Why a Strong Resident Retention Strategy is Important Now More Than Ever
With the end of the year approaching, and the impacts of COVID-19 still anticipated to sustain as we approach the winter season, resident retention has shown to be at an all-time high, particularly in the majority of top 50 metro markets of the U.S. Despite the relocation out of some major coastal cities with highest rents including places like New York, San Francisco, Seattle, and Boston, a lot of retention has resulted from concerns renters have faced over economic instability, job uncertainty, as well as stay-in-place orders while the housing market tilts in favor of sellers across many markets.
However, as landlords work to evolve around the shifting needs of their tenants to accommodate constraints from the pandemic, the overall anticipation for 2021 is that the apartment rental market should return to its normal pattern once virus concerns begin to subside.
Housing Market Recovery Projections for 2021
The competitionbetween leases and the housing market is expected by some to increase into 2021, as consumers have already began to adjust to the new way of life and find confidence in new routines. In a recent article from Housing Wire, two factors will play a role in preventing the instability in the markets like we saw in the Spring of 2020 as the virus was unfolding in the U.S.. The first is, confidence in treating and responding to COVID-19 as we have more readily available tests in supply and the anticipation of a vaccine in the near future. With residents and tenants gaining confidence over time, spending habits are expected to resume at a slow but steady pace as we inch closer to the threat of COVID-19 being behind us. The second factor includes historically low mortgage rates and the surplus of mortgage applications for younger millennial and Gen Z homeowners, despite theories that student loan debt would be a barrier from home ownership.
A Greater Emphasis on Quality Amenities Remains During the Most Challenging of Times
With the inneviteble recovery that might seem hard to imagine but not too far out of reach, many theorize that we will still expect a strong turnaround in time. In places like Hartford, CT, property development company Lexington Partners LLC has experienced positive growth at new luxury multifamily leased living spaces despite the pains to the industry overall. With the right recipe of newer, luxury living made available in a stale urban market of older housing, along with the pairing of the right amenities, good visibility, and priorities of renters in mind, their development has seen success.
Principal and President Mart Kenny of Lexington Partners notes, “When you have the right product that has the right amenity mix, the demand is insatiable. It’s definitely not for the faint of heart, but the bottom line is people need a place to live.”
In one example, the developers note that landlords and tenants have increasingly been interested in air quality and HVAC systems since the knowledge of COVID’s transmission being spread by water molecules, which is something that was never considered or asked about prior to the circumstances of this year. Purification systems like Aura Air, which filters out negative compounds and allergen particles have been shown to also filter out common virus and flu strains. To be able to offer residents the option of paying an additional monthly fee to have a unit that is outfitted with a purification such as this, is a way to put out current and future inevitable concerns of sanitation and cleanliness, a top of mind priority in the foreseeable future for residents and tenants in both residential and commercial spaces.
Less Leads for new Leases Justifies a Greater Emphasis on Resident Retention Strategies
Even with the success for groups such as Lexington Partners, more residents continue to stay put and retention is showing to hold steady across the majority of markets, as new leases that typically would generate revenue have declined. A study performed by Buildium revealed that 35% of property managers have seen a decrease in new leases, while only 18% have seen an increase. In addition, 28% of property managers are keeping rents flat on new leases or offering other concessions to attract new residents in this time.
Strong Resident Retention Tactics You Can Implement Today
For well established properties, many are not in a position with the means or capital especially in these times to be able to reconstruct units to accommodate modern concerns such as increased space and separation, filtered HVAC units and so on. To compound challenges Property Managers face, concessions such as waived deposits and free rent can easily impact net operating income in a negative way. A workaround is focusing instead on a strengthened retention plan that can provide added value and helps minimize losses.
With amenity spaces such as fitness centers and meeting areas also remaining dormant until further notice, there are still ways to provide tenants and residents the same added value from the comfort of their living spaces. Providing safe social events such as themed Trivia and Mixology nights over a virtual platform, as well as offering a virtual fitness programming for residents to enjoy from their living room, allow communities to stay active and healthy, while still allowing a sense of community interaction.
In some smaller amenity spaces, fitness classes and events can still be offered under proper CDC guidelines, but reinventing alternative, larger spaces such as vacant meeting spaces or larger rooftops and courtyards in warmer months can also provide a supplement to a virtual amenities offering.
Financial instability and uncertainty many tenants face that is the primary reason retention remains high. Therefore by keeping rents flat or offering a concession upon lease renewal paired with additional value-added and new amenity offerings can be a reasonable way to continue retention without a huge loss of current revenue.
While the short-term outlook is far from ideal in the interim for the multifamily and leasing industries (amid countless other industries), having a defensive strategy that centers around loyalty and flexibility while giving communities added value will provide residents and tenants with a lasting positive experience during a challenging time for all. The implications of a strong loyalty strategy can lead to future referrals, positive brand association, and overall stability through a challenging time, and like everything, ‘this too shall pass’.