As Multifamily Continues to Soar, Operators Focus on Retaining Existing Residents

The multifamily space has been riding high over the last economic cycle, with rent growth in the double digits across most metro areas, vacancy at a record low, and properties trading at a historic pace. Apartment rent growth hit an eye-popping 18% nationally in 2021, and rents are continuing to rise at paces exceeding pre-pandemic norms in many parts of the United States.

But as competition in the multifamily space intensifies, Keith Kimmel says operators can stand out by going back to basics.

“Technology certainly matters – but taking care of the customer in a personal, caring way does too,” says Kimmel, president of operations at AIR Communities and a thirty-year veteran of the industry. “Providing homes is a meaningful job – we’re not selling widgets. These are places where people have some of their greatest life experiences: they get married, have a new baby, become empty nesters. We want our team members to think of this as a high-touch business, in which providing excellent customer service really matters.”

A strong commitment to service shows up on a company’s balance sheet as well, he says. In a feverish market, it’s common for operators and managers to focus on pushing new leases, especially since rents are high and they know vacancy is tight.  But Kimmel says AIR “really thinks residents who stay with us longer matter.”

At one AIR Communities property in the Northeast, an elderly resident was “beside herself” when her partner passed away during the pandemic. Rents had increased, and she couldn’t leave her home due to the health crisis.  A longtime, 40-year-plus tenant and a model resident, the 86-year-old told managers she feared she’d have to move.

“She was in a panic,” Kimmel says. “And we just said look, here’s what we are going to do. You’ve lived with us for forty-plus years, and we don’t want you to ever have to worry about this again. You’re 86 years old, as long as you want to live with us, we’re not going to raise your rent and you don’t have to worry about it. And that goes back to this idea that personal touches matter.”

Technology and Lease Renewals According to data from RealPage, renters nationally are renewing expiring leases far more than usual and at a rate nearing all-time peak levels. In August, nearly 55% of renters signed renewals at a typical renewal rent increase of 11%. Resident churn can also be costly for operators, resulting in increases of $1,000 to $5,000 per unit on turnover, according to the National Apartment Association. AIR Communities puts an emphasis on resident retention, with nearly 60% of residents renewing AIR leases YTD in 2022.

“When you’re looking at margins in this industry, they’re made up of a combination of factors,” Kimmel says. “Higher margins may not be the result of commanding the highest new lease rents or having a higher renewal rate; maybe you had lower turnover and therefore fewer expenses. And that translates to better margins and higher profitability for our shareholders.”

That’s not to say technology isn’t integral to the customer experience, however. When harnessed properly, it can improve the day-to-day experiences of residents, managers and team members. Artificial intelligence and machine learning can take on many of the mundane tasks that bog down property managers’ day-to-day operations and can help companies move to a more centralized staffing model.

Driving Satisfaction, Driving Profit But strong change management skills are critical to ensuring widespread adoption across multiple audiences. AIR Communities’ AIR Edge, for example, allows the company to measure renter satisfaction on a daily, property-specific basis. Every morning, team members gather to walk through every customer satisfaction survey completed using the platform, Kimmel says. The employees thus have a tangible stake in what their residents are saying about their performance, and are incentivized to provide more stellar service.

“And the bottom line is our communities are more profitable because of that commitment,” he says. “Tech for tech’s sake does not matter if it doesn’t make the resident experience better – and it can also make employees’ lives more complicated. We want to apply tech in a way to get more consistency in our business.”

Ultimately, Kimmel says, multifamily operators are in the business of building communities.

“Building community is just so powerful,” Kimmel says. “If you create a really exceptional living experience for residents who then want to stay with you longer, everyone wins.”