Given occupancies and healthy absorption rates despite lingering economic concerns, this should be another summer of super leasing in most multifamily markets. That is, if leasing professionals don’t have to spend a disproportionate amount of time managing renewals for existing residents.
“Leasing agents can spend up to 50 percent of their time on renewals,” says Chris Brasher, marketing manager for Provo, Utah–based Property Solutions, a provider of technology services to the multifamily industry.
In response, operators and their tech vendors have worked on developing a fully automated online renewal system that will enable leasing agents to focus more on prospect sales and service and less on managing future lease expirations. In 2011, Carrollton, Texas–based RealPage introduced an online renewal system developed in collaboration with Highlands Ranch, Colo.–based REIT UDR, which manages 60,465 units nationally. Meanwhile, Property Solutions recently announced a similar renewal automation capability within its property management software.
At UDR, online renewals are part of the completion of a technology platform that allows consumers 24/7 access to self-service leasing, maintenance requests, and account information. “We’ve really cultivated the online relationship with our residents over the past two to three years,” says UDR president Jerry Davis. “Now, 80 percent of our residents pay their rent online, and more than 80 percent submit service requests and sign renewals online.”
That’s right: UDR’s rollout of online renewals across the portfolio has seen an adoption rate surpassing 80 percent. What’s more, at properties where online leasing has really taken off, UDR is tracking turnover rates 2 percent lower than its portfolio average and says that 90 percent to 95 percent of residents are immediately accepting the initial rent increase offered by the system.
Renters—particularly at properties that have transitioned to online account management and customer service via online portals—have been waiting for online renewals since they signed electronic leases in the first place. “I think every one of these processes will be run through an online portal in the future,” says Scott Pechersky, VP of technology for Phoenix-based Alliance Residential. “Right now, we’ve got work orders and online rent payments, and we can’t wait for the renewal component.”
Austin, Texas–based CWS Apartment Homes, an owner/operator of 17,000 units, adopted a RealPage technology platform a few years ago but held off on integrating online renewals until recently. “Our residents began asking about online renewals as soon as we brought them through the electronic application process,” says Amy Loos, the firm’s revenue manager.
“When you think about renewing a lease, it’s a pain in the butt,” says Davis. “It’s like standing in line with 70 to 100 passengers who want to check bags just to get a boarding pass printed, when you can instead do that from your computer,” he says. “The majority of our residents transact a lot of their business electronically. So when you wonder if this was something that they were just waiting for, I think the answer is yes, they were. They jumped all over it.”
Better Renewals, Better Pricing
And if you thought automating the renewal process—particularly with rents generated from a revenue management algorithm—is going to improve rent optimization overall, you’d be right. Electronically generated offers have an immediacy that residents seem to respond to, particularly when dynamic pricing changes displayed via the software show a fleeting opportunity to lock in lower-priced rent deals.
Prior to activating its online renewal system, CWS would send letters 90 days in advance of lease expiration. CWS now sends an online alert 75 days in advance of a 60-day notice to vacate with an offer that’s good for 15 days. At 60 days, a new offer comes but factors in real-time market rents that sharply reflect the community’s demand curve. “So typically, that second offer is going up from the first,” Loos says. “And you’d be surprised how quickly the word on that increase gets around a community.” Heading into the summer leasing cycle previously, the firm’s turnover was at 55 percent; now, it has decreased dramatically, to 45 percent.
Just as feeding updated market comps into revenue management systems can improve resulting rent optimization, so, too, do the demand algorithms feast on more accurate and timely renewal information. “Everything is really about where your supply is at,” Loos explains. “So the revenue management becomes a critical component in terms of how you are forecasting your retention rate and new lease pricing.”
Englewood, Colo.–based Archstone, which owns and operates 72,996 units, has also picked up on the trend. “I think in the long run, all of the professionally run apartment companies are going to have fully functional online renewals,” says Archstone group VP of strategic systems Donald Davidoff. “It’s another brick in the edifice of being an easy company to work with.”