“Life moves pretty fast.” So said the wise philosopher Ferris Bueller in the 1986 classic movie.
I can’t help but think of that line sometimes when thinking about apartment rental rates. They move pretty fast, too. In fact, they’re changing on an almost daily basis.
To make the most effective decisions regarding pricing and concessions, apartment communities need access to real-time rental rate data, or something extremely close to it.
The problem is, though, many operators are relying on data that – especially in the lightning-fast world we live in now – seems downright out of date.
Operators rely on a number of data points when trying to determine how rates for their communities compare to the competition. These data points include everything from market rent, concessions (upfront and/or amortized) for each unit type, occupancy and leased percentage, traffic and leases, amenities, etc.
Similarly, and to help ease the process of gathering all these data points, operators sometimes turn to market surveys compiled by third-party research organizations. These surveys are usually conducted at the market level and then a regression analysis is performed to determine submarket data. While this methodology seems to offer the most robust and logical look at how an entire market or metro is performing there are two key areas of concern: 1) the survey data is, in the best-case scenario, 30 days old and 2) the surveys don’t provide true insight into the surrounding submarket, let alone at the property/comp level.
It is also a common practice for research firms to collect market data through a variety of tactics including ILS scraping and cold calling properties within a market. These practices can result in erroneous data sets due to inaccurate ILS listings and timing needed to conduct property calls.
Onsite Team Efforts
In an effort to combat the potential pitfalls of third-party market surveys, communities also leverage onsite associates to research rental rates and vacancy data for competing properties. This manual process is also problematic. First, it can take awhile for associates to actually get in contact with someone who will give them the information. Furthermore, there is an assumption that the person on the phone is providing the most accurate information – which unfortunately is not always the case.
Also, overextended associates are understandably prone to human error when gathering this data and inputting it manually into market survey spreadsheets. Finally, by the time rental rate information has been gathered and the resulting spreadsheets have been compiled and passed, the data within the spreadsheets is often out of date.
Put simply, the methodologies used to collect and manage comp data in the multifamily industry today are seriously flawed. So the result is poor pricing and management decisions that cost millions if not billions of dollars in revenue.
The Benefits of Real Time
Furthermore, it’s time for operators to commit themselves to put automated processes in place that allow them to gather and analyze real-time rental data about the submarkets in which their communities are located.
When they have access to this type of data, they develop a true understanding of how their properties are actually competing within their submarkets. As a result, they can make effective, relevant decisions about pricing that reflect where their competitive set truly is at that point in time. In short, they can be sure that their pricing is never too high – or too low.