Market data collection strategies, including the collection of public versus private data, has dominated the headlines over the past few years, so I asked Clay Llewellyn, COO of Income Property Specialists, to discuss their market data strategies.

In this interview, Clay discusses how they evolved their market data strategies over time from manual collection, revenue management systems, centralized data collection, and finally external provider, ApartmentIQ.

How do we pick companies to talk to?

Brent Williams: Hey everybody. Thank you for joining me today. Today I have Clay Lewellen, COO at Income Property Specialists, and we're going to talk about market data and jump back into the way back machine and talk about what we did years ago on getting comp data. And then we're going to go through time and find out how they experimented with different approaches to getting market data and where they are at now.

So Clay, thank you so much for joining us.

Clay Llewellyn: Yeah. I really appreciate being here. Thank you for the invite.

Brent Williams: I'm going to maybe get a little nostalgic as we talk about some of this stuff because I remember back in my leasing consultant days, years and years ago, about calling up comps.

You call, saying, "what are your rates?" And there were a host of issues there, but let's walk back through that process. So tell me about what you all were doing several years ago on that process, and we'll see if it matches up with what I had to do.

Clay Llewellyn: Sure. Yeah. So I remember when I first started the industry, we had to do all of our market survey calls on a regular basis, usually at the beginning of the week. You figured out which leasing agents at the other properties you're talking to were going to cooperate on the information that they were providing. And it was always just very manual.

"Hey, what do you have available right now for your one bedrooms? What are we looking at?" And those comps were pretty much set at the corporate level. And so there wasn't a whole lot of art to it. I think it was just very scientific. Here's the data, this is what we're looking at and figure it out from there.

And so when I moved over to Income Property Specialists about 10 years ago, we were doing the same thing still. Everything was very manually conducted. You have your comps that you're used to, that that tenants are moving back and forth from, and it was a lot of concession driven data. When there are rate changes, you can get a sense of where their issues were on their occupancy. If it's all one bedrooms, all two bedrooms, whatever that may be, it tells a story. And so that was a very tedious and frankly inaccurate process.

And so we're always looking for better ways to find market.

Brent Williams: I remember you get some data and you're like, there's no possible way they're leasing these rates. They didn't want to tell us concessions or anything. They're going to share the market rate and it's like, there's no way.

Obviously accuracy. It's so funny because now, know data accuracy is such a big topic, but man, there were so many issues that came into that. There's a lot of challenges with that. Also the time it takes to go through that process every time. They don't answer, you have to call back.

So let's walk forward just a few steps and you want to find a better way. What was your next step?

Clay Llewellyn: Yeah. So before I was with before IPS we had used a revenue management software.

And as IPS was growing, I just realized that the manual process really just wasn't working for us anymore. And so we engaged with that same revenue management tool and I think it's easy to fall into the path of least resistance when you are conducting those market surveys.

And I think that probably a lot of our staff were just calling the properties who they knew were going to answer and give feedback. There's a lot of selection bias and didn't encapsulate the entire market data that really would've given us the information we needed to make good business decisions.

And so pushing towards an automated revenue management platform, in 2018 or so, allowed us to not just get specific information from specific properties that we've identified as comps, but also larger market data of that neighborhood and of that area to show where the rents were going up, down, staying flat, where concessions were coming in.

And obviously because it was an automated process, we took a lot of the man hours out of the equation and just relied on the computer to tell us what we needed to do. And, of course then we had we had automatically seen a pretty significant uptick in, in in leasing activity and a downward trend on vacancy loss.

So there was a pretty significant cashflow upside on leveraging that technology.

Brent Williams: And so then since then you've pivoted again. I think you brought it back manual again so walk us through there.

Clay Llewellyn: Yeah. As I'm sure many of the listeners are aware that the private data market survey, the revenue management platform, relying on private data got the industry in some hot water.

For the benefit of ourselves, our clients and the liability exposed and just a sense of obligation to the general public who are relying on where housing prices are, we brought it back manually, brought it back in house. I want to say this is around 2022 or so, and so for a good number of years, we were relying on automated market survey.

In that time, there was a lot of turnover in our onsite staff. It's a kind of turnover heavy industry, and so it wasn't necessarily unexpected, especially at that time, a lot of people were deciding that the industry wasn't quite for them. And so it was definitely a burden going through and retraining and training from the jump for a bunch of our onsite staff who had never done a manual market survey before.

They had been so reliant on the tools that all of a sudden kind of overnight became unavailable for them. That it was a bit of a challenge and the easiest thing to do for our managers, we talk to them about, "Hey, I need you to find, give me a handful of, five to seven comps for this property."

The easiest thing to do is look across the street, down the street, hey these properties are near, are nearby, and that's not necessarily where you're losing your tenants to.

Brent Williams: Yeah. Their search approach is completely different than that. It may be some element of, Hey, we're driving the area and they see something.

But a lot of times they're searching online and that's going to filter it down. And I think what's really interesting is this idea of adding in a task that, again, rewinds the clock. When we were doing market surveys, that was just part of the process.

We never really thought about the cost of the time of doing that because it's embedded. But once you have to re embed it, then it becomes very obvious about that labor cost. I'm sure that you filled up your leasing consultants' time with other things. It's not like when you took that task away from them, they were just kind of sitting on their hands for that amount of time.

They had other things to do. And so now you have to add this new task back in, and now it becomes very clear about what the cost is of adding that task in. Which I think is interesting because most people don't see it that way, I don't think.

Clay Llewellyn: Yeah, and we did it that way for a short period.

Realized that just wasn't a winning process anymore because of the organizational knowledge on how to conduct an accurate and pervasive market survey just escaped the company. And so we brought that process in-house with just one, one centralized resource.

