There is no overstating the challenge of working in the apartment industry.
Not only do operators have to sign new residents and provide great service to current ones—and manage the countless array of tasks involved with both of those objectives—but they also need to stay on top of the many trends that will affect the performance of their communities.
According to Virginia Love, industry principal for Entrata, there are three major market dynamics that apartment owners and operators cannot afford to overlook. They are decreasing renter demand; a rise in leasing fraud; and the disruption caused by the entry of financial heavy hitters like WeWork co-founder Adam Neumann into the rental housing market. She provided a deep dive into the issues at the 2023 Entrata Summit session “Three Multifamily Trends You Shouldn’t Ignore.”
Love cited several stats to illustrate the recent softening of the apartment market, including slowing absorption rates, the expected delivery of 550,000 new units in 2023, and a 7.4% decrease in Google searches using the term “apartment.” Compounding the challenge of navigating a dip in renter demand is the extremely high turnover rate for on-site staff; industry estimates say it could be anywhere from 50% to 62%.
“That means we have an entirely new group of people on-site who have never been through a downturn,” Love said. “This whole generation has had folks just served up to them. This time last year was like, ‘Lease or don’t lease. I’ve got 10 people behind you.’ But the market’s getting a lot tighter, and demand is decreasing. We have to have a staff that’s able to handle that.”
Given the current market dynamics, it’s critical that operators “develop the hustle” in their leasing associates and get rid of any complacency they exhibit in their jobs, Love noted. “I go out to leasing offices now, and, when I arrive, I’ll stand there for four minutes,” she said. “No one there—nobody—says a word. And that’s very disappointing because I knew the hustle. I had to know the hustle.
“Start talking about the hustle. What are the things your leasing associates are going to have to do every single time to get somebody onto the property and then nurture that lead to become a lease?”
Among Love’s other recommendations for navigating a slower market: Simple changes add up. For example, operators should consider using the phrase “limited availability” instead of “now leasing” on their community websites. “With that one change, there is a lot more urgency” on the part of prospective renters, she said.
An Uptick in Fraud
In recent years, apartment operators have found themselves battling more fraudulent lease applications, in part because of the economic stresses and pressures many Americans are facing, according to Love.
“When inflation is high, fraud is high, because when you don’t make enough to cover your cost of living, you choose crime,” she said. “Fraud is crime.”
Fortunately, operators have several ways they can reduce the risk of falling victim to those seeking to fraudulently lease an apartment, Love noted. To start with, they should consider someone wanting to lease site unseen as at least something of a red flag. In addition, keeping up-to-date resident application criteria on a community website can discourage fraudsters.
“A lot of these applicants that are fraudulent are going to your website first and going, ‘OK, are they doing anything to prevent fraud? Are they going to check my ID? Advertise your application criteria: It’s very much a deterrent,” Love said.
Operators should also not accept temporary IDs and should exercise caution when an applicant does not have a credit history. Finally, they should avail themselves of fraud-prevention technologies that verify identity, income, accounts, and the availability of funds for rental payments, she added.
New Arrivals on the Scene
The third major trend examined in Love’s session concerns the arrival of well-heeled disrupters like Adam Neumann and Amazon into the rental housing scene. Neumann is launching the apartment firm Flow, while Amazon has a $2 billion Housing Equity Fund to preserve and create more than 20,000 homes for moderate- and low-income households.
Flow seems to be promising a unique, enriching living experience, as one of its major investors has described standard apartment living as “soulless.”
In the face of disrupters like Flow and Amazon, and the ongoing emergence of Generation Z into the renter pool, it’s time for the multifamily industry to look at the bigger picture, Love said.
“The biggest solution is asking yourself, ‘What does the consumer want?’” she said. “We’re all going to need to take a collective sigh and take a look and go do what we need to do as an industry.”