7 Ways East Bay Landlords Minimize Vacancy Loss in 2020
When we wrote VACANCY TRENDS IN 2020 earlier this year, the East Bay’s unprecedented growth showed no signs of slowing from its upward trajectory. Notable companies like Square and Shake Shack were planning to revitalize the Uptown Station project; Blue Cross’s tenancy in Downtown and Kaiser’s $900M headquarters were driving office demand; and nearly every block of the Broadway Corridor was seeing a luxury living development under construction to accommodate population projections.
While the future seemed exceptionally bright, smaller landlords across Oakland and Berkeley were struggling to compete for the strongest, creditworthy renters who predominantly preferred the conveniences of amenity-driven properties over the old world charm of smaller ones. Rent concessions made a comeback, older buildings experienced extended vacancies, and those of us operating in the multifamily market were bracing for thousands of premium deliverables which would create steeper challenges in the months and years to come.
Today, in our POST-COVID world, so much has changed in what feels like an instant.
Rent and eviction moratoriums are in place with millions of Americans surviving on unemployment benefits. Office and retail are almost non-existent. Restaurants are struggling to survive. Technology companies are standardizing work-from-home policies indefinitely. And most notably, markets across the Bay Area are experiencing an unprecedented trend of out-migration, with residents fleeing coastal cities for more affordable areas.
While the catastrophic aftereffects are incredibly tragic – on our personal lives, our communities and our nation at large – from a pure investment perspective multifamily real estate has performed better than initially projected. On September 1, the Wall Street Journal published Apartment Values Stay Solid in Private Market Despite Falling Rents, reporting “some investors are willing to pay near pre-pandemic prices for rental apartment buildings despite the weak economy’s downward pressure on occupancy and rents.” The article continues: “Demand tends to be stronger for more affordable apartments during a recession because a large number of renters who are worried about their jobs trade down from more expensive markets.”
So while many unchartered, real world challenges exist in our modern day world, smaller landlords have the opportunity to stabilize assets by effectively targeting the high-quality renters who want to remain in the Bay Area. In order to do so will require one critical piece: the ability to operate efficiently in a high-vacancy environment.
Here are 7 Ways to Minimize Vacancy Loss in 2020:
#1: Plan Ahead
When a tenant gives 30-Days notice, schedule a walkthrough to get a clear sense of unit condition as soon as possible. A visual will help you formulate a plan based on the scope of work needed, with enough of a runway to line-up turnover teams and vendors in advance. By getting a jumpstart on the impending vacancy, time is on your side to get the process started – make the best use of it!
#2 Create Amenities
Renters’ demands have drastically shifted. Pre-pandemic, shared amenities like fitness centers and community rooms were the main draw. Today, in-unit laundry, workstations and enhanced outdoor space are being heavily prioritized by renters in apartment searches. Aligning these wish-list wants with your property’s strengths will differentiate your listing from comparable units and ultimately facilitate greater interest and leasing activity.
#3 Advertise When You’re 100% Ready
One of the biggest mistakes we see are owners make is the posting of ads while a unit is still occupied. By creating demand too soon, your property loses valuable momentum required to secure a lease quickly. In an already crowded market, put your best foot forward and advertise when you are 100% ready. It will help capture serious inquiries when you are ready to secure your next tenant. More importantly, it will help you reach your desired price point without having to make reductions due to a stale ad.
#4 Get Creative with Concessions
Prospective renters are being bombarded with “one month free” terms which were already making a strong comeback. To stand out, larger developments are taking these standardized terms and pushing aggressively – one month becomes three; three turns into five. Smaller landlords need to get creative with concessions.
If your target is the work-from-home, Gen X executive demographic, offer a signing bonus in the form of a $500 or $1000 gift card to Amazon. If your tenant segment is the younger, tech employee or Cal student, offer a $250-$500 food delivery gift card (DoorDash, GrubHub, Postmates). Know your audience and get creative with your offerings.
#5 Make It Easy and Convenient
With heightened health concerns and property showing restrictions imposed by COVID, the ability to save time and make the process as easy as possible for you, the landlord, and any prospective applicants, is critical. Provide beautiful photos and videos of the space to create interest. Capture the apartment on a bright sunny day, and when noise levels are at a minimum (avoid traffic noises or a loud neighbor). Go one step further with 3D software provided by companies like Matterport, which make it extremely easy and affordable to create virtual tours. By eliminating the need to physically tour the space, you save valuable time, speed up the process and minimize human interaction (which is appreciated more than ever).
#6 Raise the Bar on Due Diligence
It has never been more important to perform thorough due diligence and background checks on applicants, especially when rent collection is still relatively unpredictable. While you want to maintain a level of compassion, its equally important to make sound decisions when it comes to future tenancies in your buildings.
Are they currently employed? How long have they been with this employer? Have they reported hardships to their previous or current landlord? Do they have substantial savings in the event of unemployment?
Be compassionate and empathetic because of the times – no discriminating – but have a heightened checks and balances system in place to protect yourself.
#7 Move Quickly
Once you offer an apartment to a well-screened applicant and receive a verbal acceptance, move quickly to secure the deposit and lease. Renters are aggressively shopping the market, and they know inventory is at an all time high – especially in the most desirable neighborhoods. Calculated decisions are being made in terms of price, space and other amenities like in-unit laundry. If you drag your feet with paperwork, the risk of losing the incoming tenant significantly increases and you might find yourself back at square one and behind the ball.