While rents grow at an unprecedented pace so do payrolls

 

While rents grow at an unprecedented pace, so do payrolls. Apartment operators are fighting to retain and hire talent, and that's a win for community managers, leasing agents, and maintenance technicians. Apartment payrolls have surged by 12.6% in 2021 -- lifting the average increase in the COVID-era to 8.9%. By comparison, payrolls grew by an average of 3.2% annually pre-COVID.

Property management is certainly not unique in that regard. For all the (much warranted) talk about inflation, it's often lost that WAGE GROWTH plays a key role in inflation. Businesses are spending more on their top asset -- their people. And while salaries do not necessary keep pace with costs for every worker in every sector, most apartment staff are likely seeing wage growth above the national norms. We're hearing all the time how much property managers are fighting for talent. Your competitors are trying to lure away your best people. You're sometimes pulling from hospitability sectors to find potential leasing agents with no direct industry experience. And you're doing all you can to incentivize your best people to stay. Pay is a big piece of it, but not the only piece. It's also work/life balance and job duties -- relying more on technology and centralization to free up your on-site teams to focus on the highest-value tasks: leasing out units and taking care of residents. On-site teams are people/people ... this is what they want to do. Back-office work is burnout work.

Many property management companies are also operating with fewer people on-site, but that makes those remaining roles all the more valuable (and more expensive).

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Source: https://www.linkedin.com/posts/jay-parsons-a7a6656_propertymanagement-apartments-wages-activity-6909501365589319680-1QiQ?utm_source=linkedin_share&utm_medium=member_desktop_web

 

https://www.creconsult.net/market-trends/while-rents-grow-at-an-unprecedented-pace-so-do-payrolls/

A Blended Approach to Resident Prospecting

For some companies, ILS and Craigslist still offer the best way to get in front of prospects.

While geo-mapping and SEO optimization are apartment marketers’ shiny new toys, going back to the basics can serve managers well.

“We are going old school,” FPI Vice President Vanessa Siebern says. “We are spending a lot of money in ILS and we are going to back to the basics with Craigslist. We are really sharpening our curb appeal and putting up some great banners.” Shortly after talking about her low-tech strategy (great banners), Siebern acknowledges that FPI is making a major foray into geo-targeting and SEO at selected communities, especially lease-ups. That balance of traditional and cutting-edge is something other firms are also implementing. Heading into spring, Trion Properties sent out an email blast with a limited time only “Spring Special” concession to all leads it received during the past three months through its various leasing platforms. Make no mistake, Trion still leans on grassroots outreach to find new residents.

“Our property managers are heavily involved in outreach, staying on the pulse of their local communities and handing out flyers at local events,” says Max Sharkansky, Managing Partner at Trion. “We are also running a Resident Referral Program, which includes a $500 rent credit to each existing resident who refers a new one.”

Time sensitivity also still sells. Trion is running a “Look & Lease” special at its lease-up properties. “Prospective residents receive an extra concession for touring a unit, applying, and getting approved in the same day,” Sharkansky says. “This has helped us to ‘lock-in’ residents faster than we would otherwise, and reduces the chance of losing prospects who have toured our community to a competitor.”

Part of the necessity for marrying both types of marketing comes from the sheer age range of people who rent now. With Baby Boomers, Gen X, Millennials, and now Gen Z renting apartments, a one-size-fits-all strategy will not work.

“We have to understand our audience and how to communicate with them,” says Tina West, CPM, Chief Operating Officer for Capstone Real Estate Services. “Specifically, with Millennials, we have to work on how responsive we are and creating opportunities for online chat, text messaging, and online call centers that are really the digital call centers. We are really trying to capture their values in short videos and chats—trying to connect with them in the way they communicate today.” But having great curb appeal and traditional forms of marketing also matter.

“We are always doing our tried-and-true and what works for the rest of the audience,” West says. “We have to spread our net wide and far and create any opportunity we can to get in front of our customers.”

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Source: A Blended Approach to Resident Prospecting

https://www.creconsult.net/market-trends/a-blended-approach-to-resident-prospecting/

Multifamily Market Polarized by Renter Incomes

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The pandemic’s second year witnessed a robust rebound in rental housing demand, which reduced vacancies and propelled rents higher. Lack of for-sale inventory kept many higher-income renters in their apartments, while the same lower-income folks who suffered the greatest COVID-related job losses were also most rent-burdened. That sober reality has heightened the need for a fully-funded housing safety net, which must take into account safeguarding existing housing from climate change threats.

