The Tough Get Creative

At this time last year, it was expected that the apartment sector would emerge in 2009 as the market-leading property type in terms of performance and investor demand. This has occurred, to a point-compared to its counterparts in the other property types, multifamily assets rank at the top of the list as the sector hurt the least by the recession. Yet the sector was still pressured by the surrounding conditions, and any improvements seen this year came with just as many costs. Demand continues to sink in the face of continued unemployment. To maintain occupancies, landlords first offered concessions and, eventually, outright rent breaks. That pushes already-dismal rent growth further into negative territory. In October, for instance, most of the public apartment REITs reported a collective 60-basis-point monthly decline in effective rents, according to Bank of America. The same is reportedly occurring at privately owned multifamily companies.By most accounts, 2010 is expected to be as bad, if not worse, than 2009, when it comes to revenue increases. The long-awaited recovery has been pushed even further back, to 2012 or even 2013.Whether it’s a slight pinch or a major blow, it’s fairly certain that apartment owners are feeling the pain of this downturn. Yet from what I’m hearing from some folks in the industry, many players are rising to the challenge by being innovative. I’ve heard of owner/operators that are aiming to boost occupancy by going after a specific section of the renter pool, like fashionistas or tech junkies, by designing their properties and amenities to cater specifically to those individuals. Some others have moved their marketing completely online, reportedly signing tenants sight unseen through Facebook pages.I even heard one landlord confess to how his firm cyber-stalks their tenants to find reasons to push them into a larger unit or increase rents. If, say, the tenant’s name pops up on a wedding registry, he or she may receive a call from the manager’s office “congratulating” them on the impending nuptials, followed by an offer for a larger unit versus a rent increase on their current studio or one bedroom.I’m sure most owner/operators don’t go that far (although it is pretty funny), but in tough times, you need to do what you need to do. Feel free to share your own interesting strategies or anecdotes.