Not every company is waiting though. Lane Cos., an apartment owner and developer in Atlanta, likes to go into a new development with 20 percent or 25 percent of its units leased. To accomplish this, it sets up a model unit and a call center to handle inquiries from possible residents. The company likes to begin leasing four to six months out. “This works well in capturing interest from those watching construction progress,” says Jared Miller, director of marketing for Lane. “We start out with Internet advertising and simple public relations to create a list of interested renters and then move into the other advertising mediums once the property is closer to accepting initial occupancy.”
In one mid-rise, SummerWalk in Tampa, Lane pre-leased about four months out from an office located in an adjacent hotel. Though the market was challenging, the company pre leased 10 percent of the property without significant move-in incentives.
Others aren’t so sure this is the way to go. “We are not spending a great deal of money in an effort to lease more than 60 to 90 days out,” says Steve Patterson, CEO of ZOM, a multifamily developer and owner in Orlando, Fla. “We don’t find it cost-effective. [Pre-leasing] more than 60 days in advance would probably require some sort of temporary office, which is costly.”
And Patterson says the return on these costs isn’t high enough to justify the investment. “People are not inclined to rent more than 60 to 90 days in advance, therefore the conversion rate is very low,” he says.
Timing can also be an issue. “I don’t think people would pre-lease more than three or four months out because it’s too hard to pin down the dates,” says Dave Woodard, managing partner and CEO with Laramar Communities, an apartment owner and manager in Greenwood Village, Colo. “Unit deliveries are almost always later than planned. You can tell people they’re moving in on May 1. But then May 1 comes around and the building is not ready.”
Herrman just thinks renters don’t like long-term commitment. “The psychology of the renter is a little closer in,” he says. “It’s very difficult to pre-lease apartments in most situations unless I can come see it, and it’s in a 30- to 60-day timeframe. As a renter, I’m not thinking about moving 30 to 60 days out.” As a result, Herrman doesn’t spend to staff a sales center too far in advance. “You obviously want to get those leases in early, but you don’t want to start staffing until you can get those leases,” he says.
