What Multifamily Data are Managers Watching Now?

Multifamily data about market conditions, trends and competitor activity is even more critical than usual in times of uncertainty like this one. New variables come into play that make it important to take into account unusual metrics in addition to leaning on experience and gut feel.

Even before COVID, operational strategies that drive success had already evolved through the understanding of how real-time data draws a true market picture. Lenders and brokers now maximize their returns and mitigate risk with accurate market, submarket and property-level business intelligence to identify the optimal moves to make.

Operators, developers and investors began watching data closely when the current cycle began skidding this spring.

Mounting job losses sent tremors through the industry, and eyes focused on occupancy, rent roll, revenue, concessions, and other metrics within markets. But the traditional decision support recipe of survey data plus experience took on a less commanding role in assessing strengths and weaknesses.

BH Management and Simpson Housing are among the companies that are relying more than ever on transaction-driven research to attain complete market visibility. These leaders are using multifamily business software to make decisions necessary to move their companies forward in the moment while building strategies for the longer term.

Charting new directions when markets change

During the first couple of months of 2020, Simpson Housing focused on the usual goals of staying on budget and increasing profit year-over-year. But as markets changed, so did the approach of Senior Vice President of Revenue Management Bryan Hilton and his team. Today, market analytics technology is helping Simpson Housing chart a new direction.

“We're looking at how the market's performing around us,” he said. “We don't know what's coming next, so we're kind of feeling our way along. And it’s been really helpful to have the industry let us know what they're seeing so we can form our strategies.”

Hilton, like the analysts and revenue managers at BH Management, is monitoring occupancy rates, rent rolls, concessions, revenue and collections, closely reviewing hard data to navigate an otherwise murky market.

Understanding how price points impact the market

BH Management has one eye on employment rates and rent payments, says Senior Revenue Manager Sierra Zielke Garza, and another on how concessions are affecting occupancy.

The company is taking a very conservative and compassionate approach with its residents and offering incentives to stay and continue paying rent. Data available through Market Analytics covering concessions, rent payments and occupancy is helping drive decisions.

“Like everyone else, the immense job loss has our attention, and those delinquency challenges are things that we are facing right alongside the rest of the country right now,” Garza says. “But paying attention to the occupancy and concessions in our markets, and just the overall impact to revenue in itself has assisted us in taking the next step in our action plan.”

Concessions are typically the canary in the coal mine indicating stress in the marketplace, especially where new supply is emerging. Where the typical focus is on the impact of new supply to rents, today’s climate is forcing new perspectives as rents change. This is why it’s important to understand how and when a market’s top price points are altered and what it does to rent at the stabilized assets.

Leveraging multifamily data from data providers

Equally important are collections, an aspect of property management that many companies have measured internally until recently. Now, they’re looking at external data showing how competing properties are managing rent payments at a time when some residents have been temporarily furloughed or lost jobs.

These companies are turning to NMHC, RealPage and other multifamily data providers to get as much information as possible on what's happening every month with collections – by market, class level, or urban versus suburban.

Lower rents, concessions and wobbling occupancy are on the radar at Simpson Housing. Armed with real-time market data, the company’s revenue management team can assess the market and determine the right course of action when moving the needle on rents to maintain occupancy.

Hilton can see how rents are changing through RealPage's Market Analytics along with Performance Analytics, and see how the company lines up with competitors for new leases and renewals.

“We're also looking at the lease terms that our competitors are offering because we can now see those in transaction-based reporting, and people are offering up to 18-month leases in some markets because they're not anticipating a quick recovery,” he says. “So that means that we may want to offer leases to match that.”

Analyzing rent revenue, lease demographic information

While following mainstream metrics has been essential, some companies are finding deeper multifamily data within Market Analytics that shed more light on the full market picture.

Trade-out information, for example, helps paint a bigger picture of the lease potential of a specific area. That’s never been more important at a time when renewals are a high percentage of leases being signed.

Some are finding that rent revenue per available square foot and revenue per occupied square foot are also great ways to benchmark an asset to actual market or submarket performance.

And lease demographic information is another key indicator that can shed light on market conditions. It shows the average income of renters being signed in the area, and helps illustrate the cushion between average rent and what people can afford, and whether that cushion is expanding or contracting.

Looking ahead with property management forecasting

While Market Analytics is leading the way for short-term decisions, analysts are also putting a lot of stock in the solution’s artificial intelligence-infused multifamily forecasting models that extend several years out.

Given current economic circumstances, even maintaining a one-year budget is a tough task. But looking ahead is helping Simpson Housing and others realign to stay on track for longer-term objectives.

“We definitely see ourselves falling away from the budget,” Hilton says. “But in the longer term, the three- and the five-year forecasts, we're looking at that for rehabs, for new acquisitions and for developments, because long-term we've seen the forecast and it looks like it's coming back within those time frames. And that's what's really going to help direct us.”

Garza says BH Management uses forecasting models while working with its operations team to review client goals and strategies and how they align with clients’ pro forma and underwriting annual targets. Even though forecasts change, the company has a more educated idea on expectations of a market or submarket.

This level of support, Garza says, has help BH Management reach a new level as occupancy and rent growth projections are being altered by the economy.

“We're able to help our teams create more of a realistic budget, and discuss the different action plans and items with their clients, and their requested strategies,” she says. “That yields a stronger performance and even better buy-in with our on-site teams.”

If the market cannot support the 95% occupancy and 3% rent growth that has been the benchmark for so long, BH Management has the tools to make actionable decisions about how to address the shortfalls, Garza says. “If their market cannot sustain that, we are taking that information and creating the best game plan to put them in a successful position from the start."

How are you using deep multifamily data to successfully navigate this uncertain market? Contact us to learn more about how to take advantage of Market Analytics.