There has always been a strange characteristic about revenue in multifamily housing.
We devote enormous time and energy to attracting new residents. We invest in marketing, websites, AI chat and other leasing technology because we understand that every new lease matters. One might be forgiven for thinking that new leases are a multifamily community’s only source of income. But of course, they aren’t.
As every multifamily professional knows, more than half of our revenue comes from residents already living in the building. Yet, curiously, renewals have never received a level of attention commensurate with their contribution to revenue. That appears to be changing, finally.
That observation is the starting point for a brand new white paper, “What Renewals Can Be,” which is published today. The paper studies a group of companies that are transforming renewals from what is conventionally an admin process into a strategic driver of portfolio performance.
The Scale of the Opportunity
The conventional approach to renewals has, for most of the history of our industry, involved printing a letter and pushing it under the resident’s door. Latterly, operators embraced email as a way to improve the process, but once the email is delivered, the steps to get residents to their decision have been ad hoc and not supported by any dedicated technology.
PMSs enable the sending and manual tracking of the offers, but most leasing offices still manage the renewal process through a versioned spreadsheet that has to be updated by hand.
The paper draws on the experience of operators who are fundamentally rethinking how renewals should work. The first lesson is perhaps the simplest: That renewals are mostly a process problem.
Today we focus a lot of time on the pricing part of the process, with stakeholders collaborating to generate and approve the offer. Property teams communicate the rent increase, and then we wait for the resident to make their decision, and that part turns out to be a big missed opportunity.
How Process Affects Outcomes
Most people’s renewal decisions have nothing to do with the renewal process, nor indeed anything else that the property did. But there is always some subset of residents whose decision to stay or go is marginal. And that cohort of renewals represents a risk based on the current process.
For a resident to finish renewing their lease, they must take multiple steps, some of which involve interaction with the leasing office. When questions go unanswered, or when residents hit “snooze” on the process, momentum is lost and the risk that they will find alternatives increases. The delay in learning the final decision also represents operational risk, as the property risks receiving too little notice to find a new resident, or to complete the unit turn on time.
We rely on individual team members amid the constant interruptions of the leasing office to manage these risks. Staff turnover makes things worse, as follow-up often changes hands between the offer and the decision. Add further complexities like the ever-increasing burden of compliance, and we see how the cost of inconsistency keeps growing.
As this new research demonstrates, it is by addressing the process systematically that companies are taking friction out of the process, shortening decision times and achieving levels of consistency that were previously impossible.
A Centralizing Function This would not be a 20for20 paper if we did not touch on one of the biggest operational trends of the last few years: admin centralization. Renewals have always been a property-based affair, but that is changing. Renewals are more complicated than other centralized processes, but standardized workflows are making it easier to manage large portfolios consistently.
As with most admin processes, once they fall under dedicated teams, further improvement opportunities start to emerge. A digital process and user experience start to build a rich source of information on how residents interact with renewal offers. One of the more interesting themes explored in the paper is how the digital record is enabling operators to understand resident intent.
That improves several things: better forecasting is an obvious one, as it benefits pricing and marketing. It also changes the decisions that properties can make about how they focus follow-up activities, and what they can do when it looks like a resident is likely to say “no.”
If renewals have historically received less attention than new leasing, the companies featured in the paper suggest that imbalance is beginning to change. The full paper explores their experiences in much greater detail, together with the operational data that underpins many of their conclusions.
Retention has been a big theme in the challenging markets of the last few years. “What Renewals Can Be,” reveals that there is a lot more that most companies can do to grasp this strategic opportunity.
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