Ralph Reahard’s Post

It's a tough time to be a developer delivering newly built apartments. Lease-up velocity slowed materially in 2023, with the average U.S. lease-up signing just 11.7 leases per month -- down from 15.3 leases per month in 2022. And it'll remain challenging through 2024. So, what happened? It's not because macro apartment demand cooled. In fact, nationally, apartment demand re-accelerated nicely in 2023. It's not because of rent levels. In fact, the average monthly rent (inclusive of concessions) for a new apartment in lease-up has fallen to the lowest level since August 2021. So what's the issue? It's the sheer volume of newly built apartments all competing for a large -- but still finite -- pool of demand. Apartment supply hit a 37-year high in 2023, and it'll jump even higher in 2024. So the demand is out there, but you may not feel it because you have more competition than ever. Put another way: There's a lot of demand out there, but even more supply, and that's shifted the balance of power back to renters. I'm not a "doomsday" guy, and barring a big economic collapse, I'm in the camp of those who think the U.S. apartment sector will remain in relatively decent shape in 2024. But there will be pockets of short-term challenges, and lease-ups in heavy-supplied submarkets are one such pocket. Longer term, all these properties will certainly lease up and achieve targeted rents ... just at a slower pace and with lower initial rents than pro forma-ed. But for now, average monthly rents for lease-ups are declining faster than stabilized rents as developers offered both a) generous concessions and b) true rent cuts. That's unusual, as developers typically rely primarily on concessions in Year 1. Additionally, the 2023 wave of lease-ups will be challenged to retain residents with expiring leases in 2024 due to another wave of lease-ups hitting the market. Don't count on concessions to just "burn off." For the 2024 wave of new supply, there's an added challenge: These properties were likely built at higher costs (due to starting around/after peak inflation) and assumed higher rents (having baked in inflationary costs + 2021-22 rent hikes). It'll be tough to achieve that. So it's all about that cliche of "survive 'til 2025." I suspect we'll continue to see developers prioritize occupancy over price -- giving on rents (via both concessions and true rent cuts) in order to fill up. Screening standards won't change (too much fraud risk for that), and affordability won't a major headwind for lease-ups, either. Bigger picture: Remember this is very much a short-term challenge. We're delivering 3 years worth of supply into a 2-year period. After that, supply thins out dramatically. It can still make sense to start new projects, knowing with a high degree of certainty that lease-up competition will be significantly less in 2026-27. Just got to get there, and that's easier said than done. #apartments #multifamily #CRE #housing

Since word of his Aug. 31 passing after a long battle with pancreatic cancer began to spread around Richmond last week, players in the local real estate world spanning multiple generations have recounted their experiences with developer Louis Salomonsky and his influence on the industry.

Real Property Management Richmond Metro Celebrates 9 Years of Excellence in Property Management! 🎉 We are proud to announce our 9-year anniversary, marking nearly a decade of exceptional property management services in the Richmond community and beyond. Since our inception on August 8, 2014, the company has grown and achieved remarkable milestones. Real Property Management Richmond Metro has consistently demonstrated its commitment to excellence, becoming a beacon of trust and reliability in the property management industry. Over the years, the company has established itself as a locally owned and operated enterprise and has made a significant impact on the national stage. Recognized as a top performer, the company has gained acclaim for its accomplishments, including INC 5000 recognition in two of the past three years, solidifying its position as a key player in the market. Under the visionary leadership of its founder, Real Property Management Richmond Metro has achieved remarkable growth. Over the last five years alone, the company's revenue has surged by an impressive 250%, a testament to its unwavering dedication to delivering top-tier services to property owners and residents alike. With over 30 employees, the company has cultivated a skilled and dedicated workforce that is well-equipped to handle the dynamic demands of the property management industry. "We are thrilled to celebrate this milestone of nine years in business," said Ralph Reahard, Founder. "From our humble beginnings to becoming a recognized name in property management, this journey has been incredibly rewarding. Our success is a testament to our team's hard work and dedication, as well as the trust and support of our clients and partners." Real Property Management Richmond Metro's success story extends beyond its local impact. As part of a nationwide franchise network with over 400 offices across the country, the company consistently ranks within the top 5% amongst its peers, showcasing its exceptional performance and responsibility to deliver outstanding property management services. As the company continues to grow, it remains loyal to its core values of integrity, transparency, and unparalleled customer service. We look forward to building our success and continuing to provide property owners and tenants with the highest standard of service in the years to come. 

It's more expensive than ever to lose an apartment resident. Turnover costs have more than doubled over the last four years -- another sign that inflation not only impacted rents in recent years, but operating costs, too. And a clear indicator of why apartment operators this year are prioritizing resident retention and renter satisfaction. Turn costs are expenses related to prepping a vacated unit for the next resident after a move-out. A few takeaways: 1) Turn costs are growing for two reasons. First, labor and materials are more expensive than ever. It costs more even for light repairs -- paint, carpet, etc. Second, turnover is normalizing following a few years of unusually low turnover (due first to the pandemic then to record low vacancy, giving renters few options for relocation). More turnover = more costs. Even if your cost per vacated unit stayed stagnant, you'd still see a big jump in turn costs. 2) I've mentioned this many times, but operators everywhere are focused on occupancy and retention this year. With new construction at a 50-year high plus normalized vacancy, there's more competition than ever for renters. The balance of power has shifted back to renters. Remember despite the myths we see in social media: Apartment owners make no money on a vacant unit. And in an environment when it's taking longer to backfill a vacant unit AND it's costing more to do it, operators are wisely prioritizing retention. That means no only reduced renewal rent growth but also a big focus on resident satisfaction and resident self-service, among other things. 3) Turn costs tend to be more expensive in older (and more affordable) units simply because older units tend to have more repair needs. At the same time, these units usually generate lesser rent than newer units. So as a percentage of revenue, turn costs eat a bigger piece of the budget in Class B and Class C units. That's why these operators tend to put even bigger emphasis on retention, even in normal times. #apartments #propertymanagement #multifamily