It is obvious that there has been a fundamental change in the demand for homeownership over the last few years. Fiscal policies and social pressures have encouraged American consumers to buy homes, oftentimes biting off more than they can chew, and saddling them with responsibilities for which they are ill prepared.
As we slowly approach the light at the end of the “economic downturn” tunnel, I am confident that the end of that road puts the apartment industry at a unique crossroads.
In one direction: a tempting view of green pastures and growing profits that only come with focusing solely on our wallets, quantity over quality, and putting residents second. The other direction is not so tempting: The development of true communities for residents, communities that encourage resident retention in ways unimaginable just a few years ago.
This is not to say that the multifamily industry is loaded with greediness. Quite the contrary. The industry is full of people who endeavor to provide the most basic and useful commodity: a roof over the heads of millions. What it means is that when times are good, companies sometimes lose sight of the real driver of growth and profitability — happy residents.
Leaders in the apartment industry, whether CEOs or front line leaders such as property managers, must admit that their focus is traditionally monopolized by assuring their organizations are running efficiently and generating acceptable margins for clients and shareholders.
A recent white paper “Redefining the New Normal,” concluded with the following: “Remember, there will be a glimpse of heaven by 2011… getting there will be a challenge for some and a boom for others. What is your plan to win?”
In order to “win,” the apartment industry must pay attention to the available data and demographics.
By doing this, the choice may be the less popular, but ultimately more beneficial direction, at the crossroads.
The multifamily industry must put the best practices in place to create real communities, retain residents, and attract and provide the highest quality service for the avalanche of people that trending data shows are heading its way. By 2020 the population of renters is projected to rebound to 67 million, from 59 million at its low point in 2000.
Apartment demand rarely goes negative and spikes back hard when jobs recover. Prudence dictates that the industry should be prepared to take advantage of this pent-up demand for clients.
In establishing a true sense of community within its assets, the apartment industry will focus on those practices that involve real interaction with and amongst residents. They will create places where families are comfortable, safe and have amenities they enjoy. A strong feeling of community and belonging has immeasurable benefits for a growing population of residents. This, in turn, will drive greater retention and increased asset-level profitability.
While all signs point to 2010 being another challenging year for commercial real estate, a ballooning federal deficit, growing unemployment, limited credit availability and declining rents, it is hard to have a different short-term perspective.
What is also clear is that if you believe the marketplace and believe in cycles, then you know that this too shall pass.
When it does, there is hope that the apartment industry chooses the road less traveled at the crossroads.
Author: As founder and CEO of Greystar, Faith is responsible for the strategic planning and growth of the company and absolutely essential to this is his consistent focus on Greystar’s Six Pillars of Excellence.