I think they're spending 25 or so, 25 to 30 hours a week on just that process for our entire portfolio. Which was a slight improvement just because we had at least a consistent methodology across the board. And so we were able to get the information we needed to make our pricing decisions.

One of the problems you run into there is that the advantage you have on site is there's a lot of nuance in that market, in that neighborhood that gets lost when it's one person in a centralized area that's conducting their market survey process.

Brent Williams: They lose a little bit of the market knowledge overall because they're not calling around and they don't who their comps are?

Clay Llewellyn: Yeah. It's usually they're the first to know if one of the larger employers in that specific neighborhood may start conducting layoffs and that has a change to and an impact to how the market market's going to interact and where pricing needs to be in order to maintain occupancy without leaving too much money on the table.

Brent Williams: Interesting. And also it feeds into that discussion about the cost of labor. Because now you know exactly how many hours for that one person. So if you're saying 25 hours of labor and you multiply that out, you have exact cost of what does market data collection look like. Which again, most companies probably don't have a specific number for that, which I think is interesting.

Clay Llewellyn: Yeah. And we're a smaller to medium sized firm. I'm sure there are larger outfits there who, that impact is much, much more significant to their bottom line and how much they're really committing to, to that cost.

Brent Williams: You went from redoing it manually on site. Now at this point you've gone to a centralized model. You have one person doing it 25 th 30 hours a week of pulling that data. And then where did you go from there?

Clay Llewellyn: Yeah, from there we, we had got introduced to ApartmentIQ. I think at the time they were either Rentable or Abode.

They'd rebranded a few times and landed on ApartmentIQ within this specific tool. And, that was a game changer for us. Obviously, it checks the most important box for us, which is the reliance on public data. But it's also an automated tool that takes away a lot of those man hours that were burdening our organization. And so as a result, we started getting better information coming in, and there's, they're always making updates and improvements and finding new and interesting ways that we can leverage that information to tell the story. Because that's what the market survey is intended to do, is tell the story of what's happening in the market right now. It's a snapshot in time. But if you look at enough of those snapshots there's a trend that indicates, all right, this is what's happening. This is how we solve the problem.

And one of, one of the tools that they offer that I think is most interesting is they can see how long an individual vacancy or available unit if it was on notice, had been available to the market. And so that tells a story. And some of our individual neighborhoods, we sit on vacancy for longer than we feel comfortable with, but we look at what everybody else is doing, and their average day of vacancy might be over 30 days.

And so that tells the story of that the, that neighborhood, that market, they think that the activity is going to rebound. And so they don't want be the first one to blink and chase the market down. We're going to wait and sit on a little bit of vacancy loss. And we'll get it rented at a point that makes sense for us.

Because you have to remember our properties are all under rent control. So lowering the base rent is a decision that does not come easily. We want to get the unit rented, but vacancy loss, you can never recover that. But we do want to make sure we're protecting the base rent so that the market does increase over the next year or two.

Those units aren't caught too far behind on what they are able to collect.

Brent Williams: Yeah. And you can't get that sort of granular data when you're thinking about a centralized person at that point. Or, and especially doing it manually on site. There's no way that type of information just is, wouldn't exist.

I'm curious about how many companies are still doing it the same way that, you and I did it, decades ago. I'm sure there's a good chunk that still do the call up method.

Clay Llewellyn: I'm sure, I'm sure we do some outdated things still too.

When I first started with the company, we were having our onsite staff actually fax leases into the corporate office for one of the licensed individuals to sign the lease and fax it back. And it was just, it was a nightmare. And, that was less than 10 years ago. So I'm sure there are other things that are happening that are practically inefficient, but just because of history and just the lack of need to change that we're probably still doing some of those things that don't really make a whole lot of sense.

Brent Williams: Yeah it's interesting how external forces really drive change when it's easy to keep momentum. It's easy to keep doing the way we are doing it.

But then sometimes, outside forces can be a real blessing, even though there may be cost to it as well.

Clay Llewellyn: Necessity and invention and all that. Yeah.

Brent Williams: Absolutely. One more thing. You had talked about shifting towards public data. When you're pulling data from external sources, tell me about.

How do you view the benefits of public data from that perspective?

Clay Llewellyn: Obviously there's liability concerns, which we need to be cognizant of. And the other reality is, one of the advantages we thought we had with the other services that did look at some of the private data it would show with the actual contracted rent might be rather than what was advertised.

But at the end of the day, we're comparing ourselves against what the public is seeing. And so if there's a $50, a hundred dollars reduction in the rent on the contract rent relative to what was advertised, I really don't care that much because when I'm not comparing myself against what is now off the market.

I'm comparing myself against what else is available public facing. And that's, I think that changed the calculation for us quite a bit in how we really view the benefits of public data.

Brent Williams: Absolutely, because they're still comparing and contrasting you relative to what they're seeing online and whatever.

That's again, going back to that filter. They're narrowing the focus based upon that, which is what you want to be.

Clay Llewellyn: Yeah, and we have enough history on leasing activity trends as on a seasonal basis. You we expect that rents from March till about September or so are going to be much stronger than those from November through January.

And so we can make those decisions without relying on private internal data to tell us that. If we have somebody who's moving in January, fine. We don't need to move them in on a 12 month lease. We can go a little bit longer and make it more competitive to make sense for the tenant at the time.

And if they do decide they're going to vacate, they're going to vacate during a timeframe that makes more sense for us, and we have enough background and history on that, that we can make that work.

Brent Williams: Clay, thank you so much for taking some time with me today. This is a huge topic right now and so I appreciate you sharing.

Everybody thank you all for joining us today and watching myself and Clay get into market data and we'll see you next time. Take care everybody.

Clay Llewellyn: Alright, thanks Brent.