Declining apartment rents and increasing vacancy rates have property managers across the region scrambling to keep existing tenants and provide higher levels of tenant service — and some property managers are even reducing existing rents to keep or lure new tenants.
A fourth-quarter multi-family housing analysis by CB Richard Ellis says rents declined by an average of $5 a month for apartment complexes under 80 units, and rents fell $10 for larger properties with 80 or more units. Among the area’s smaller complexes, northeast and southwest Reno lead the market with vacancies above 10 percent, the CBRE report states. And in larger complexes, west Reno has a whopping 25 percent vacancy rate, followed by southwest Reno at 14 percent.
Len Ramos, first vice president with the multi-housing group with CBRE, says managing occupancy is of utmost importance in a time of declining rents and rising vacancies.
“That is the key; maintaining occupancy is the bottom line,” he says. “Managers are saying they are meeting more with their tenant base and are just staying closer to them to make sure they don’t leave.”
And drawing new tenants typically requires concessions such as free rent.
“For new tenants you will find everything from monthly rent concessions, first month off or second month half off — it all comes down to a concession or whatever they think they need to do to get a guy to rent or stay there,” Ramos says.
Jason Plaut, manager of Parkway Manor Apartment Homes in Carson City, said that occupancy has been the single biggest issue in the past few months, and they are offering deals for new renters who sign six- and 12-month leases. They are also working harder to promote the features of their property and provide good customer service.
But many times it just comes down to price.
“You definitely have to be open to negotiations for renewals and first-time renters,” Plaut said.
Parkway Manor has about 85 percent occupancy, according to Plaut. This is up over just a few months ago because of the 30 units they have rented to people in town for the 2009 session of the Nevada Legislature.
“The Legislature does great for us,” Plaut said. “We really appreciate it.”
Danielle Young, broker and owner of Real Estate Connection in Reno and a property owner as well, doesn’t believe in giving free rent as it can change the quality of the tenants that are attracted. Instead, Young says, making a great first impression can lure new tenants and keep current residents happy. And if possible, landlords should give them other perks.
“Make sure you take care of your property,” she says. “Have the trash picked up and be very conscientious of your tenants’ needs. That, I am finding, keeps the tenants there. Also, providing a washer and drying in a unit and allowing pets if possible.”
Don Wilkerson, president of Gaston and Wilkerson Management Group, says the most typical concessions are a month off a year lease, or a reduction in required deposits. And in worst-case scenarios for property owners losing tenants to other properties, managers are cutting rents unbidden.
“I have heard of managers that have gone to their residents and say, ‘I am going to lower your rent by $5 or $10 for remainder of your lease. In case of one owner they were losing residents to other properties that were offering big discounts.’”
Other property managers are getting much more creative in keeping tenants, says Morgan Walsh, multi- family specialist with NAI Alliance. Walsh points to one complex that’s offering three different stylish room and kitchen remodel upgrades with a 12-month lease renewal.
“The best operators have become very pro-active in tenant retention, flexibility with tenants who want to double-up, and giving generous incentives to renew,” Walsh says. “The astute manager draws up a list of the best tenants by length of tenure at the complex, payment history, income strength and housekeeping standards and then works diligently to retain each one.”
Wilkerson says that with rents declining and vacancies increasing, perhaps the most important thing an owner or management group can do is to staff the apartment complex with talented people. Employing front-office staff trained as Accredited Residential Managers from the Institute of Real Estate Management makes a big difference in perception, he says.
“Amateur hour is over. What is it going to take to keep apartments full is good strong property management, and that is more than collecting rents and paying bills. Good quality site managers are absolutely critical in today’s market. Accredited Residential Managers have been trained, and they are not amateurs.”
In addition to keeping revenues high, one of the main reasons property managers try to keep existing tenants is the high cost associated with tenant turnover. “If I lower your rent and you stay, that costs me less than new flooring, appliances, paint, all that stuff,” Wilkerson says.
Occupancy and rental rates directly affect revenues, CBRE’s Ramos says.
“The reason why the rental rate is dropping is because occupancy is dropping, and in order to get occupancy you have to do something, which is usually lowering rents.”
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