These were among the issues discussed during the “America’s Rental Housing 2022” webinar, a Joint Center for Housing Studies of Harvard University panel discussion moderated by Vox policy reporter Jerusalem Demsas.

Expert panel

Offering their perspectives were panelists Peggy Bailey, senior advisor on rental assistance, Office of the Secretary for the U.S. Department of Housing and Urban Development; Calvin Gladney, president & CEO of Smart Growth America; Chris Herbert, managing director of the Harvard Joint Center for Housing Studies; and Kara McShane, managing director, commercial real estate for Wells Fargo.

Necessary policy considerations were top of mind for Bailey, who emphasized setting in place intentional policies that at the least subsidize rent and create the right incentives to develop affordable housing along with higher-end rental units. “We can internally look at things like the affordable housing assistance we currently employ,” she said. “We must look at how do we align our programs at HUD to get those pieces of the affordable housing capital stack working better, ensuring it’s easier to create affordable housing.”

Asked what banks can do to address the lack of affordable housing, McShane noted the affordable crisis is one of supply.

“So whatever we can do as a bank to increase supply and preserve the housing stock we have is what we need to do,” said McShane. “We need a solution from both government policy and the private sector . . . We need to partner together in the private sector, not just big banks but big tech, to create and preserve housing.”

Climate change

Keeping renters in their homes given the increased threat of climate change is a matter, Gladney opined, of the need to “stop doing dumb things.”

Continuing to build in flood-prone zones and in places where it’s recognized homes may burn to the ground are among those ill-advised moves, he added. “We allow things to happen in the market to put renters in harm’s way, and we need to stop doing that.”

Noting the difficulty of building multifamily housing in many places, especially in suburban areas, Herbert said states must take bigger roles in mandating zoning for denser housing within communities. “We can also lean into how we can build housing that’s more affordable,” he added. “Design professionals must be brought into how housing can be designed to make more efficient use of space.”

Another way to overcome resistance to denser development is to design multifamily housing that looks more like single-family housing, Gladney said.

Putting the capstone on the discussion, McShane stressed the need for partnership and collaboration. “One company or organization is not going to get it done,” she noted. “We all need to come together and keep people in homes they can be proud of.”

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Source: Multifamily Market Polarized by Renter Incomes

https://www.creconsult.net/market-trends/multifamily-market-polarized-by-renter-incomes/

Chicago apartment market shows no signs of cooling off

 

The new report, released yesterday, shows that Chicago apartment rents had by the end of January increased by 15.6 percent when compared to the same month a year earlier.

Apartment List reports that the median rent for a one-bedroom apartment in Chicago stood at $1,265 at the end of January. That median figure rises to $1,395 for a two-bedroom apartment in the city.

For the entire state, median apartment rents have jumped 14.2 percent on a year-over-year basis. For the entire country, that year-over-year increase is 17.8 percent.

Not all areas of Chicago, of course, are seeing rents rise at the same rate. Apartment List reports that median apartment rents in the suburb of Lombard were down 0.9 percent on a year-over-year basis. The median rent for two-bedroom apartments in that suburb is $1,919, while one-bedroom units have a median rent of $1,438. Naperville has the most expensive rents among larger cities in the Chicago area. Apartment List reports that the median rent for a two-bedroom apartment in Naperville now stands at $2,033.

And the cheapest apartment rents in the Chicago area? You’ll find those in Waukegan. According to Apartment List, the median rent for a two-bedroom apartment in that suburb is now $1,212.

While renting an apartment in Chicago isn’t cheap, units are less expensive here than in many other comparable cities. San Francisco, for instance, has a median two-bedroom rent of $2,681, more than one-and-a-half the median two-bedroom rent in Chicago.

