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LEASING COMFORT
Clare isn’t alone. Other firms have seen robust rent growth across their portfolios. “Rent growth has been robust across all markets and projects,” says Greg West, Chief Executive Officer of ZOM Living. “The velocity of growth has been surprising, as has been the absorption of new apartment deliveries. The pandemic did stall absorption for some time, but it also delayed new starts, which has created an environment of supply shortage in most markets.”
While concessions became commonplace during the pandemic, they’ve now burned off. “For the most part, the only deals offering concessions are lease- ups on merchant builds that want to accelerate the pace to get to an occupancy they can market for sale,” West says. Even with 2020’s rent increase, Clare says some leasing agents remain nervous about asking for increases. “We haven’t seen these types of increases in many years,” she says. “Coming off last year, it is a little bit of a whiplash. So, it makes our teams nervous, but they also recognize their occupancies are high and people are coming in and paying the rent because we’re at market.”
But Clare says her leasing agents are getting more comfortable that these rent increases are market driven. “Our occupancies are high, so people are feeling much more comfortable about their leasing and getting residents in the door,” Clare says.
Wood Partners has seen rents jump across its entire portfolio this summer, including some surprising places. But some of that is beginning to moderate. “We have seen rents increase even in areas we expected to see a slower recovery, such as Portland, San Francisco, Oakland and Washington, D.C.,” says Steve Hallsey, Executive Vice President of Operations for Wood Residential Services. “However, rents are starting to show a slower amount of increase in the last several weeks, as the seasonal decrease in prospects begins.”
INFLATED OCCUPANCY?
Beyond the strong occupancies numbers is an unknown: The effect of eviction moratoriums. “How inflated is occupancy because of people who haven’t paid their rent?” says Clare.
When Chris Riley, a Co-Founder and Managing Partner of Blaze Capital Partners, looks across his A and B portfolio, he sees occupancies generally in the 90s. The market took off in March and pushed forward throughout the summer. “Universally across the board, we’ve seen a lot of demand and out-sized
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rent growth for sure,” he says. “Much of that has just been predicated on the high occupancies.” But like Clare, Riley notes that there is a catch. “Some of that occupancy in the B and C space is somewhat hyper-inflated and is a byproduct of the eviction moratorium,” he says.
Clare agrees that the number of people in units but not paying rent varies by location and asset level. “Some markets were more impacted than others,” she says. “The markets where there’s a lot of service industry jobs felt it more than markets where people were able to work from home.” Occupancy hasn’t surged everywhere. In some places, particularly pricy urban areas, occupancy also suffered during the pandemic. And it still hasn’t totally recovered, though it also picked up during the summer. “The increase in remote work options boosted an out-migration as renters saw the opportunity to move closer to family, in the suburbs or any place that offered a change of scenery,” says Tina West, Senior Managing Director with Cushman & Wakefield. In the future, Tina West thinks hybrid working will benefit both urban and suburban markets. “Homeowners who capitalize on elevated home values and have no place to go after they sell will push a higher demand on rentals, which will continue to lower vacancies, eliminate concessions and bump rents,” she says.
Even with these increases, other issues are cutting into profitability. “Rents have gone up in my region, but we are just trying to keep up with the steep increases in inflation,” says Dan Flamini, Area Vice President for Morgan Properties. “Payroll, maintenance supplies, taxes, insurance, and repair services are all increasing steadily.”
LEASING TECH IS HERE TO STAY
During the height of the COVID lockdowns, face- to-face leasing was nearly impossible. For the companies that had at least tested virtual tours before the pandemic, the transition was more manageable, according to Tina West. “The benefits of a digital landscape gave prospects access to leasing 24/7 and transparency in pricing and inventory,” she says. “The use of chatbots and interactive functionalities also helped us identify great prospects and guide their buying decisions.”
As it did for many other companies, the pandemic expedited the adoption of technology into leasing for Bell. While companies were already testing artificial intelligence tools and virtual leasing, the pandemic expedited their adoption. “We rolled it out across the board because there was a pandemic going on,” Clare says. “But what we’ve seen is that we are now