Dan Haefner and the team at CFLane will focus on retention this year, offering incentives from gift cards to unit renovations. PHOTO: Gregory Miller
Dan Haefner believes the key to future success can be inspired by his past.
Haefner, who serves as president and COO of CFLane, can remember renewing the lease on his first apartment in Menlo Park, Calif. more than 30 years ago.
“For me, it was really about convenience, cost and location,” he says.
Renewals are a hot topic of conversation for Haefner and the team at the Atlanta-based management firm this winter because retention will be the name of the game in this upcoming leasing season.
Competition is expected to heat up as more than 240,300 new apartments are slated to be delivered this year, according to Dallas-based research firm Axiometrics. And that gives renters many more options. In fact, resident renewal intent dropped from 65 percent in the second quarter of 2010 to 54.9 percent in the last quarter of 2013, according to a recent NMHC survey conducted by Kingsley Associates.
And as rent growth slows in many markets, apartment managers are girding themselves to fight tooth and nail to keep as many residents as possible.
Haefner believes the biggest selling point to a possible renewal is customer service. His inspiration to have exceptional customer service was learned when he managed a grocery store while he was in college.
“To me, my personal integrity and how I treat other people is probably the most paramount thing to who I am,” he says. “I take great pride in trying to be the best I can, not only for myself and the people I interact with, but because that’s how people judge me.”
Shailene Casio-Smith, vice president of business development, Austin, Texas-based FirstService Residential Realty (FSRR), agrees that a strong relationship is key to resident retention. But, if that relationship gets off on the wrong foot, it may be lost forever.
“If a resident is unhappy and you haven’t resolved the issue quickly enough, then no matter what you do they’re going to move out,” she says. “It’s very hard to re-establish that relationship if they haven’t been attended to. A lot of people have been focused on resident events and amenities and that’s great, but ultimately it’s a relationship that keeps people there."
Making sure associates are communicating on a personal level with residents is part and parcel to the corporate culture, one of the most important ways the FSSR office touches base, Casio-Smith says.
“You’ve got to follow up with them every chance you get,” she says. “If you know something personal about them, if it’s their birthday or if you know their wife is in the hospital battling cancer, then you should acknowledge that. Or it could be just following up with them on something as basic as service request.”
Gone are the days of moving a resident in and waiting until 90 days before the lease expires to send out a renewal letter. Renewal opportunities begin from the moment the resident steps inside the unit. Every day presents opportunities to win them over for another year.
The renewal letter is still sent out about 90 days before the lease expires, but in an increasingly competitive market, managers will make contact with residents as often as possible. One key way to sweeten the deal is by offering some sort of incentive in those renewal letters to entice residents to stay.
With rents projected to continue growing, some managers believe offering incentives in their renewal letters helps retention.
Patty Holt, vice president of property management, says McLean, Va.-based Jefferson Apartment Group offers incentives that take a bite out the rent increase. Some money will be taken off the increased rental rate if a resident signs a new lease more than a month before their current lease ends, she says.
Meanwhile, Casio-Smith says FSRR offers thank you gifts on renewals at some properties.
“You want the renewal to be more than just about the rent increase,” she says. “So you want to give a token of your gratitude.”
Some of the company’s most popular incentives include one-time complimentary house cleaning or valet laundry service. And it’s easy to develop a relationship with the companies offering the cleaning services since they may garner new business from the apartment community through the renewal gifts.
“The great part is that typically we have relationships with these providers so they give our residents a discount (if the service is continued),” Casio-Smith says. “When they get introduced to that they get a little spoiled and may want to continue using the company.”
CFLane also offers incentives here and there for lease renewals. Haefner says when a property needs to spark some renewal activity, a short-term incentive program can be started and sent out to targeted residents.
“It’ll be something like if you renew your lease in the next week we will give you a $50 gift card,” he says. “It usually has a very short time frame with it to kind of stimulate and generate some activity. And then you can turn it off.”
Since turning an apartment over can cost between $1,500 and $2,000 depending on the property, Haefner would always rather keep a resident in place.
Unit renovations are also a big incentive that may sway a resident to stay. Instead of having to completely turn the unit, CFLane may offer upgrades to a resident.
Upgrading finishes and interiors will add value instead of wasting money on cleaning costs.
“It costs me close to a couple thousand dollars to turn the unit,” he says. “If I could save that same resident for $2,000 worth of upgrades I might as well do that. I’m going to lose that $2,000 anyway. So, by investing the $2,000 and keeping them, it will ensure I won’t have rent loss and I’ve just increased the value of my property too.”
Apartment features and finishes were the third most important amenities to residents who were unsure if they were going to renew their leases in late 2013, according to a recent Kingsley survey. Rental rates and location were the first two deciding factors in renewals for those residents, respectively.
Interior upgrades, such as accent wall paint, upgraded light fixtures or the addition of ceiling fans, seem to be the most popular kind of renovation that people prefer, Stanton says. And if that doesn’t convince someone to stay, there are other upgrade options as well.
“Making sure the residents are aware they have options to transfer on site is smart too,” Stanton says. “Maybe their personal life has changed and they want to transfer to a smaller or larger apartment. And in some of our communities we’ve upgraded the entire interior. So instead of moving down the street to a shiny new property, they opt to move into a fully renovated apartment.”
3 Factors Guiding Renewals
There’s no exact formula to guarantee a renewal. But while focusing on retention is always a best practice, it’s even more crucial in a market where rent growth is decelerating, and more new supply comes on line every day.
Houston-based Camden Property Trust manages more than 59,000 apartments nationwide. Yet, each community tweaks its retention strategies based on local factors, says Kristy Simonette, the company’s senior vice president of strategic services.
Here are the top three factors Simonette believes residents consider when deciding if they’ll stay:
Location versus community. It’s the age-old real estate adage, but it can be offset. Camden has 170 properties, and sometimes residents may not be satisfied with where a property is located in relation to work, school, or other commitments. However, Simonette says other considerations, such as amenities and community, can make up for this stumbling block.
“If you’re exceeding on all those other points, sometimes people will drive a little farther to work, or they will make some concessions,” she says. “If you’re just winning them over on the value of the community, [they may stay].”
Pricing transparency. The past four years have provided a great atmosphere for managers to push rent, but sometimes doing so drives residents to leave. The Camden staff encourages residents who are considering a move to shop around and compare prices.
“We offer fair market prices,” Simonette says. “We think that if our residents go out and shop and compare, they will find that we are fairly priced and competitive in the market. So many times, if you get a rent increase, it’s the sticker shock of it. We help our residents to understand, this is market price.”
However, sometimes people will leave anyway, and there’s nothing you can do about that. “Sometimes people can’t afford to absorb a rent increase,” she says.
Service. Residents want to be treated like valued members of the community. The Camden team strives to deliver excellent customer service across the board, from the maintenance staff to common-area amenities.
This is yet another lesson from the hospitality industry: Beyond the bricks and sticks, service with a smile goes a long way toward customer satisfaction.
Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.