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Source: Chicago apartment market shows no signs of cooling off

https://www.creconsult.net/market-trends/chicago-apartment-market-shows-no-signs-of-cooling-off/

Rates Jump to New 2-Year Highs After Fed Announcement

 

Fed policy is critically important to interest rates and January has marked a shift in the Fed policy outlook.  In not so many words, the Fed sees itself hiking rates and decreasing its bond purchased more quickly than previously expected.  It has conveyed this in various ways since the beginning of the month.  Today's policy announcement and press conference were just the latest iterations.  They were also arguably the least equivocal.

Despite the relatively clear communication from the Fed in recent weeks, financial markets were increasingly laboring under the misapprehension that the Fed would take a softer tone in light of recent market drama.  In other words, stocks have dropped significantly and rates spiked to 2-year highs as the Fed began its communication push this month, so perhaps they would "communicate" in a more market-friendly way today.

While it's not uncommon for some market participants to hope for such things, it was never very likely in this case (one of the reasons I reiterated that the Fed is not tasked with babysitting the market in yesterday's commentary).  True to form, the Fed paid zero attention to recent market movement.  In their view, rates are still low, and asset prices are elevated.  If anything, they feel they need to hustle when it comes to hiking rates and decreasing bond purchases.

Bottom line, the market was a bit flat-footed heading into today's Fed events.  When the Fed stuck to the tightening script rather religiously, rates were forced to snap back to the reality they'd previously done a good job of understanding.  Case in point, Treasury yields and mortgage rates are both very close to levels seen last Monday.  Mortgage rates just happen to have edged slightly higher, thus earning the dubious distinction of "highest in 2 years."

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Source: Rates Jump to New 2-Year Highs After Fed Announcement

https://www.creconsult.net/market-trends/rates-jump-to-new-2-year-highs-after-fed-announcement/

Apartment Residents' Preferences Driven by Remote Work

 

NMHC/Grace Hill renter preference survey sheds light on how the pandemic has affected resident behavior.

Teleworking factored significantly in renter preferences, according to a survey released last week by NMHC/Grace Hill—a trend that is expected to carry into 2022 and beyond. The desire for single-family rentals also made the list.

The NMHC/Grace Hill 2022 Renter Preferences Survey Report featured input from 221,000 renters living in 4,564 communities nationwide, with data available in 79 markets.

One-quarter of all moves tracked were specific to changes in teleworking.

“Whether digital nomads looking to join a flexible membership club, pet amenities dog owners won’t rent without or the insatiable appetite for more packages, the NMHC/Grace Hill Renter Preferences Survey reveals all that has changed since 2019,” Sarah Yaussi, Vice President, Business Strategy, NMHC, said in prepared remarks. “And what we’ve seen overall are renters reporting a great desire for more space, better amenities, and in-home creature comforts.”

The survey was a topic of conversation last week during NMHC’s Annual Meeting in Orlando.

Home is Now Sanctuary

Now more than ever, home is proving to be a sanctuary, and renters have a great desire—and are willing to pay a premium in additional monthly rent—for certain amenities. Reported features with the highest share of renter interest, and their associated additional average monthly premiums, include:

• Washer/dryer in-unit (92% of renters interested / $54.73 monthly premium);
• Air conditioning (91% / $54.73);
• Soundproof walls (90% / $46.21);
• High-speed Internet access (89%; $47.93), and
• Walk-in closet (88%; $43.46).

Give Them Their Space

All the lockdowns seemingly led to a strong desire for additional space; 28% of renters who said they intend to move to a different rental community when their lease expires cited “additional living space” as a reason, up from just 19% two years ago. This was the third-most-common reason for wanting to move after “seeking lower rent” (49% of renters) and “seeking better community amenities” (29%).

When asked which types of rental homes were considered during their last home search, traditional apartment homes garnered a majority of responses (57%). However, townhomes and single-family rentals were also in the mix at 23% and 19% of responses, respectively, supporting the desire for more space and validating industry and investor eyes on these property types.

Special Delivery

While many kept venturing out to a minimum, the need for goods to be delivered increased. The share of renters who received two or fewer packages per month dropped from 45% in 2019 to just 24% this round. Conversely, the share who received three or more packages per month increased from 55% to 76% over the two-year period. And the share of renters who received perishable items several times a month or more nearly doubled from 9% in 2019 to 17%.

