It’s July, which means the annual apartment summer leasing bonanza is in full swing. Most communities saw significant gains in occupancy and effective rents after a strong 2010, and absorption is healthy despite slow job growth. Indeed, by all accounts, this should be the summer of super leasing in most multifamily markets across the country. That is, if leasing professionals didn’t have to spend so much time managing renewals for existing residents.
“Between managing expiration matrices; sending out renewal letters; setting, staging, and meeting appointments; and processing paperwork, leasing agents can spend up to 50 percent of their time on renewals,” says Chris Brashear, marketing manager for Provo, Utah–based Property Solutions, a provider of website, marketing, and payment technologies and services to the multifamily industry.
With the zeitgeist of tech-enabled admin alleviation saturating apartment leasing models across the industry, apartment operators and their tech vendors have been hard at work over the past 24 months to develop a fully automated online renewal system that will enable leasing agents to focus more of their time on prospect sales and professionalized service and less time licking renewal envelopes and managing lease expirations that are four months away. In May, Carrollton, Texas–based RealPage announced the availability of an online renewal system developed in collaboration with Highlands Ranch, Colo.–based REIT UDR, which manages 57,988 units nationally. Meanwhile, Property Solutions has 10 clients beta-testing a similar system due out later this year.
At UDR, online renewals have been long sought after as part of the completion of a technology platform that allows consumers 24/7 access to self-service leasing, maintenance requests, and account information throughout the entire resident life cycle. “We’ve really cultivated the online relationship with our residents over the past two to three years, particularly getting people comfortable with using the resident portal,” says UDR president Jerry Davis. “Now, 80 percent of our residents pay their rent online. More than 80 percent submit service requests online, and more than 80 percent sign their renewal online.”
That’s right: UDR’s rollout of online renewals across the portfolio has seen an adoption rate surpassing 80 percent that mirrors successes seen by the REIT last fall during beta-testing of the technology. 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 approximately 90 percent to 95 percent of residents are immediately accepting the initial rent increase offered by the system as generated via the REIT’s revenue management. In fact, other than some basic marketing to residents, the outreach necessary to build resident adoption was minimal.
With the prospect of that kind of overwhelming adoption and minimal leasing agent time ahead of them, it’s no wonder multifamily firms are more eager than ever this year to sign off on online renewal rollouts.
Renters—particularly at properties that have made the transition to online account management and customer service via online portals—have been waiting for online renewal technology since they signed electronic leases in the first place.
“I think every one of these processes is going to be run through an online portal in the future,” says Scott Pechersky, vice president of technology for Phoenix-based Alliance Residential, which is aiming over the next six months to integrate LRO pricing optimization into the firm’s Yardi Portal system to provide online renewals for Alliance’s 47,000 units under management. “Right now, we’ve got work orders and online rent payments, and we can’t wait for the renewal component.” According to Pechersky, Alliance will complete the migration of revenue management as a strategic step to enabling renewals.
“Our residents began asking about online renewals as soon as we brought them through the electronic application process,” says Amy Loos, revenue manager for Austin, Texas–based CWS Apartment Homes, an owner/operator of 17,000 units that adopted a RealPage technology platform two years ago but held off on integrating online renewals until recently. “We simply turned on the system during our integration and testing period, and in less than an hour, one of our residents responded to the renewal prompt,” Loos says.
At UDR, which rolled out online apartment reservation in 2003 before flipping the switch on online renewals, Davis likens the traditional renewal process to obtaining a printed boarding pass for a flight from a gate agent, as opposed to printing via a self-service kiosk or downloading one on a smart phone, and says the upshot for efficiency and better transactional relationships between apartment owners and residents could be just as revolutionary. “When you think about renewing a lease, it’s a pain in the butt. You have to find time to leave work, which is usually when the leasing office is busy with traffic, and it’s like standing in line with 70 to 100 people 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 think automating the renewal process—particularly with rents generated from a revenue management algorithm—is going to improve rent optimization overall, you’d be right. Instead of paper renewal letters that are sent several months prior to lease expiration only to end up on resident kitchen tables and then in garbage cans, electronically generated offers have an immediacy that residents seem much more responsive 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 was sending out letters 90 days in advance of lease expiration with set pricing but little sense of urgency, resulting in most renewal captures falling closer to 30 days before expirations. With online renewals, the firm sends an alert out 75 days in advance of a 60-day notice to vacate with an offer that is good for 15 days. At 60 days out, a new offer is generated, but factors in real-time market rents (particularly from other residents who have already renewed) drastically affect 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.” Indeed, CWS has seen significant increases in renewal capture since going live. Heading into summer leasing last year, the firm’s turnover was at 55 percent; this year, 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 while still capitalizing on what is happening in the market.”
Englewood, Colo.–based Archstone, which owns and operates 57,474 units, might be next to bring a next-generation online renewal system to market. The apartment operator launched a renewal tool several years ago that was limited in capabilities and not promoted heavily among the user base. “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 does two things for you: It certainly eases the work flow, and my guess is that while it won’t eliminate people coming in to complain about their offer and wanting to negotiate, it will probably reduce that from happening. It’s another brick in the edifice of being an easy company to work with.”