Leasing may return to normal this year, but a lot depends on the vaccine.
Just as spring leasing season was about to heat up last year, the world stopped. COVID-19 fears closed businesses, stores, restaurants and, yes, leasing offices around the country in March 2020.
While there were stories coming from China about the emergence of a new virus, the pandemic didn’t affect everyday life in the U.S. from January to mid-March. Rents were following their typical trajectory and trending up in 2020 when the shutdown hit, according to Apartment List. While leases typically increase 1% per month from March to June, they moved in the opposite direction.
Other data backs this up. In a year-end report, RENTCafé said the pandemic delayed peak leasing by two months, eventually kicking off in May with a 27% monthly increase in renter activity. In 2018 and 2019, renting activity accelerated in March by 23% and slowed in August by an average of 9%. In 2020, renter movement dropped 13% in July, which meant peak leasing season only lasted two months.
“This [pandemic] did impact leasing and turnover during that period, as people were simply not moving,” says Greg Williams, Senior Regional Vice President of Fogelman Properties. “Despite the pandemic, once those orders began to lift, we saw leasing demand return to levels that have met or exceeded the numbers we saw in 2019.”
Akin to most years, things cooled off for the remainder of the year. Nationally, rents were down 1.5% for the year, but there were variances, according to Apartment List.
While the health crisis was terrible, leasing in 2020 could have been a lot worse. For starters, The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and enhanced unemployment benefits pumped much-needed money into the economy, which helped residents pay their rents. Apartment firms were quick to respond with payment plans and other creative methods for keeping residents in their homes and rapidly adopted technology to help them lease apartments, even if prospective residents never set foot in the building they were touring.
With uncertainty surrounding when vaccinations will be widespread, expect the leasing season to run later again and virtual technologies to continue to get people to sign leases. But to successfully do so, property staffers will need the proper training.
Delayed Leasing Season
Like much of the economy, the success of spring leasing ultimately depends on how close the world is to getting back to normal. “I don’t think we will see as much turnover in years past, at least until the COVID pandemic is under control,” says Vanessa Siebern, CPM, Senior Vice President for FPI Management.
Most people will probably need to be vaccinated before they feel comfortable moving. They may also need to feel more certain about their job, or financial assistance from the government, before they are ready to sign a lease.
Williams thinks that as vaccines continue to be administered and assistance reaches those in need, there will be a positive uptick in rental activity entering the second quarter of 2021. At the time of this writing, vaccines were rolling out, but there are already concerns that they are behind schedule.
“It is hard to predict the long-lasting impact of this pandemic on our communities,” says Woody Stone, Executive Managing Director of Operations for Cushman & Wakefield, Multifamily Asset Management, Americas. “We are hopeful that the vaccine will be quickly and effectively deployed, but the timing is uncertain.”
Many apartment companies are still seeing demand. Bozzuto had a busy December and early January with improving month-over-month and year-over-year tour and leasing numbers. Still, JoLynn Scotch, Managing Director of Operations at Bozzuto, also expects a longer-than-usual leasing season.
“We don’t expect the drivers for the leasing season to change much, but with positive job growth and a widely available vaccine we do think there will be an uptick beyond the normal spring and summer seasons,” Scotch says.
Most other executives interviewed for units agree that leasing season could again be delayed. “We expect to see a fairly traditional seasonal lift in leasing demand,” says Tim Hermeling, Executive Vice President of Marketing for Cortland. “We may see some shifting of the leasing season as some people deferred moving due to the uncertainty of the pandemic.”
Williams doesn’t think the delays will make a tangible difference. Overall, he doesn’t expect the spring of 2021 to be that different from historical spring patterns.
“We have no reason to believe that seasonality will be significantly impacted in 2021,” Williams says. “We may see some moderate delay depending on the severity of the pandemic over the winter but feel that could also be followed by some level of heightened demand as vaccinations expand to the general public and we begin to see cases subside.”
Relying on Virtual
Not everyone is as optimistic things will get back to normal early in 2021. For Siebern and FPI, that means relying on many of the tools that got the company through 2020. “Only time will tell what spring leasing looks like,” Siebern says. “I would anticipate that we will continue well into 2021 with social distancing. Therefore, virtual [leasing] is our best bet.”
FPI is doing in-person leasing, but only in certain situations. “In some areas, we are still able to do tours by appointment only, but we are looking to make the process as touchless as possible,” Siebern says.
For Melissa Brady, Vice President of Strategic Marketing for Fogelman Properties, 2021 looks more like a year of hybrid experiences—with both in-person and virtual leasing.
“Digital-first interactions will persist, but with virtual fatigue on the rise and the promise of a vaccine in the first half of the year, leasing agents will need to be agile and nimble to balance virtual leasing and a return to in-person experiences,” Brady says.
