How Developers Maintain High Occupancy With High Rents
So, here's the deal: In the world of multifamily development, there's a persistent myth that to retain renters, you have to lower rents.
At CHARLESGATE, we know this simply isn’t true. In fact, we've proven it. You can maintain high occupancy rates without compromising on rental prices.
How?
Through strategic and powerful marketing that actually adds value to your property and keeps renters happy. Let's dig in!
The Fallacy of Lower Rents and Higher Occupancy
Conventional wisdom says lower rents attract more residents and keep occupancy rates high. On the flip side, it suggests raising rents will drive happy residents away. But this overlooks a crucial factor: perceived value from strong GTM strategies. With the right go-to marketing plan, new development projects can create a perception of superior value that justifies higher rents and retains their renter pool.
The Power of a Strong Go-To-Market Strategy
Effective marketing is more than just flashy ads and premium listings. It’s about deeply understanding your market and your competition, highlighting unique property differentiators, leveraging high-quality visuals, and using data-driven pricing strategies. Its about selling that resident experience, top tier customer service, and hospitality mindset to your renters.
It’s about creating a brand that prospective residents and even the neighbors down the street love and trust. But having the best brand on the block doesn't come cheap.
We recommend, from proven experience, investing at least 0.50% of your project cost in apartment marketing and 1% in condominiums. These investments pay off by positioning your property as a premium choice on the market, attracting residents who are willing to pay a premium price tag for quality.
Investment Breakdown
Here's how marketing investments can look based on project value:
| Project Value ($) | 0.50% Marketing Investment ($) |
|---|---|
| 50,000,000 | 250,000 |
| 60,000,000 | 300,000 |
| 70,000,000 | 350,000 |
| 80,000,000 | 400,000 |
| 90,000,000 | 450,000 |
| 100,000,000 | 500,000 |
These numbers might seem high at first glance, but consider the tangible ROI. Authentic's partners at Left Lane saw a 5% increase in rent per square foot and a $733K increase in property value in just one year after implementing our marketing strategies. That right there, is ROI you can take all the way to the bank.
See what we did there?
It Costs $ to Cutting Corners
Skimping on a highly specialized go-to-market strategy in multifamily can lead to prolonged vacancies and a weak tenant pool. A minimal marketing budget often results in longer stabilization periods and lower overall ROI. You don't have time for that! Nothing kills a new development news story like underwhelming pre-leasing stats out of the gate.
If you forgo sizable investments for marketing expenses, you will struggle to fill vacancies and miss out on qualified traffic. Plain and simple. Multifamily marketing is not one of those line items on the proforma where you can expect to do more with less.
You will do less with less.
What does the ROI on a small marketing budget look like? Factoring in a prolonged stabilization period, plus a cutthroat market with plenty of inventory, the ROI looks… in the negative.
But hey! Your site team will still have plenty of semi-qualified, semi-fraudulent leads to the field since you put all of your eggs into the ILS basket.
You have covers of news articles to be on, and ribbons to cut with oversized scissors, remember? Think of this expense like success insurance on your lease-up in a market of unprecedented amounts of new inventory hitting the market.
Strategies To Avoid Lowering Rents
Now that we've talked numbers, let's dig into the four key ingredients of maintaining high occupancy and high rents in today's market:
Know Your Market: Tailor your marketing message to the specific needs and desires of your target residents. This attracts the right residents who are willing to pay a premium price for your brand.
Highlight Unique Features: Showcase what sets your property apart from the competition. Effective marketing conveys these unique features in a way that amplifies their perceived value. The best amenities you can highlight in today's market are the ones that work in the leasing and maintenance offices. A strong property management team who is dedicated to enhancing the renter experience, is an amenity that goes so far for today's prospects.
Use High-Quality Visuals: Professional photography, videography, and virtual tours enhance your property's appeal and brand, attracting more prospective tenants and supporting higher rental prices.
Develop a Strong Brand: A memorable brand creates a connection with tenants and differentiates your property in the market. Strong branding supports higher rents and tenant retention.
Storytime: The600
It's one thing to talk the talk, but at Charlesgate, here's a brief overview of a case study that specifically tells the story of how a comprehensive marketing plan can add value to your property per square foot.
The Challenge THE600 had smaller studio, one, and two-bedroom apartments with limited storage and parking in a competitive market.
The Solution CHARLESGATE implemented a highly custom comprehensive marketing strategy, focusing on centralized "on-demand" leasing with skilled on-site sales talent.
The Results This strategy led to leasing the building at an average of $4.50 per square foot, achieving unprecedented rents in the Everett market, and generating $212K in monthly rental income.
The Perceived Value Factor
Effective marketing creates a perception of a superior living experience, encouraging residents to pay higher rents. Additionally, a sense of scarcity and exclusivity can prompt potential residents to act quickly, maintaining high occupancy rates even with higher rental prices.
Think of the brand Liquid Death, for example. They sell water. H2O. A product that is free in most places, and yet, their current market valuation is 1.4 Billion. All thanks to brand marketing.
Strong creative partners with Multifamily expertise will develop a full brand strategy for your project and collaborate on the best GTM approach to help you win the market.
Consider This Myth: Busted
The belief that higher rents lead to lower occupancy is a myth. With the right marketing strategies, you can retain renters and maintain high rental prices. By understanding your market, highlighting unique features, using high-quality visuals, and developing a strong brand, you can achieve the best of both worlds.
In fine real estate, perception is reality. By creating and maintaining a perception of high value through powerful marketing, you maximize profitability and retain satisfied renters. So next time you're worried about cutting rents to bring leads into your pipeline or cling to your occupancy rate, consider investing in your marketing strategy instead.
Your bottom line will thank you!
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CHARLESGATE consults on the entire design and development process to guide you through creating a top-of-market new development project that residents love. Contact our team today to learn how we can drive demand to your new development project with forward-thinking design and development.
