How Multifamily Real Estate Professionals Can Embrace The Softening Market
How to keep your career, business, or clients thriving despite the current macro headwinds.
For those of us in the multifamily real estate sector, it can be easy to think we’re immune from larger market shifts because everyone needs a place to live. However, in today’s softening market, combined with a challenging macro environment, there are factors impacting multifamily in complex ways.
Increasing interest rates are driving up the cost of capital, and the cost to acquire and hold properties is rising. Meanwhile, property values are softening and cap rates have jumped. There are also the developers and owners who bought properties too high. The negative impact of these factors is evidenced by multifamily properties’ declining transaction volumes. By the end of Q3 2022, sales volume decreased 21.3% to $74.1 billion, down 17.2% from the previous year.
What these macro changes mean for individuals within the multifamily industry depends on their roles. Particularly, multifamily property decision makers, vital on-site leasing professionals and industry technology suppliers will need to adjust their approaches to work to survive the softening market.
Multifamily decision-makers should optimize systems and team roles.
The current multifamily real estate market demands that property leaders and decision makers run their businesses with greater efficiency, reduced costs and a prioritization of lifetime customer value and renter experience. Two strategies these leaders can put into place to better support their businesses are centralization and role specialization. These work together well to help businesses operate with greater efficiency. For example, Essex Property Trust shared that it’s realized 35% time savings for team members by centralizing operations.
In a centralized operating model, teams are organized to handle specific detailed workstreams, while automation and AI technology manage rote administrative tasks. This tandem support leaves on-site teams free to engage in high-value, in-person interactions with renters. Then, team members’ roles can be narrowed to focus on specific task categories.
To begin implementing these strategies, leaders should consider the operations required to manage a single community, then build categories of work based on the operations. In my experience, common categories are sales, tours, application processing, lease signing, maintenance, resident services and renewals. Then, for each category, leaders should determine which team roles should handle those categories today. Making this kind of companywide assessment can help leaders determine what is and isn’t working with their current operational model and how to make changes that improve efficiency.
On-site leasing professionals should focus on growth opportunities.
With 22 million apartment homes in the United States, comprising around 160,000 communities, on-site teams are essential for taking care of prospective renters and current residents. For on-site professionals wanting to grow their career—particularly entry-level team members—current market conditions are actually a great time to start evaluating their goals and determining how to pursue them. Thinking about things like the company they work for and the tools that support their success are vitally important to scale these professionals’ impact as industry contributors.
I encourage on-site professionals to look at multifamily management companies that offer specialized roles and clear career paths. These companies are more likely to utilize tools and processes that allow you to prioritize valuable tasks like in-person tours, answering nuanced questions and closing leases. It’s also important to find companies that support your professional development. Does leadership encourage questions and feedback? Is there a mentorship program? Are these opportunities for expanding knowledge around leasing best-practices and sales strategies? Knowing these answers can help leasing professionals ensure that their success will be nurtured, even in times of economic uncertainty.
Service suppliers should start thinking next level.
Over the past three decades or so, the 1-to-100 multifamily operating model (where there’s one on-site management team member for every 100 apartment units) has remained relatively unchanged. But considering all the services multifamily technology suppliers can provide—from websites to electric vehicle chargers to operational efficiency—it may be time to focus on offering solutions that empower operators to centralize.
This is a little bit of tough love, but suppliers need to consider whether their solutions will be a prerequisite in five years or be obsolete. Research what multifamily industry leaders are adopting to run their business with more efficiency. This will allow you to understand what offerings are a need-to-have investment in a tight market.
Change is inevitable, and at the end of the day, what matters most is knowing your residents and how to support them successfully. No matter your position within the multifamily family, embracing operational changes will propel both your career and your business forward.