Market-Level Nuances

“It’s important to note that, beyond national trends, there are several market-level nuances affecting renter preferences,” said Kendall Pretzer, CEO of Grace Hill. “National data paints an overall picture for the industry, but it is vital for operators to keep a finger on the pulse of each individual market in their portfolios. Trends vary by region, by state, and by municipality, and may stray significantly from national averages. A program that regularly polls prospects and solicits resident feedback is essential to successfully meeting renter preferences and expectations.”

For example:

• A gear wall, for home storage and organization, is a sought-after home feature in Honolulu, where 45% of renters say they are interested or won’t rent without one.
• Rental dwellers in Savannah, Ga., show the least interest (11%) in a gear wall but show more interest than any other market in a makerspace/DIY room (39%).
• There is interest in hot tubs in Boulder, Colo. (70%) than in Philadelphia (41%).
• Covered parking is more important in Minneapolis (80%) than in Gainesville, Fla. (47%)

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Source: Apartment Residents’ Preferences Driven by Remote Work

https://www.creconsult.net/market-trends/apartment-residents-preferences-driven-by-remote-work/

Drilling Down Into the Hot Apartment Submarkets

Areas near Phoenix and Dallas are poised to perform well in 2022.

There are hot apartment markets such as Phoenix and Dallas projected to do well this year, but understanding the fundamentals in those areas’ key submarkets can prove even more valuable to investors and developers.

Much has been written about the scorching hot Phoenix market, for example. Greg Willett, Vice President of Marcus & Millichap’s Institutional Property Advisors (IPA) multifamily research, points more specifically to its nearby cities such as Tempe, Chandler, and Gilbert on the west side of metro Phoenix.

Development is the heaviest downtown and in West Valley suburbs such as Glendale, Ariz., according to Marcus & Millichap’s report. Net absorption surpasses 19,000 units, the highest annual total since at least 2000. Still, the record-setting wave of supply results in a slight vacancy increase to 2.8 percent.

Rent growth will settle from last year’s 21.9 percent gain but remain strong. The mean will jump to $1,630 per month in 2022, aligning with the 2016-2020 annual average growth rate.

More buyers pursue Class B and C assets Downtown and in North Phoenix. These may better align with the budgets of some renters in the area amid a wave of new modern facilities.

A Closer Look at Dallas

Likewise in the Dallas metro, Willett said nearby locations such as Frisco, Allen, and McKinney on the north side of metro Dallas were ones to watch.

Amid rapid population growth and household formation, assets in Dallas-Fort Worth are attractive to investors throughout the world, according to the report.

“The sizable field of buyers eager to acquire properties in the Metroplex is pushing up sale prices and compressing yields. From 2013 to 2020 the mean sale price increased by an average of more than 10 percent per year, a trajectory sustained in 2021.

“The average cap rate also dipped below 5 percent for the first time on record last year. Many buyers are following household formation trends to North Dallas suburbs, with deal velocity ramping up in locations beyond Interstate 635 like Carrollton, Frisco, and Garland.

“Areas that will receive the most new supply include Frisco, South Arlington-Mansfield, and Intown Dallas. Following a 190-basis-point drop in 2021, downward vacancy movement continues this year as net absorption exceeds new supply. The rate will fall to a two-plus decade low of 3.6 percent. It will be difficult to mirror the 12 percent gain from last year, but rent growth in 2022 will be the second-fastest in the past six years.”

The mean effective rate will reach $1,395 per month, Marcus & Millichap forecasted. Competition for assets in North Dallas suburbs, Downtown, and in the Mid-Cities will lead buyers to search farther out. Denton, McKinney, and Waxahachie may offer compelling prospects.

Willett added that key suburban job centers across the entire state of Florida continue to perform well.

Looking Elsewhere

“Performances lagged to some degree in most urban core settings across the country, but even the worst-performing neighborhoods generally made progress viewed relative to 2020 results,” Willett said. “By the end of 2021, the only places where rents had not fully recovered to pre-pandemic levels were in the San Francisco Bay area and select neighborhoods in metro New York.”

Marcus & Millichap this week released its full 2022 apartment market forecast, citing Orlando and Las Vegas as its best bets overall for 2022.

 

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Source: Drilling Down Into the Hot Apartment Submarkets

https://www.creconsult.net/market-trends/drilling-down-into-the-hot-apartment-submarkets/