3 surprising trends about multifamily unit turnover
Find out how top multifamily property managers combat unit turnover by improving resident experience management.
Unit turnover can dramatically impact NOI at multifamily communities. But companies that prioritize the resident experience typically enjoy better retention rates. That’s because renters’ priorities have evolved – and they are more inclined to stay in communities that deliver a pleasant living experience.
Residents once prized amenities, like pools or gyms, but now they heavily value convenience, connections, and meaningful living experiences. In other words, resident renewals are often determined by how a community makes residents feel.
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Unit turnover is costly for multifamily property managers
Naturally, you may wonder how to make renters feel good about their homes so you can minimize unit turnover. Because losing residents has major financial impacts. Did you know the cost to replace just ONE resident that moves out is nearly $4,000? This is hardly chump change!
If you consistently have residents who move because they are underwhelmed with their community, the costs will eat away at your NOI. Even slight improvements in resident retention can boost your bottom line.
So, what are companies doing to combat unit turnover? Our first-ever State of the Resident Experience Report provides some insight. With the help of Strategy Analytics, nearly 700 apartment operators gave us feedback on the resident experience in their communities. And our report shares those results. Here are a few notable takeaways.
#1 Industry average resident retention rate is 58% but top performers are achieving 65%
Clearly, unit turnover is harmful to your business. So how many companies have goals around resident retention? As it turns out, almost all.
Does your company have a resident retention goal?
It’s great so many companies are setting goals to minimize unit turnover. But we were also curious to hear what they are aiming for with resident retention.
The majority of management companies aim to retain at least 50 percent of their residents year-over-year. Thirty-one percent aim for 61 percent retention or higher.
Current resident retention rates for management companies in 2021
The top performing quartile of property management companies is achieving a 65% resident retention rate. On the flip side, the bottom third and fourth quartile are falling below the industry average retention rate of 58%. There is nearly a 20% difference in retention rates between the top quartile and the bottom quartile. While some churn is to be expected, the gap between the top and bottom quartile begs the question, what are the top performers doing differently?
Our takeaway: property managers should look closer at their resident experience
Most companies (77 percent) are aiming for 55 percent retention or higher. This is a healthy and realistic goal. It also accounts for non-controllable instances of unit turnover (job location change, life circumstances, etc). But survey data shows that most companies fall short of their goal. Particularly, those who manage fewer than 1,000 units.
This suggests that not enough resources are being devoted to resident satisfaction. Companies are likely putting more emphasis on what, traditionally, has been a top business priority: acquiring new residents.
And while that should still remain an important focus, it’s not enough to stay competitive. With turnover costs being what they are, management companies need to focus on creating exceptional resident experiences. That will minimize unit turnover so retention goals are easier to hit.
#2 The majority of unit turnover is preventable
Sometimes residents are happy with their community but can’t stay when it’s time to renew. Maybe they got a new job that’s farther away. Or their life circumstances have changed.
But more often than not, the decision to leave stems from unhappiness with the community management. In fact, NMHC’s Apartment Resident Preferences Report cites this as the second most common reason residents move away from their community (behind seeking lower rent).
Because it is so costly to replace residents, we wanted to understand what causes churn. We started by looking at the reasons residents report moving to a different community. Then, we categorized the responses: controllable by management and not controllable by management. This gives us a better understanding of why residents leave a community.
reasons to not renew lease
Our takeaway: Unit turnover rates are driven by the resident experience
There will always be instances of unit turnover that your company cannot prevent. For instance, sometimes renters are relocating to a new city, or have a change in family status. These things are unavoidable and a healthy reason for churn.
However, these instances are the minority. By a factor of nearly 2:1, residents leave a community for reasons that are preventable. The reasons include seeking better apartment management, lower rent, or better apartment features. By focusing on improving the resident experience operators can make a material impact on reducing unit turnover.
For example, “seeking better apartment management” is a broad bucket. It can encompass how residents retrieve their packages, to the way you manage maintenance requests. And don’t forget all the other small touchpoints in between.
It’s wise to examine the key touchpoints across the resident lifecycle. From there, you can find ways to optimize your communities’ living experience. If you can transform some situations that are unpleasant for your residents you may eliminate some instances of unit turnover.
#3 Providing a modern living experience is the top area associated with Resident Experience Management
Resident experience management has many components. We wanted to understand which aspect multifamily operators think is the most important.
Our takeaway: modernized community features play a big role in resident satisfaction
Property managers think that a modern living experience is the most central part of resident experience management. Does that mean you have to have a newly-built community? No.
While updated cosmetic features are definitely appreciated, there’s more to a modern living experience. A big part is modernizing interactions with residents. For example, technology that eliminates friction points – things like access control, smart technology, or community apps. Digital, automated methods to facilitate apartment interactions are becoming increasingly critical.
And while modern living experience ranks at the top, all of the other areas follow closely behind. Therefore, they are almost equally important as a modern living experience. Companies that master most or all of these areas will see positive impacts on retention.
Multifamily apartment operators reveal their unit turnover strategies
Want more insights on resident retention and fighting unit turnover? Download our new report, The State of Resident Experience Management! It includes more key takeaways from our survey of multifamily operators. Not only that, we offer recommendations that improve the community living experience and resident retention rates.