Challenges of the Apartment Lease-Up Period
Effective marketing strategies, preparing for increased spending and the right property management team can help you combat the challenges that come with the apartment lease-up period.
As a crucial point in time for a commercial property, the lease-up period accounts for the space of time between pre-leasing and stabilization — which is when the asset reaches the breakeven occupancy rate. During lease-up, project investors or developers focus on signing as many leases as possible, as quickly as possible. A successful lease-up period not only reduces vacancy fears but works to free up cash flow during the early stages of the project. While it may seem like an easy feat for a brand new project to attract lessees, the truth is that the lease-up period isn’t without its fair share of challenges.
What are the challenges of the lease-up period?
While most people tend to fall into the belief that newer is better, a good portion of the challenges that a lease-up property faces stem from the newness of the project. Lease up — particularly with new construction — seems to invite a different set of obstacles in comparison with working to fill vacant units in an established and stabilized property. Truth be told, it isn’t too far-fetched, considering that establishing a brand in any market is usually hard-going. Even so, some of the more glaring issues presented during the lease-up period include:
Costs
The lease-up period is such a critical time for a property that investors and developers often allocate substantial portions of their budget towards it. And to be fair, the costs of the lease-up period can be substantial. A successful lease-up may require items such as increased marketing spend, increased staff, leasing events, and networking — all of which can contribute to a greatly inflated budget.
The pressures caused by the race to stabilization are major drivers for determining just how much should be spent during this time frame, but that's not all. When executed successfully, the income from lease-up can help investors and developers truly refine their projects. Adding useful technologies and processes and securing the right first batch of tenants, who are sure to thrive within the space, are making the transition from lease-up to stabilization a more seamless and stress-free process.
Marketing
Marketing a lease-up property can be tough. A new brand or even an established developer making entry into a market with a new kind of project can suffer from a lack of brand authority and trust. New projects often don’t have materials to market beyond developer concept art and floor plans. In an internet-focused society, not having the right online presence can mean a significant lack of reach and interaction. Established communities don’t typically have this issue, since more and more property and unit photos, videos, resident testimonials, and positive reviews, are naturally spawned as time passes by.
Even so, with the latest advancements in video technology, prospective residents can do virtual tours through a community, even if they are unfinished. This new technology does help to relieve some of the marketing burdens, but in some cases, the costs and time associated with these virtual tours can make it a non-option for many projects.
Schedule Management
Signing leases goes well beyond the actual paperwork. During a typical lease-up period for a new property, some of the largest pressures are placed on the property manager or the leasing agent. Most people don’t sign a lease without serious vetting of a property, and it falls on the aforementioned entities to schedule and execute the leasing process for each prospective lessee. This process includes numerous meetings, background checks, interviews, community and unit walkthroughs, and even after signing, new resident orientations — often while there is still employee training and construction going on on the project. All things considered, this can equate to a scheduling nightmare.
This, of course, only seems to compound the difficulties of trying to market a property that isn’t fully ready to be shown. Even after construction is completed, a new pain is born with simply scheduling move-ins. Adding to that, once there are residents actually living at the property, resident engagement is another concern, to ensure that early tenants are satisfied with the community. Ensuring that the property management company has all of the tools and training they need to operate at their best is essential to lease up success.
Final Thoughts
There is no easy way to get through the lease-up period, regardless of experience or the magnitude of a project and its offerings. A new community must endeavor to appeal to the market that it serves, and it is up to investors, developers, and property managers to aid in this process. Still, even with the obstacles presented during lease-up, there are very few notable failures and almost none that can’t be turned around at some point. Simply keeping the above challenges in mind can go a long way towards strategizing a successful lease-up for a new project.
Related Questions
What are the most common challenges of the apartment lease-up period?
The most common challenges of the apartment lease-up period include:
- Schedule Management - Signing leases goes well beyond the actual paperwork. During a typical lease-up period for a new property, some of the largest pressures are placed on the property manager or the leasing agent. Most people don’t sign a lease without serious vetting of a property, and it falls on the aforementioned entities to schedule and execute the leasing process for each prospective lessee. This process includes numerous meetings, background checks, interviews, community and unit walkthroughs, and even after signing, new resident orientations — often while there is still employee training and construction going on on the project. All things considered, this can equate to a scheduling nightmare.
- Marketing a Property That Isn't Ready - This, of course, only seems to compound the difficulties of trying to market a property that isn’t fully ready to be shown. Even after construction is completed, a new pain is born with simply scheduling move-ins.
- Resident Engagement - Once there are residents actually living at the property, resident engagement is another concern, to ensure that early tenants are satisfied with the community. Ensuring that the property management company has all of the tools and training they need to operate at their best is essential to lease up success.
What strategies can be used to reduce the time it takes to lease up an apartment?
There are a few strategies that can be used to reduce the time it takes to lease up an apartment. First, it is important to have a comprehensive marketing plan in place. This should include online marketing, such as creating a website and social media presence, as well as traditional marketing methods, such as print ads and direct mail. Additionally, it is important to have a strong leasing team in place to ensure that the process is running smoothly and efficiently. Finally, offering incentives such as reduced rent or free amenities can help to attract potential tenants and reduce the time it takes to lease up an apartment.
For more information on strategies to reduce the time it takes to lease up an apartment, please see the following sources:
What are the best ways to attract tenants during the lease-up period?
The best ways to attract tenants during the lease-up period are to create a strong online presence, offer virtual tours, and create a marketing strategy that appeals to the target market.
Creating a strong online presence is key to attracting tenants during the lease-up period. This includes having a website, social media accounts, and other online resources that prospective tenants can use to learn more about the property. Additionally, offering virtual tours of the property can help to give prospective tenants a better idea of what the property looks like and what it has to offer.
Finally, creating a marketing strategy that appeals to the target market is essential. This includes understanding the needs and wants of the target market and creating a strategy that speaks to them. This could include offering incentives, such as discounts or free amenities, or creating a unique experience that sets the property apart from the competition.
What are the most important factors to consider when setting rental rates during the lease-up period?
When setting rental rates during the lease-up period, it is important to consider the market rate for similar properties in the area, the amenities and features of the property, and the target demographic. It is also important to consider the cost of the lease-up period, as this can have an impact on the rental rates. Additionally, it is important to consider the potential for future rent increases, as this can help to ensure that the property is able to remain profitable in the long-term. Finally, it is important to consider the potential for tenant turnover, as this can have an impact on the rental rates as well.
For more information, please see the following sources:
What are the benefits of using a professional leasing agent during the lease-up period?
The benefits of using a professional leasing agent during the lease-up period are numerous. A professional leasing agent can help to ensure that the leasing process is conducted in an efficient and effective manner. They can help to ensure that all of the necessary paperwork is completed correctly and that all of the necessary background checks are conducted. Additionally, they can help to ensure that the property is marketed in the most effective way possible, and that prospective tenants are given the best possible experience when touring the property. Finally, they can help to ensure that the move-in process is as smooth as possible, and that any issues that arise are addressed quickly and efficiently.
Source: Apartment.loans