How Apartment Communities Can Thrive in a Challenging Market

Image by Tatiana Maksimova/Getty Image; courtesy of Apartment.com

Facing a tightening market, properties will need to adjust their marketing strategy to counteract rising vacancies and softening demand.

Multifamily owners and operators confront challenging market conditions this summer and fall.

Supply and vacancy on the rise

Supply continues to grow, with 500,000 new units expected to be delivered in 2023, the highest number since the 1980s. Almost 1 million new units are currently under construction, a record high not seen since the 1970s. And notably, over 70 percent of these new units will be four- or five-star properties.

Vacancies, despite a recent plateau at 6.7 percent, are expected to rise as newly constructed properties begin to lease up. CoStar forecasts the national vacancy rate to hit the mid-7 percent range by the end of 2023, with an even higher rate of 9.8 percent for 4- and 5-star properties.

Adding to these dynamics, renters are facing inflation pressures and economic uncertainty. This has driven some renters to limit household spending and consider alternative housing situations, like adding roommates or moving in with family, while yet others are delaying household formation altogether.

Renters seek speed and autonomy

As competition for renters intensifies, it’s more important than ever to understand what they want. Over 40 percent of renters plan to move this year, according to an Apartments.com survey in May 2023, with the top driver their need for affordable rent.

Today’s renters are more autonomous and better informed. Nine in 10 renters consider unit pricing, availability, amenities, floor plans, location, and view to be important to their decision-making process. More than 90 percent expect multiple ways to tour communities, including in-person visits with a leasing agent, self-guided walkthroughs, and virtual tours.

Empowered with greater information and control, renters are acting faster than ever, submitting leads only when they’re seriously interested. Over 65 percent of renters who submit leads on Apartments.com do so for only one property. And the average decision time has shortened from 46 days in 2020 to 29 in 2023, according to Apartments.com search data.

Multifamily exposure grows increasingly important

In light of these challenges, communities may need to re-evaluate rent increases and focus on retaining residents and targeting prospective renters. In this newly renter-friendly market, it’s essential for communities to distinguish themselves from the competition.

“Overall, 2023 will remain a challenging year for the multifamily sector,” said Jay Lybik, National Director of Multifamily Analytics for CoStar Group.

With renters making decisions more quickly than ever, communities should provide comprehensive information about their available units as part of their marketing strategy. This approach helps answer renters’ questions before they reach out to the leasing team. When renters can access these details upfront, they’re more likely to narrow down their selection earlier. This can streamline the leasing process for both renters and leasing staff and increase the efficiency of lead conversion.