“I’ve always believed in the basics of blocking and tackling and providing superior customer service, and the best way to get rent increases is to have satisfied customers,” Encore Multifamily’s Miller sums up. “We’ve proved over and over again in the apartment business that if residents can recruit or make friends, it creates a sense of community where renters are less likely to move out strictly because of cost. Social media is a continuation and enhancement of that.”
Even at the highest end of the market, there will be a push/pull dynamic at play when it comes to resident renewals, especially as market rents rise and firms attempt to differentiate themselves to current renters and new prospects. As prices spread out and concessions come to an abrupt end, residents are also likely to settle back into asset classes corresponding to their economic demographic, making asset-appropriate marketing and customer service efforts vital to rent competitiveness.
“When you go through a period of mass concessions, what you get is multiple segments of consumers living at your properties,” says David Doyle, president of Beverly Hills, Calif.–based high-end apartment ILS LuxeList. “As that unwinds, the more precise and targeted you are in marketing, the more capable you will be of achieving your highest rent objectives. Creating community will assist with that effort, because people who are connected to their neighbors are more likely to absorb rent increases than residents who are disengaged and detached from their housing experience.”
With community building and revenue management technologies plugged in, occupancies at a pricing power inflection point, and on-site personnel advised to reach beyond market comps at the expense of slight vacancy increases, the question remains: How high will 2011 rents get?
The answer, it turns out, is not a simple one to generalize: While improvements will be location dependent (see “Hot Markets,” on page 40), it is likely that all major markets will get a real rent boost. According to Marcus & Millichap’s Nadji, 2010 was the first time since 1990 that his firm registered a drop in vacancy rates across all 55 metros it tracked, and 2011 is expected to be strong across the board.
“2010 was the best market we have seen, and 2011 should stay the pace,” agrees Axiometrics’ Johnsey, who is expecting further improvements in apartment market fundamentals, with effective rent growth going from 4.4 percent to about 5 percent, and with substantial absorption along the way cutting a 6.5 vacancy rate down to 5.8 percent. “I’ve been in this business for 30 years, and I have never seen apartment markets this strong. It is astounding, and I think it will keep on going into 2011.”
