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NMHC Annual Meeting Review: The Next Chapter Starts

NMHC Annual Meeting Review: The Next Chapter Starts
I just returned from the 2021 NMHC Annual Meeting in San Diego (six months deferred from its customary time). I can't help but reflect on our industry's resilience and the rapid changes happening as we now have more than 62% of the eligible US population (12 and older) with at least one vaccination. First, we must congratulate Doug Bibby and the entire NMHC team for pulling off an amazingly successful conference. To my knowledge, it was the first face-to-face meeting of its kind since the pandemic started. The necessity of limiting this to 2,500 people became a strength as several veterans commented on how it felt much more intimate, much like the conferences in Palm Springs and Boca Raton before the event outgrew those venues. Having decided to put the event on long before we knew how few new cases would be coming each day, NMHC had strong protocols in place. In particular, there was a requirement to either validate vaccination status ahead of the conference or submit to daily testing. It led me to two observations about the post-pandemic world: If you're wondering whether the fear of breakthrough infections or other unknown variants will affect behavior, the answer for the moment is a resounding no. Once in the NMHC bubble, there were few masks in sight, other than on Hyatt and NMHC staff. Personally, I have been very risk-averse in the past 16 months, but I wasn't really bothered by this at all. Given my vaccination status and knowledge of NMHC's protocols,......
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7 Big Questions for 2021 Multifamily Leasing Season

7 Big Questions for 2021 Multifamily Leasing Season
Now that we're in the early stages of the leasing season, it's a great time to take stock of where we are with our sales platform. With 3-4 months of rising seasonality coupled with the economic recovery, this is the proverbial chance to make hay while the sun shines! Here are seven questions to ask yourself to be sure your teams will maximize this opportunity. #1: What is your sales model?  If you're not sure how to answer this question, you're probably leaving sales up to leasing agents' individual talents and skills. Or worse, defaulting to an old school "always be closing" approach. Maybe you're at least using a "feature-benefits" model and just don't think too much about the sales model. The truth is that our understanding of what really drives sales and the sales models developed from that knowledge have evolved over the past few decades. There are now a well-known set of skills that any motivated leasing agent can learn. And with a much more savvy and knowledgeable prospect base than ever before, an "always be helping" approach outperforms the more manipulative "always be closing" style.   #2: What is your coaching approach?  In 22+ years of working with operators, I've come to notice a very challenging fault line in our workplaces. On the one hand, developing salespeople requires a coaching paradigm. Just like coaches in sports (or in life), sometimes that involves handholding, and sometimes it involves some "tough love." But it always requires a focus on the person as a learner, working......
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Don't Miss The Biggest Opportunity of the Recovery!

Don't Miss The Biggest Opportunity of the Recovery!
It is becoming clear that we're in the early stages of what will be an incredible economic recovery, especially for multifamily rental housing. In this post, I will summarize the reasons to be cheerful about 2021 and the things that revenue managers should be doing now to capitalize on the unique opportunities that this recovery offers. First, the tailwinds There are so many tailwinds in current economic data. The recent additional $1.9T in stimulus included many things that will help us: the extra $1,400 in payments to most adults, tens of billions in specific rent support and perhaps most importantly, the $300 per week in supplemental unemployment insurance payouts. Then there's the progress of our vaccine efforts. Through April 24, almost 42% of Americans (52% of the eligible population 16 and older) have had at least one vaccine, with 35% fully vaccinated. While experts still say we need 75% penetration to get herd immunity, prior results from Israel indicate that vaccination rates approaching 40% have a material impact on the transmission rate.  Case numbers are also encouraging: the trailing-7 average of daily new cases is down more than 18% since the peak of what was initially feared to be a true 4th wave. Barring a new variant that defeats current vaccines, we are heading to the low rates of new infections that will support the near-complete reopening of all elements of our economy. Multifamily demand suggests that these trends are already playing out as demand surges into our high season. New......
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The Return of Pricing Power, And What You Should Do With It

