of renewing and staying, while the building owner is getting an updated unit they’ll be able to sell more easily when that resident does eventually move out.
Sullivan and Lyons are also homing in on psychographics. Sullivan said Gables is paying attention to what a specific renter wants. For example, if her team is targeting downsizing baby boomers, the product is about larger closets and a better experience from the garage to the lobby. “This demographic is largely used to driving up to their home and seeing some curb appeal. Entering a dingy garage doesn’t feel the same for them. They still want their guests to be wowed,” she said.
Lyons said her marketing team tries to attract the right tenants in the first place to cultivate a community essence that will be hard to leave. Her theory is that if you get the right residents in your community from the start, they’ll be more likely to stay. When people live with their friends and their entire lifestyle is in that community, people are willing to pay as much as $500 more monthly to stay there, she noted.
That’s how Lyons wants residents to view moving out of Cardinal's communities: not just as a location change, but as a lifestyle change, too.