The multifamily industry is experiencing a unique climate as it navigates the challenges of this COVID-19 marketplace. New constructions continue even as demand is decreasing and rental rates are on a downward trend. What does this mean? Well, it’s the perfect time to consider and thoughtfully implement concessions and specials to continue to drive a lackluster market. Right now, the apartment leasing market is facing challenges including:
- Slower leasing season: The fall and winter months are typically a slower time for leasing even outside a global pandemic.
- Concerns about COVID: Many prospects are opting to “wait it out” for fear of making a move or even making visits to shop for a new home.
- New construction is creating fierce competition: New communities continue to be constructed, further saturating the marketplace.
- Lower rates and incentives on new construction put pressure on all property classes.
Let’s stop to discuss semantics. When offering prospects incentives, consider referring to them as “specials” rather than “concessions”. Think about what each of those words mean:
- Special – Better, greater or otherwise different from what is usual.
- Concession – Something that is granted, especially in response to demands; a thing that is conceded.
Offering a “special”, although the word may have a more informal connotation, can be more exciting!
Before we consider what specific specials to offer, let’s first make sure we’re doing all we can to capture the business that’s coming to us. When a prospect calls, make it a priority to answer the phone! Remember, when they are calling you, you are the expert and they’re looking for your help, but when you have to call back, you become a salesperson and even maybe an interruption. At that point, the prospect may not be in the same mindset they were when they called you initially.
Here are 7 key things to consider when deciding on leasing specials and incentives.
1. Concessions can have negative impacts. Think through your plan first. Some possible negative impacts of leasing specials are:
- The value is short lived
- They can impact renewal rates, especially pro-rated concessions
- They can frustrate existing residents
- They can change your resident profile
2. You may not need to offer a special or incentive. Ask yourself the following:
- Will it give us a competitive advantage? When you decide to offer a special, make sure that doing so will really offer a competitive advantage. Don’t just offer it because other communities are.
- Do we have a leasing problem? Is it possible you have the traffic and are just not successfully closing the sale? Take a look and confirm whether or not your team might need some additional training.
- Do we have a marketing/advertising problem? Traffic? Could you increase your traffic with better marketing rather than offering specials?
3. You need a plan to identify any other possible issues before you make price modifications. Look at the 4 P’s (people, product, promotion, price). You can follow these steps to address other issues:
- Discuss the issue with your staff.
- Shop your team and then train in areas needed.
- Create a training aid with techniques for handling objections and put-offs.
- Shop your closest and most comparable competition.
- How are you positioned online compared to your competition?
4. What NOT to do when it comes to offering specials. Once you’ve decided it’s time to offer a special, there are two big rules you should never break when offering leasing specials or incentives:
- Never offer automatic, across-the-board concessions. Make sure you’re offering specials strategically on floorplans you have an excess of or as a way to convince prospects to upgrade.
- Never give without getting something back. Whether it’s a longer lease term or a deadline to sign by, make sure you’re not giving something for nothing.
5. Make your special “special”! Give it a name; create a theme and story. Give it its own color theme and logo. Just make it extra special and sell it as just for the prospect and on an extremely limited basis. Create that urgency!
6. When your community isn’t in the best position to offer major financial concessions. Well, here are some ideas for leasing specials you can offer that will have zero cost to you!
- Double your deposit – then offer half off
- Double ANY fee, even the app fee – then offer half off
- Waive pet, parking, admin fees – or double and offer half off
- New appliances and upgrades you have to upgrade or replace anyway
- Offer FREE rent until official move-in day on apartment that are sitting vacant
- Increase your rental rate by $100 and then offer $1,200 off on a 13 month lease
7. What if a prospect asks for a concession or special? Guess what? That’s actually an objection, which is a buying cue. They’re questioning the value of your community versus another one offering a special, so your response should sell value and do an apples to apples comparison. Really let them know what sets you apart. If necessary, can you make a special accommodation?
Here are some basic specials you can play with:
- Month Free – This is a most basic (and a little boring) special.
- Flat Term – This takes off a flat amount over a set lease term, like $1,000 off a 13-month lease.
- Reduced Rental Rates – Equally pro-rated or tiered to increase. Beware of this type of special because it can make for an unpleasant sticker-shock for the resident when it comes time to renew!
- Coupon or Voucher Book – Vouchers to be used at the renter’s discretion. For example, a $1,000 concession broken into ten $100 voucher coupons.
To recap, let’s look at some do’s and don’ts of concessions.
- Make specials really special and fun.
- Timing is critical – offer specials to either entice a property visit or generate a commitment RIGHT NOW.
- Show the value – What does this special mean for the prospect?
- Take your Fair Housing seriously – Offer the same concession to every prospect in the same order and process.
- Offer an across-the-board special
- Give without getting something in return
- Immediately blurt out your special to the prospect
- Reveal ALL your concession details in your online communications (unless this is part of your strategy)
- Wait too long to make adjustments and changes.
These 7 key things to consider when deciding on leasing specials and incentives will help get you on the right track to keep leasing those apartments even in a slow market or time of year. One more important thing to keep in mind in this COVID-19 marketplace, it may be worth it to offer a renewal concession, up to the value of what you’re offering new residents, to get them to stay. It’s cheaper to keep existing residents than the cost of turnover combined with leasing specials.
Rick Ellis, CAM, CPM
CEO and Founder
Ellis Consulting Group
Since 1984, Ellis Partners in Management Solutions has specialized exclusively in helping our multifamily clients measure and improve the customer experience by teaming with customers to develop professional skills and behaviors in each team member. We evaluate customer service and performance of onsite leasing professionals through comprehensive mystery shopping reports, our multiple touchpoint resident survey program, and training. Our turn-key integrated customer experience program, backed by outstanding customer service, sophisticated technology, and ethical business practices, has made Ellis one of the multifamily industry’s most respected and sought-after providers of training and consulting services.