The Return of Pricing Power, And What You Should Do With It
Spring is arriving, and revenue manager's thoughts typically turn not just to baseball but to sequential rent growth. Of course, this year is particularly uncertain given everyone's interest in how the COVID-19 crisis will affect us. I'm going to be bold and say that "Yes, we are seeing a return of pricing power," and those who recognize this earlier than others will reap the benefit of that insight. Why am I so bullish? Let's look at some macro trends and then share some micro data we've been seeing. Almost all of the macro trends are in our favor: Rent seasonality trends positive for at least the next 4+ months. Vaccine supply and distribution continue to accelerate. The Biden administration has increased its "first 100 days" target from 100 million doses to 200 million. According to Bloomberg, 143 million does have been given through March 28. We are averaging 2.71 million doses per day on a trailing 7-day basis. On current trajectory, that will rise to 3 million within the next 2-3 weeks. Roughly 94 million Americans have already received at least one dose as of March 28. That's 28.2% of the entire population (35.0% of the eligible population, i.e., 16 and older) This means about 49 million have been fully vaccinated Virtually all states have increased relaxed their rules, and the trends continue to move in that direction. On the micro-data front, we recently asked participants in our weekly downturn roundtable to share how much their lease-over-lease rent growth has changed: Several operators ......
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The Pros and Cons of Lease Terms Longer Than 12 Months

The Pros and Cons of Lease Terms Longer Than 12 Months
Over the past decade, there's been an increasing number of operators regularly offering lease terms longer than 12 months. It's part of a natural progression that I have observed over my 20+ years in pricing and revenue management in multifamily housing. When I first got involved with the industry, few operators offered leases shorter than 12 months (except through corporate housing providers. And when they offered shorter-term leases, they were typically limited to only 6- or 9-month leases. With the adoption of revenue management systems (RMS), it became possible to know mathematically what appropriate rents would be for various lease terms so that operators could be indifferent to prospects' choices. Sure, shorter-term leases increase vacancy loss and increase turn costs, but if the premium for those terms is high enough, then operators can be ok with that. How revenue management changed lease terms Operators began using these RMSs along with more sophisticated approaches to lease expiration management (LEM) to offer "best priced" rents for lease terms less than 12 months when they needed to. The objective was to use shorter lease terms to improve a property's expiration profile. However, prospects and residents didn't respond to the shorter lease terms as well as the operators offering them had hoped. That led to a substantial increase in the practice of offering longer-term leases. Prospects were much more amenable to accepting 15-18 month terms that moved the expiration than they were to 6-9 month lease terms. And with these longer-term leases came a decrease in frictional vacancy.......
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What Unit Amenity Matters More Than Square Footage?

What Unit Amenity Matters More Than Square Footage?
Over the past 10+ months, we've observed, blogged and presented webinars about this recession. We've compared our observations to our experience of the last couple of recessions. We've always tried to tie these observations to actionable tasks any multifamily housing operator can do to manage the downsides of this and leverage the upsides. One of the most curious quirks of this current downturn is the way that residents and prospects seem to be thinking about physical space, and there are important implications for operators. In the recessions of 2002-3 and 2008-9, prospects and residents generally became more price-sensitive. Larger units got harder to rent and highly amenitized units even harder than that. Yet, for the past several months of this downturn, smaller units have turned out to be much more difficult to lease, while larger units have been easier. Why is that? We believe a couple of things are playing into this. Once again: this recession is different First, as we discussed in our latest webinar, unlike past V- or U-shaped recessions, this one has been K-shaped. That means that the demographic attracted to A and B-class housing has suffered little if any long-term economic harm. They can still afford the larger homes, and in markets where rents have declined, they have been able to take advantage. In fact, with stimulus checks and "forced savings" from fewer opportunities to spend money on travel, restaurants and bars, etc., they can afford to spend even more on housing. Second, and perhaps more importantly, the pandemic is ......
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The K-Shaped Recovery: What it Means for Multifamily Pricing

The K-Shaped Recovery: What it Means for Multifamily Pricing
When the recession first hit so quickly back in March, pundits naturally and immediately began to predict what would happen as the country navigated the crisis. We got introduced to a litany of alphabet metaphors. Would we have the "V-shaped" we all wanted? Or would it be more of a "U-shaped" one? What about the "L-shaped recovery we all feared? As it has turned out, an alphabet metaphor has appeared to be appropriate, just not one of the ones that most people expected. It now seems clear that we are experiencing a "K-shaped" recovery, with growth for some and contraction for others. Various statistics have shown that high net worth individuals have grown their wealth in the past ten months, while those without significant assets have lost ground.   Highly educated professionals are doing much better than those with less education who rely more on services for the jobs. The most stunning statistics I saw was that, by September, jobs over $32/hour were back above their pre-Covid numbers while jobs under $15 an hour were still down 40% from that period.   What this means for rental housing The K-shaped recovery appears to hold true the rental housing industry in many other ways. For example: Single-family rentals have substantially outperformed multifamily housing Secondary and tertiary markets are generally seeing growth where many primary markets are down Suburban communities are generally experiencing significantly more demand than urban A-class communities are doing much better than C-class when it comes to rent collections This is ......
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Five Things to do NOW to Prepare for the Post-Vaccine World