While the pandemic suddenly made apartment operators reliant on virtual leasing, many were experimenting with those platforms long before COVID hit.
Bozzuto had been testing a virtual touring platform before COVID. It rolled it out after the pandemic began, and Scotch says it has been successful.
Cushman & Wakefield, whose team members have adapted virtual tours, interactive site maps and reputation management tools, was in a similar situation.
“Even before the pandemic made its impact, virtual tours became an important component of successful leasing,” Stone says. “Now that prospects have fully adjusted to an online leasing experience, virtual leasing is an absolute must.”
Like Cushman & Wakefield and Bozzuto, it didn’t take long for Cortland to ramp up its virtual leasing platform. Since the beginning of the pandemic, it has conducted more than 10,000 live video and self-guided tours.
“We added more video content, such as virtual tours, and have expanded our self-guided tour and self-scheduling options,” says Tim Hermeling, Executive Vice President of Marketing at Cortland.
When coupled with the ability to lease an apartment through Cortland’s website, Hermeling says these enhancements allow prospective residents the flexibility to shop for their next home on their own terms.
Knowing that virtual leasing will still be important, Fogelman is focused on creating and marketing virtual and self-guided touring experiences. It also plans to leverage video platforms to easily produce high-quality content to visually tell the story of a property.
“Mapping and measuring this across a customer journey tells us where we need to focus and invest to continually improve the customer experience,” Brady says.
Capturing Leases
Just offering a virtual tour isn’t enough, though. You need to convert the tour into a lease. Doing this requires a mix of technology and leasing skills.
“Since it is more difficult for prospects to visit a property in person, we must provide the most immersive and engaging virtual tour possible,” Stone says. “While a prospect can typically view a unit and building photos online, our interactive site maps allows you to pick a specific floor and unit. This helps us create an experience that is similar to an actual in-person visit.”
For FPI, the tools to close leases in 2021 through self-guided, 3-D and iPad tours will include camera stabilizers and social media. “Some of the tools that we are using, we knew about but weren’t widely used,” Siebern says.
Having the right tech tools are only part of the equation for a successful virtual leasing strategy in 2021. The leasing skills of the onsite team will also be essential. At Bozzuto, like many companies, leasing agents walk prospective residents through video tours.
For some leasing agents, that requires a different skill set than closing tours in-person.
“I think our leasing agents will need to be more skilled in customer service to be able to connect with their prospects virtually and be memorable so that the prospects will choose them,” Siebern says. “Building that personal rapport and selling the lifestyle to someone who won’t be able to see it in person with their own eyes is a sales skill that we will need to train for going forward.”
Hermeling agrees. While websites can give prospective residents more information about their home choices, leasing agents will still need to deliver impactful live virtual tours and focus on prospective residents’ needs. The goal is to have leasing agents tailor leasing interactions to showcase how a community can best meet prospective residents’ needs by translating features into benefits.
“It’s important to recognize that every prospect has different needs,” Hermeling says. “Leasing is not a one-size-fits-all approach.”
And, after the pandemic, leasing may never look the same again. As apartment operators and residents have adapted to this new way of leasing, some COVID changes may be here for the long run.
“Anything that was traditional in the past will look different going forward and that will include our leasing season, the way we market, and the way we lease,” Siebern says.
For all the certainty and unique challenges facing the industry this spring, it nevertheless seems well equipped to navigate these changes in 2021 and beyond.
Les Shaver is a freelance writer.
Sidebar
Trends That Could Help in 2021
- Supply is Hindered
In late summer, Yardi Matrix reported 283,114 new apartments were expected to be completed in 2020, which was a decrease of 12 percent compared to 2019.
That falloff in supply should help existing communities. “Demand for larger unit types and suburban living remains particularly high, while the introduction of new product has slowed,” says Woody Stone, Executive Managing Director of Operations for Cushman & Wakefield, Multifamily Asset Management, Americas.
- The Return of International Students
When the COVID shutdown hit, many schools went virtual and students moved home. When things open back up, JoLynn Scotch, Managing Director of Operations at Bozzuto Management Company, expects those people to return, which will boost occupancy.
“We are expecting the return of international students once the vaccine is available and travel resumes,” Scotch says. “We’ve lost some segment of those renters temporarily and we’re excited that we’re starting to see the return of that renter.”
- Fewer Open Apartments
In 2020, 10% fewer renters applied for new apartments, according to RENTCafé. That broke a years-long trend of single-digit increases.
“Retention has increased this past year because people chose to stay where they were for another lease term,” says Tim Hermeling, Executive Vice President of Marketing for Cortland.
—L.S.