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Why Centralize Multifamily Leasing?

Couple shaking hands with leasing agent Shutterstock_1687244602 Centralization is a hot topic in multifamily, particularly the centralization of leasing functions. A confluence of factors has been transforming the leasing process over the past few years, stemming from new technologies that support a more self-serve-based leasing environment and changing customer preferences. The pandemic reinforced the trend, as self-show became a necessity. More recently, staff shortages have increased the urgency with which companies are reviewing staffing models. 

In this environment, many companies are reconsidering how they organize a function as critical as leasing.

This is the first in a series of blogs that will tackle the concept of centralization, its technological components, and its advantages over the current staffing/leasing model. We will highlight the factors that influence companies to become more centralized. Additionally, we will detail the playbooks that others have used for successful centralization. But in this post, we’ll first provide some background information about centralization as a whole.

About the Multifamily Operating Model

The multifamily property staffing model is rooted in coverage. As a general rule, operators have one staff member for every hundred units. So, in a 300-unit community, there are three staff members: a community manager, an assistant manager, and a leasing agent. 

These roles are fundamentally property-centric, and this is an important bias in the multifamily industry. Developers see patches of dirt on which they can build assets. The assets must entice people into leasing a unit and must deliver services so that they keep paying rent. Historically, the best way to do this has been to hire staff members and assign them to individual properties.

The coverage-based staffing model is baked into the property profit and loss statement and the proforma. Leasing agents are part of this formula, with individuals hired to answer the phones, organize tours, and close leases. 

Everybody is used to leasing staff assigned to individual properties. It’s the way that things have worked in multifamily since time immemorial. However, there are many reasons why this is a suboptimal way of organizing leasing. 

Why it’s Suboptimal, Even if You’re Used to it

Multifamily operations are unpredictable, so aligning staffing levels to workload is challenging. Sometimes the phones are busy; other times, they’re quiet. Sometimes there are many units to sell; other times, very few. It’s difficult to predict what’s needed and when. Moreover, this balance of time and labor becomes more difficult when you’re the only option as a single individual assigned to that one individual building.  

Coverage also creates a natural disconnect between prospects and onsite teams. When we give an individual staff member a nine to five job covering a leasing office, they are usually working simultaneously with your prospects. Historically, prospects wanting a tour of the community have had to “fit” the availability of the leasing agent to complete the tour.

Over the last decade or so, companies have tried to make their coverage more flexible—for example, staying open late one or two nights a week. But the extended hours only go part of the way towards giving the prospect what they need. Fundamentally, multifamily companies have asked their prospects to conform to them in a world of services designed around their customers’ needs. Take Zappos, for example, a hugely successful company built on convenience and excellent service.

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The Case for Change

There are numerous reasons why companies are now motivated to deliver this change in the leasing process. Some do it for financial engineering: the full-time equivalent (FTE) cost is the highest cost in property management, other than property tax. So, any opportunity to reduce FTE cost is attractive based on a net operating income (NOI) lift. 

On the other hand, some companies simply see this as meeting the customer’s needs, rather than forcing customers to conform to the property’s staffing limitations. Others still see the suboptimal progression of some multifamily career paths. We all know, for example, that the success of leasing agents is clearly defined by their abilities to close deals. If leasing agents are tied to a single property, their selling opportunities are limited. If the property they are assigned to has minimal availability, their earning potential has minimal potential as a direct correlation.  

A stronger solution would be to deploy leasing agents across multiple properties affording them the opportunity to sell available units’ portfolio wide.  To make this a reality, many companies are coupling the right labor force with the right technology, making it possible to innovate today’s leasing process. 

In Conclusion

Even at first pass, the opportunity to centralize leasing functions and its benefits are compelling enough for companies to pursue it. But of course, there are some things that operators must do to capitalize on the opportunity. They must understand the technology and how it works because not all technologies work in the same way. Some applications are better suited for centralization than others. 

As companies consider centralizing functions, they must consider and decide how their prospect and resident experiences will work. They must account for the general multifamily characteristic that one size does not fit all. Companies have different owners, portfolio structures, and property types, and all of these must be taken into account. Understanding the right approach to centralization is vital for success and is a topic that we’ll return to in the next blog post.

Source: Multifamily Insiders