Leasing, Are We Back?

July 26, 2023

With the exception of winter 2021/2022, all of the markets we are in historically have some level of seasonality. For various reasons across multiple markets (most common reason seems to be supply deliveries) we saw a very slow and prolonged winter leasing season this year. We went through a large-scale management change over the same time period which I don’t think did us any favors in backfilling the locations that were slow to lease. In my experience, when changing management platforms, operations tend to get slightly worse for a short period before they get better.

Now I don’t want to jinx ourselves, but it appears in looking at the data over the last 4-6 weeks, we might be back. We are seeing incredibly strong leasing statistics across our entire portfolio. Assets where we had to implement move-in incentives and reduced rates have filled up at a rapid pace and allowed us to pivot back to leasing from a position of strength rather than weakness. We have assets in the portfolio that have secured more leases/applications in the last two weeks than they did in the entire first quarter of 2023. This snap back has been exciting to watch and has resulted in building onsite team morale and confidence which then perpetuates additional leasing momentum.

The biggest question we are monitoring internally is whether or not we expect to continue to see this trend throughout the remainder of the year. We are seeing a heightened level of construction deliveries across most of our markets and continue to monitor how those deliveries will impact rents and concessions in the near future. Based on current operations and the data we are seeing we expect to see continued near term concessions and flat rents in our rent by lifestyle choice assets. For the most part, any of our rent by necessity targeted assets have held strong and in most cases we are seeing strong occupancy and rent growth. Growth has moderated substantially in that profile, but we are still seeing stability.

Given the goal of the Fed is to combat inflation through a softening in the labor market, we will see if this trend continues with potential increases in the unemployment rate. Our thesis has been, and the data generally supports, that our targeted B quality assets tend to hold up better in times of labor market contractions. We typically see decreased desire for families to stretch into the newest nicest product.

As always I would love to hear what you are seeing, especially if notably different than the feedback above. Feel free to reach out to me directly to share notes!