Outperforming in a Soft Apartment Market
How operators can use AI to ‘squeeze more juice’ out of demand for new leases.
Multifamily operators that were early adopters of artificial intelligence have been reaping the benefits, and now they’re sharing lessons learned. At the National Association of Home Builders International Builders Show in Las Vegas, Lisa Gunderson, partner and vice president of asset management at Bristol Development Group and Dr. Amruth Sivalenka, senior vice president of revenue management and data science at Spherexx presented “Show Predict, Plan, Perform: Using AI to Optimize Multifamily Housing Operations.”
Bristol Development Group is a regional multifamily developer of brand new Class A multifamily projects. “This topic is near and dear to my heart,” said Gunderson. “I’m keenly interested in operational efficiencies and increasing revenues. We are always trying to find opportunities to make things smoother for our onsite staff.”
Combining robust tech tools
The multifamily industry has evolved in a way where customer relationship management software and revenue management software have for the longest time worked in silos, but actually they have the most profound effect when they’re brought together, according to Sivalenka. They can run by themselves, but they work even better in tandem.
The basic purpose of a CRM is to create demand and to add more leases to the portfolio. “The application uses traffic by nurturing the leads that come through all channels; whereas the role of revenue management software is to manage the demand,” says Sivalenka. “It takes the demand that’s already coming in and prices the demand so you can optimize the revenue that you can generate out of the demand that is being created by the CRM.”
When the two work together, it helps fill the leasing gaps created by busy offices and short staffing. It also creates an inviting digital experience through personalized email and texts that nurture leads and move them through the lead pipeline. According to Sivalenka, the CRM uses generative AI to provide the information to the prospect and keep them engaged. The revenue management product uses predictive AI that relies on historical asset performance, transactional data and other metrics to forecast demand for future moves.
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This has been a game changer for Bristol Development Group’s onsite teams. “We used to get to stabilization and then worry about rent growth. That didn’t give us the body of history that tells the story about demand. We find that each submarket is very demand specific. We have some markets where our maximum rental opportunity is a short window between March and May. Now it’s one continuous loop that’s capturing what’s happening in terms of interest for our apartments,” says Gunderson. “The revenue models respond to that interest and capture the most beneficial rents for us on site.”
AI lease-up case study
Gunderson presented a case study showing one of Bristol’s new construction properties. She explained that before they got started with the lease-up they used their CRM tool to get people interested in the product. They had a placeholder website which generated 197 leads. By using the AI features, they were able to understand that 100 of those leads were valid before they even opened the door to leasing.
“Those are people who are interested in renting in our community before we have something to show, before we’re open for business,” said Gunderson. “We had first move-ins in October of 2023, and we were stabilized by September the following year.”
The pricing model grew rental revenue over the course of the lease up. “It wasn’t just that we were using the model, we dropped rents and we got full. We were actually growing rents as we moved along through the lease-up,” explained Gunderson. The CRM in concert with AI and the revenue management was thinking about all of those things together and fulfilling Bristol’s goals as an owner to get to a specific occupancy within the timeframe of their pro-forma.
Gunderson added, “If you are not using AI, you are missing leases. Thirty five percent of the interaction that we had with people looking to rent an apartment occurred when we didn’t have humans in the office. It equates to 185 man hours saved, which of course is a bonus to the bottom line and improves the resident experience,” said Gunderson.
When they started, they were at about a $100 less than when they ended the lease up. So not only were they growing occupancy over nine to 10 months, they were growing rental revenue at the same time and still meeting their objectives in terms of per month lease absorption.
Even in seasonably slower periods of time, November and December, Bristol was still able to raise rent and continue to grow occupancy because they had those leads that were being worked in concert with the revenue management software. “You don’t start off at a revenue that you end up at just because you’re trying to understand demand and figure out what’s going to work in the market,” said Gunderson.
As her Bristol Development Group case study demonstrated, with the right tech tools a property can actually outperform in a soft market. Sivalenka added, “You can squeeze more juice out of the same demand even in a softening environment without having to spend or put more marketing dollars behind demand creation.”
