The Demand Solutions Blog

Fall is upon us. As usual for multifamily operators, Halloween preparations and pumpkin spice treats provide the backdrop to the main event - next year’s budget. As we grind through the seemingly endless iterations of revenue and cost numbers and reconciliation between properties and central teams, at some point the light will appear at the end of the tunnel. At that point, we will get to turn our attention not merely to the goals, but how we will achieve them.

We will bring 2018 to a close with a decade of growth behind us. We will enter 2019 facing what is now an annual question "is this going to be the year when things slow down?"  Of course, nobody knows the answer to that question, but there are good reasons to take our preparations for next year as an opportunity to revisit sales. A decade when demand has outstripped supply more often than not has delivered spectacular returns but in many cases, less-than-spectacular sales performance.

Just yesterday, Pillow Homes released a white paper I authored, “Allowing Short-term Rentals in Multi-family Buildings: The Benefits and the Risks Based on Real-world Data.” Though in full disclosure I was compensated for my work, I am particularly proud of this piece of analysis as it’s the first time I’m aware of any comprehensive case study of what really happens when buildings actively allow residents to sublet their homes out for short-term rentals (STRs).

The paper was made possible by data collected on the Pillow Homes platform and the courtesy of two management teams of Denver multi-family communities allowing me to interview them to bring their experiences into the analysis along with the “hard” numbers. The study was made all the more interesting as one of the communities was a stabilized property and the other is going through lease-up, thus giving different perspectives from different operating imperatives.

Over the last 20 years, the multifamily industry has gotten better at managing the core elements of their business. Companies are smarter regarding where they're building or buying their properties, and how they're operating them. The use of pricing and revenue management systems has become the norm, not the exception. Utilizing sophisticated property management systems, online marketing tools and so forth--again, the norm. That means we're operating more efficiently than we ever have before.

With all of these improvements, there is still one area that has been (and often still is) overlooked: sales. As the demands of customers continue to evolve and liquid expectations impact their expectations, experience and buying journey, smart operators know this needs to change. At these companies, sales acumen has begun to “earn its seat at the table” as a key driver to operational performance.

It's important to note that selling today isn't like what selling used to be. Daniel Pink, noted author of the book To Sell is Human shared, "Most of what we know about sales comes from a world of information asymmetry. Sellers had far, far more information than buyers did." That was certainly true in multifamily. Sellers could manipulate buyers and force them to play the game that salespeople wanted to play. That is no longer true.   

A week or so ago, I blogged on my daughter’s reaction to a study allegedly sharing insights into how you need market to millennials differently than everyone else. I got so many responses to the raw honesty and insight, I thought I’d go back to the D2 Demand Solutions Millennial Focus Group (again, really just my 23-year old daughter who is a renter) and ask her what she thought about the buzz around micro units and co-living concepts.

The good news is that, unprompted, she’s heard plenty about both of these. The not-so-good news? Just read her response:

Literally every millennial I have seen comment on them thinks they are glorified college dorms, and no one wants to live in them over a normal apartment. People just have to in places like San Fran because rent prices are ridiculous. There is a lot of grumbling about how baby boomers screwed over the housing market and now they think we want to live in dorms forever. Seriously, no one wants a communal bathroom and kitchen.

Selling is a lot like hitting a baseball. If you watch any Major League team play, you’ll quickly see two things: first, you’ll see some highly talented athletes on the field, and second you’ll see a wide variety of approaches, batting stances and swings from batters.

While a batting stance is as unique as the player employing it, if you study hitting, you’ll discover that despite the variety, effective batting swings have quite a lot in common. In hitting, there are three key points with the swing (where the hands are at the “load” position, where they are when the hands enter the “swing zone” and where they are at the point of contact) common across all good swings that enable a hitter to maximize the probability of making strong contact with the baseball and getting a hit.

Leasing is similar in this way. Leasing associates all have different styles and personalities. Additionally, the communities and buildings they’re leasing are quite different, and prospective residents bring their own unique personalities. The result is that every leasing opportunity is a unique experience.

Yet, in our study of top leasing associates and great leasing sales processes, we’ve identified that, like hitting a baseball, the great ones have three key elements that separate them from all others and maximize the likelihood of a positive outcome.

Over the years we’ve reviewed quite a few multifamily sales processes and training programs. The number one thing they’ve all had in common is (to put it nicely) they’re old. They’re built for a time that no longer exists. The impact of this is twofold:

• It puts a drag on leasing performance and pricing while increasing lead generation costs.
• It creates a negative customer experience, harming word-of-mouth and Net Promoter Score (NPS).
  

With leasing season just around the corner, now is a great time to give your leasing/sales process a check up. If you’re wondering whether yours needs improvement, here are five signs that the time to improve your leasing and sales process has come:

Flying back home from the NMHC Annual Meeting in Orlando, I can’t help but reflect on how fortunate we all are to be in this particular industry, at this particular moment in time. After several years of record 4-5+% rent growth, the past 16 months have seen remarkably stable rent growth with Axiometrics reporting YOY growth in the very narrow range of 2.1% to 2.5% (the long-term historical average is roughly 2.2-2.3%).

It’s not often we get to experience a sustained period of “Goldilocks” growth (“not too high, not too low”). Not surprisingly, the single biggest theme I observed at the session was a general satisfaction and confidence in the industry. The tone was clearly optimistic, but not heady. I realized that many of the CEOs and COOs attending were in the same or similar positions with their companies back in 2006-07. So while everyone feels good, the lingering memory of how that bull run came to a crashing end tempers any irrational enthusiasm.

Despite the stability of current market conditions, we are clearly in a transitional period not just in our industry, but in the larger business world as well. Here are a few key observations from my vantage point:

Over the last few months I’ve had a number of conversations with multifamily executives about important areas of focus for their operations. It doesn’t take long for the subject of sales to come up in conversation.

As we’ve shared over the last few years on this blog, sales in multifamily represents a unique challenge. Traditional approaches to improving sales are neither appropriate or effective. While it’s an important focus, I’ve seen first hand how operators, managers and leasing associates struggle to uncover and understand what it means to improve sales performance in this industry.

Several years ago we shared the seminal research study on sales performance done by CEB, that became the bestselling book The Challenger Sale. We’ve highlighted the study as the model to apply to leasing when designing and implementing a leasing sales performance improvement program.

In the challenger model, CEB highlights three things that top performers do continuously, that average and bottom performers either only do occasionally or don’t do at all. The study showed that top performers teach, tailor their presentation and take control of the process. When I explain this to executives, a common question I get is how this applies to leasing associates.

Top leasing associates, or “challenger” associates, regularly do these five things:

Most companies wisely set renewal policies by month and by property. Certain times of the year may call for different strategies and you’ll want to consider property performance as part of the overall renewal strategy. However, it can be a quite subjective practice to set renewal parameters. There are a few guidelines to keep in mind when doing so: