What is your customer acquisition costs? What does it costs the property to obtain a new lease? There is advertising, overhead and staff time- all part of the expense for obtaining a new resident. Then there is the customer retention costs.
This article is about retention costs and the use of concessions. I am not suggesting auto-offering concessions as a standard business practice. They are just another tool in our tool box for use when appropriate. Before getting to concessions an assessment of “why” is appropriate. Why is there vacancy of X? Is your advertising and web presence in order? What is your showing-to-lease ratio? Is staff trained and up to date on tactics?
Concessions for a multifamily assets are not a given. Concessions are often a function of competitive factors from competitive properties in the same submarket as the subject asset.
For example, your property may have more in-place amenities than neighboring properties yet have a higher vacancy rate in 2-bed’s versus 1-bed’s. In this instance, your renewal concessions will be offered only on two-bed rooms with none offered on one-bedrooms.
Gaining further insight into what your competitors are offering requires surveying those properties. This is best accomplished by a third-party service provider to assure independent outcomes.
Many “gift-card” options can be purchased at a small discount to face value if purchased in bulk, particularly with local vendors that offer personal services. They are gaining a new customer, after all.
There is a reason for the order of concession below; the top five add value to the property in some way; the first five concessions are either property upgrades or increase longevity of in-place fixtures. This list provides you with a starting point for selecting concessions to gain renewals.
- Refresh paint or adding an accent wall
- Replacing older living room or dining room light fixtures
- Replacing standard light fixtures with ceiling fans
- Carpet Cleaning
- Replace older blinds
- Car wash gift card
- Restaurant Gift Cards
- Spa treatments
- Go phones / trac phones gift cards
- A gift to a charity selected by the Resident
- Free parking for one month
- Dry cleaning gift card
- Dog grooming
- Cooking classes
- Hair cuts
- Shoe shines
- Movie tickets
- Specialty ice cream
- Apple Store
- Oil change
- Wal-Mart / Target / Kohl’s / Macy’s /
- Pizza (always popular)
When selecting local vendors for concessions, consider proximity to the multifamily asset; the closer the better as these will be perceived as having high value because the Resident will know exactly where the vendor is located.
Concession should have a similar perceived value- not necessarily an equal value.
Offer no more than two at one time. Decide on an initial set of two concessions and test for responsiveness. Keep testing until you have two that people respond to equally well.
There may be a difference in response rates due to the season or weather. People love cooking classes during cold months and car washes in summer, for example. Residents will give to a charity during the holidays or select the spa treatment to give as a gift. There is no reason to guess when you can test. Testing will lead you to the right offers at the right time.