In the meantime, Haefner says Lane, its fee-management clients, and the industry at large are rethinking operations at the property and portfolio level. After a period of significant investment, development, and deal flow, operators are being challenged to boost net operating incomes through cost containment strategies and competitive property management. “In a much friendlier environment, people would be spending the majority of their time underwriting new deals,” Haefner says. “Now, management wants to know what the marketing plan is, how are we going to get occupancies up, how we are going to improve the revenue stream, how we are going to cut expenses. Property and asset management people have more pressure on them than they have had in some time.”
When it comes to that pressure, respondents to the 2009 Strategies Survey say residents will be particularly attracted to technology, recreational amenities such as pools and gyms, and—little surprise in today’s economy—incentives and concessions. They will be less interested in features such as green building or social and event planning.
“Given the economy, most of us are not going to be able to maximize income other than trying to maintain occupancy. We certainly are not going to be out there raising rents,” explains McLean, Va.-based Kettler Management president Cindy Clare. “We’ll control expenses and, if anything, lower them so we can maximize the NOI on the property.”
Given increased property-level competition for renter dollars, Clare is hesitant to make significant cost cuts on staffing line items, particularly when it comes to personnel who regularly interact with customers. Instead of layoffs, Kettler plans to make targeted promotions and increase management responsibilities for associates that seem ready to take on the extra work. Those tactics—advancement opportunities and increased salaries—are high on the list of tools Strategies Survey respondents will leverage to retain key employees next year (See Figure 5 on page 46).
“While personnel is the biggest budget line item, it is also the most important factor on the property when it comes to leasing, maintenance, and operations,” Clare says. “If you have people who are ready to move up, now is a good time to get creative with multi-site management. Have those associates manage two assets, increase their salary as a retention tool, but also decrease the net payroll costs to your properties.”
In addition to minimizing cost cuts on the personnel side, Waterton Associates will look to continue to fund capital projects through 2009. Though Lozinak admits that spending rehab monies seems contradictory to expense management, he says the investments—managed wisely—can be a value-added payoff.
“When NOI is down, the tendency is to skimp back and not spend the money on capital projects,” he explains. “But look at what all the economists are talking about with a recovery in 2010 or 2011. When that recovery starts, do you want to scramble to get your assets where they should be by spending even more capital? You should make smart decisions on all of your operating costs and capital spends. Where there are opportunities to spend smart capital dollars, spend them now.”
MARKETING & TECHNOLOGY
A Promising Future
In response to bandwidth-hungry and tech-driven renters, respondents to the Strategies Survey also plan to funnel some of that smart capital investment into a variety of front-end and back-end technology systems. The focus on property management and operating fundamentals is again apparent among multifamily tech professionals, with 35 percent of respondents saying that they plan to invest in property management software. Another 30 percent are looking to maximize rents by putting money into comprehensive revenue management systems.
Trammell Crow’s Lomenick, for one, explains that—after culture match—a third-party manager’s tech acumen is one of the primary factors influencing whether they are contracted out to a High Street development. “The technology is critical,” Lomenick says. “We want to be real time with property management data, and we want to do everything through the Web. The Web is where the bulk of multifamily is done now, particularly when it comes to marketing.”
In fact, while the Strategies Survey indicates that print advertising is still in use among 64 percent of respondents, a full 74 percent say they will engage in online and Web 2.0 marketing efforts next year. When it comes to online marketing dollars, 64 percent of respondents are using Internet listing services (ILS), while another 59 percent report using search engine optimization (SEO). An additional 43 percent will rely on e-mail marketing campaigns.
“Print media will never go away, but SEO will continue to be important,” Haefner says. “People are not going through multiple search pages to find information anymore, so it will become even more important to get to the top of the list, especially as it becomes more cost-effective. We’re also really trying to look more towards the social networks such as Facebook and LinkedIn and Twitter. We won’t dedicate a full-time person to it, but we plan to focus on it fairly extensively this year.”
Clare says that Kettler will put all new tech initiatives through a stringent evaluation process in 2009. In particular, systems that promise greater efficiency and productivity will be held to a strict litmus test as the company focuses on tightening up its operations going forward.
“We’re only going to spend money on technology if it helps us to be more efficient and reduces costs in other areas,” she says. “If someone cannot show me that direct correlation, that investment is probably not something I am going to do. We are going to be looking at things very hard because our No. 1 priority is to make sure residents understand that their first priority is to pay rent.”
Likewise, Waterton is looking at technology as just one tool to leverage in a 2009 effort to regroup and prepare for opportunities in 2010 and 2011. “We’re rolling out Rainmaker’s lease optimizer, and we are going to refine our e-procurement and paperless invoicing process, but for the most part, we are going to focus on perfecting what we already have on the plate rather than throwing a bunch of new initiatives on the table,” Lozinak says.
To that end, Waterton stands as an example of the renewed competitive spirit in the multifamily industry and the extent to which players are preparing balance sheets, portfolios, and assets down to the unit level for the next window of opportunity. Lozinak and his team are walking vacant apartments to assess repairs and remodeling needs as they’re simultaneously teaming up with CalSTERS on a $225 million acquisition fund.
“Things are good at Waterton,” Lozinak says. “We’re going to focus on operating at optimum levels and bringing the customer service promise to life. We have a fund; we’ve got capital; we’ve got a line of credit. We’re set.”