Every property manager’s goal is to maximize revenue and minimize vacancy loss—a goal no one understands better than Andrew Lowe, Director, Residential Real Estate Management at Oxford Properties Group.
“In the apartment business, every day a suite is not generating income is lost income,” Lowe explains. “To that end, the art of balancing rate and occupancy is the challenge and creates a healthy friction.”
Lowe says that regardless of the company’s overarching strategy—whether it’s carrying a bit of vacancy to capture a higher average rental rate or keeping a building as full as possible to manage to a low vacancy level—there are four conditions surrounding vacancy that need to be effectively managed. Those four conditions are:
- Vacant, no income – the suite is currently unoccupied, with no future prospect
- Vacant, under renovation – the suite is in the process of being “turned” or prepared for the next incoming resident
- Notice to vacate – the suite will be leased back-to-back, with no revenue lost
- Vacant, leased – the suite is currently vacant but has been leased for a future date
Here are some key strategies Lowe recommends to help property managers better make use of these revolving scenarios:
1. Vacant, no income: Use this opportunity to personally inspect your empty suites. You can only “expect what you inspect.” If you are not inspecting, chances are the quality of the suite is not aligned with your prospects’ expectations. Front line leasing staff must have an intimate knowledge of the local market. Rental surveys and competitive shops should be conducted on a regular basis in order to remain competitive. Make sure marketing initiatives are current and driving traffic. Review prospect feedback with your leasing staff. Inquire as to what is preventing a rental—rate? Quality? Lack of incentive? It may require a fine tuning of rental rates, incentives, or product offering to ensure your property and the suite in question is positioned well to be rented.
2. Vacant, under renovation: When renovating a suite, set aggressive completion timelines. A large percentage of the population has a hard time seeing the end result, and as such, you may lose prospects—or lose them because you cannot meet an immediate move-in requirement.
3. Notice to vacate: Zero vacancy loss is the ultimate achievement. If back-to-back renting is part of your business strategy then make sure your leasing staff do not over sell and under deliver. Set realistic expectations during the rental stage. Explain what work will be outstanding after move in and how best to get temporarily settled until all work has been completed.
4. Vacant, leased: Establish maximum forward leasing timelines based on suite type popularity and lease to move-in lead time trends. The shorter the lead time or the greater the popularity of the suite type, the less likely you are to have a longer vacant, leased timeline. Typically, no greater than 30 days.
Lastly, Lowe says that in order to maximize occupancy potential, a successful leasing strategy should include an analysis of the market rents and incentives, and a rental grid with differentiated pricing in place. These practices need to be present to translate strategy into execution. Leasing staff must be well trained to sell; properly answer phone calls; show suites; have a complete understanding of services and conveniences within the area; and have knowledge of the competition and how the property is positioned in the market.