Five Things to do NOW to Prepare for the Post-Vaccine World
As we enter this year full of hope (knock on wood) that there's no way that 2021 won't be better than 2020, there's still a lot of uncertainty around. Uncertainty over slower-than-expected vaccine rollout, new strains of the virus that appear to transmit more readily and simply the mental fatigue from 10 months of COVID-related stress will make for a challenging first half of 2021. While this will probably last longer than we hope, we are clearly in the "when, not if" stage of overcoming the public health crisis, which means we should already be planning for a change in economic conditions. Below we have identified five things we can do today to be prepared for a new beginning ahead of us, whether that ends up being April, June, August or later. Start communicating with your teams now Simply put, humans tend to solve last quarter's problems. Left to our own devices, we will realize the tipping point at least 2-3 months after it really occurs. There's a lot of good news to share and many reasons to be bullish. Conveying that sense of confidence will be (pardon the pun) infectious! If we explain to our teams why we're bullish and how they can see the signs that we're past the bottom, it will give them confidence. That confidence will positively impact both their own decision making and their communications with residents and prospects alike. Understand how to implement strategy changes in your RMS As we have said repeatedly since the start......
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5 Top Pricing Tips for Getting Through Low Season

MFH_LowSeasonHere we are about to go through the lowest part of our season, all while still dealing with pandemic effects. While there are clearly smoother seas ahead--improved seasonality and a likely exit from the public health crisis once vaccines are widely distributed--we still have 2-3 months of low season and several more before we can talk about the pandemic in the past tense. So based on more than 20 multifamily revenue management low seasons, here are five key things all revenue managers can do to get through these difficult periods: Adjust your Revenue Management System (RMS) parameters All of the off-the-shelf RMSs can be configured to implement different strategies for different times of the year and different business cycle phases. These are NOT "set and forget" parameters. The single best thing revenue managers can do for the low season is to be on top of changing to more conservative settings in the low season and then shifting to high season parameters at the appropriate time. The best time to make changes (and how big the changes should be) varies with the year and market. Proactively managing these settings is key to outperforming comp sets. Focus on the market, not the budget  Budgets matter, but they are forecasts based on a point in time that is essentially arbitrary. RMSs (rightfully) don't care about what we thought was going to happen "n" months ago; they are built to take all current state data into account and make decisions to maximize future operating revenue.  That said, revenue managers......
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COVID-19 Vaccines: A Multifamily Revenue Manager's Guide

COVID-19 Vaccines: A Multifamily Revenue Manager's Guide
The last few weeks have been quite the mix of bad and good news with respect to COVID-19. As the virus rages essentially out of control, increasing constraints being reimposed by state and county governments could reduce the pace of recovery and even risk putting us back into negative growth territory. Yet, amid these concerns comes some highly encouraging news about vaccines.  To summarize, Pfizer announced 95% efficacy and has filed for emergency use authorization with FDA. Moderna announced 94.5% efficacy and is likely to file for emergency authorization any week now. Lastly, AstraZeneca Oxford announced at least 70% efficacy, though possibly up to 90% depending on further trials.   With these highly encouraging results and numerous other vaccines under development, there appears to be light at the end of the tunnel. However, as we have all heard, there are enormous manufacturing and logistical hurdles ahead of us. So what does this mean for multifamily operators? When are we likely to see the benefit of these treatments accrue to our demand streams? First, do the math. There are roughly 330 million Americans, so let's say that 80% of us will need to be vaccinated to consider distribution to be widespread. That means we will need to inoculate 264 million people; since both vaccines require two doses roughly a month apart, we need 528 million doses. Since the Pfizer and Moderna vaccines are domestically produced, we'll limit our analysis to those two. Public reports indicate that Pfizer might get 20 million doses out......
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