Is Occupancy Truly King?

As we approach the summer months, many apartment communities are gearing up for their busiest season when move-ins and move-outs reach their annual peak. A great deal of resources, both time and money, are expended to ensure the property is ready. Marketing spend increases to generate sufficient prospect traffic, maintenance expenses swell in order optimize curb appeal, and additional personnel may be required just to handle the increased volume. All of this and more are undertaken to deliver success during the “summer rush”. But is it all necessary?

When I first started in property management, it made sense to me. The summer is the most hectic season because it’s always been that way, the weather is nicer, that’s just when people want to move, etc…There was a certain logic in that way of thinking, but as I progressed into having more profit and loss responsibility I noticed that even though my property was at a high economic occupancy, the cost incurred to get there eroded any gains that should be expected with more net move-ins than move-outs.

There are several factors that play into overemphasizing the summer months; the most influential of them being that occupancy is king. Without a doubt, occupancy, especially economic occupancy, is important, but there is still a school of thought that places too much weight on “heads on beds”. As an example, take two 100-unit apartment buildings in the same sub-market; The Grove is 98% occupied while The Meadows is only 90%.

The Grove

The Meadows

Occupancy

98%

90%

Average Rent

$800

$900

Potential Revenue

$78,400

$81,000

If you’re an owner or manager that believes occupancy is the key performance indicator, you would think The Grove is clearly outperforming The Meadows, right? Not necessarily if you look at the (admittedly simplified) example to the right of this paragraph.

Instead of reducing rents or offering concessions in order to lease up the building, the manager of The Meadows (we’ll call her Lisa) has keenly tracked the market and held firm on pricing. Lisa likely decided that they were going to differentiate themselves on service rather than rents and was able to maintain a higher monthly potential revenue than the direct competition, The Grove.

In order to keenly track the market, Lisa used to rely on methods such as making phone calls to competitive properties, scraping Internet Listing Services, or depending on staff members to accurately conduct these market studies on a monthly basis. These methods were not always reliable, accurate, or compiled in a cadence that would allow for timely decisions to be made about pricing. More importantly, the time it took to conduct market studies detracted from the level of service the community wanted to differentiate themselves on. To better free up herself and her staff, Lisa employed the use of VaultWare Market Comps.

Vaultware’s Market Comps automates the collection of competitive market information and does so on a weekly basis. This has allowed Lisa to not only take the time that was previously spent on market studies and focus more on customer service, but has enabled her to confidently and more quickly track the pricing in her sub-market. The ability to do so has not only enabled The Meadows to stay ahead of its competition and build a reputation of value revolving around customer service, but also improved the community’s financial health.

Market Comps contributes to a holistic vision of property management and is currently helping property managers across the country increase their NOI. Interested in learning more? Check out our website.

Insights

MRI OnLocation NYC Monthly Commentary – May 2024

Encouraging news for NYC retail hubs as pedestrian traffic jumps month over month Each month MRI OnLocation delivers insights on retail performance for downtowns. Pedestrian traffic in NYC retail hubs rebounded in May compared to April, representing …

View the Insights

Related Resources

Industry Event

BOMA International

Find out more

Select your region

45000+

Clients

20.1m

Units

4.2m

Leases

300+

Partners

170+

Countries