In recent years it has become common to see the number of new constructions in the multifamily industry climb and keep climbing. In particular, we are seeing a number of new luxury constructions coming online. This is simply a product of economic necessity, according to many in the industry.
"The two-by-four doesn't care whether it's in a luxury building or in an affordable building. It costs the same," said Toby Bozzuto, a major developer in the industry, in an interview with CNBC. "The differential of course, is the rent and there's a huge disparity in high-end rent versus low-end rent."
The CNBC story goes on to note that there are other problems besides the cost of lumber, though lumber costs are quite high. Steel and concrete are also more expensive. But labor and land are the places where costs have really spiked. The result is that it is often not feasible financially to build anything except for luxury properties, where the rent will be high enough to justify the cost.
As a result, the share of new constructions that are luxury-level properties nearly doubled between 2012 and Q1 of 2016. The USA Today has reported on the same problem, noting that in 2013 new luxury properties typically got up to 89% occupancy within 18 months of opening. By 2015, average occupancy 18 months after opening sat at 82%—a large drop and a huge drop in revenue when you consider the high rent rates at these properties.
But this creates two problems. First, it creates a shortage of affordable and lower-level market rate housing. Second, it creates an excess of luxury properties. From there, the problem is simple economics: When you have a large supply of luxury properties, eventually supply outstrips demand.
The result of all this was described last year by the New York Times, which hailed 2017 as "the year of the renter," and noted how these trends were affecting rent rates in New York City:
In Manhattan, Brooklyn and Queens, inventories and vacancies are up, and landlords are offering new tenants discounts, like several months of free rent and no broker’s fee. In the Bronx and Staten Island, rents are holding steady because those boroughs did not experience the same rapid rent escalations or volume of new development. But that could change when new rental buildings open in both boroughs this year and in 2018.
The biggest deals are happening at the top of the market, where some luxury developments are offering as much as four months of free rent on a two-year lease. But deals are to be had in older, less expensive buildings, too. Despite these concessions, some apartments linger vacant for months. Worried that a slowdown will continue, many landlords are not raising the rent when leases come up for renewal, and some are even throwing in perks like gift cards.
Given these trends, we want to share a few ideas on how you can market luxury properties more effectively in order to avoid some of the problems that often come with over-building.
What is the most important thing for luxury apartment communities to do with their online marketing?
The best thing you can do as a luxury property to stand out is to build a website that is product-focused. What we often see with luxury properties are websites built around developing a strong brand rather than informing prospects about the product they would be purchasing were they to sign a lease.
In practice, this looks like glamorous, high-dollar websites that look spectacular but often don't tell prospects very much about the property. Of course, in some industries this sort of marketing plan is by design. Your marketing strategy consists of building a brand that gets prospects to associate your fairly ordinary product with something they value.
So, for example, a restaurant chain's marketing might try to get us to think of something as simple as a burrito or burger as being particularly virtuous because the food is sourced in certain ways, they don't use GMOs, etc.
For restaurants, this sort of brand-based marketing works well because having a strong brand with consumers is highly advantageous. People buy food all the time so if you can get a consumer to think of you in a certain way that will create a deeper bond with your product, the odds of turning them into a repeat customer and long-term fan are very good.
In multifamily, however, a brand-based strategy doesn't make as much sense. In the first place, most management companies are not going to have repeat customers and almost certainly will not have long-term customers who lease from them at three or more different properties. Apartment choice has more to do with amenities, price, location, etc. then with the brand of a specific company. Second, brands make sense with low-risk purchases where the initial bar to try your product is very low. I might see an ad I like for a new energy drink and, given that the cost of the drink is only $3, go ahead and give it a try based only on the very flimsy basis of seeing a single ad. But an apartment lease is a much riskier purchase. Even a comparatively cheap lease like $650/month for 12 months still ends up being $7800 over the full year. So you can try to build a brand, but the value you get from that is likely to be pretty limited.
What are specific ways to create a product-centered website?
There are three main things we want to focus on in discussing specific tactics for focusing your luxury property's website more around your product than your brand:
- Create floorplan-specific content that helps prospects see into their apartment.
- Make amenity information easy-to-find.
- Do not neglect technical SEO points.
We'll expand on what each of these mean below.
Create floorplan-specific content that helps prospects see into their apartment.
The most obvious way to be product-centered is to make it easy for prospects to find specific information about your product. In this case, the specific thing a person is leasing from you is an apartment. So make it easy for them to actually see that specific apartment.
At a minimum this means having floorplan-specific photos on a gallery page that are plainly marked by floorplan. But that's just a minimal requirement.
It's far better to create specific floorplan landing pages for each floorplan in your community. On that page you will have photos of the floorplan, but you can also post a walkthrough video tour of the floorplan, and specific amenity information about that floorplan.
What all this information does is allow prospects to learn about the floorplan for themselves and make an informed decision about whether or not they want to take a tour of it in-person.
If they decide they do want to tour, then they are that much warmer when they call your leasing office. If they decide that they don't want to tour, then you've disqualified a bad lead before they ever called your property and have saved your leasing staff a fair bit of time.
Make amenity information easy-to-find.
Next to the floorplan itself, the most important factor for many prospects in making a decision about the apartment will be amenities. Pet policy is hugely important.
At a minimum, prospects strongly prefer ads that state the pet policy. But we also know that 45% of property managers say that their residents tell them pet-friendliness is the most important amenity a community offers.
For this reason, you should make it easy for prospects to find specific amenity information about your property. This is partly, again, a matter of lead qualification as in the case of floorplan content.
But it is also an issue of user experience. When you need a specific piece of information and can't find it where you would reasonably expect it to be, that's frustrating. A good website should reduce that frustration for users, particularly when the purpose of the website is to entice visitors into calling the leasing office and possibly signing a lease, which is a major financial commitment for them.
Do not neglect the technical points of search engine optimization.
This is another point that can be lost when communities splash the cash on a high-dollar website without thinking enough about their marketing priorities. If you want people to see that site, they need to be able to find it. And if they are to find it, search engines need to index it and rank it highly for relevant keywords. And if that is to happen then you have to take care of the nitty-gritty technical SEO work that requires. This includes things like the following:
- You must optimize photos on the site to make sure they are sized correctly and can load quickly. (Design-intensive websites often load slowly due to the size of their images, particularly on mobile devices.)
- You need to make sure that redirects are set up correctly. This particularly means making sure that you have a redirect set up so that http://yourdomain.com redirects to http://www.yourdomain.com or vice versa.
- You should also check to make sure the site is mobile-friendly. To do that, you can simply go to this link and plug in your site's URL. If you have particular questions about this issue as it pertains to multifamily, you should also check out our extensive posts on the issue. The main summary piece is here. A more in-depth treatment can be found here.
The key with all of this is to be thinking about the prospect's experience as they are using your site. Sites with huge hero images of happy people lounging by pools and thin, trendy fonts may look cool, but they aren't necessarily going to lease apartments which is what your site needs to do. Focus on the product. Focus on the customer. The branding, so far as it goes, will take care of itself.