Clapping Back Against Flat Rents: Operational Spaces for Shoring Up Margin

Multifamily housing lives between two titans. On one side, brooding over much of the United States, the pillar of supply shortage has forced regions like New York and Boston to grapple with sky-high rents. And on the other side, the monolith of regulatory oversight has begun to significantly taper the ability of multifamily businesses to protect and grow margins. It’s a fascinating position and a dynamic situation, but a somewhat underreported element of these twin pressures is the downstream effect they’ve had on new build trends in specific regions. Limited supply has driven the regulatory weights off of many municipalities, and the nationwide climb in demand has mobilized an influx of investment into new construction. 

And that new construction is contributing to region-specific rent drops throughout the country. Cities, where new construction and changing resident trends have been highly reported, have also endured the most dramatic price drops. Austin, TX, for instance, has seen rent prices drop by 6.6%, while Nashville, TN, and Jacksonville, FL, aren’t far behind with decreases of 5.9% and 5.6% respectively. In markets like Seattle, where construction activity has been especially high, median asking rents have fallen even more precipitously—7.3% in this instance.

When Rents Fall, Better Operations Can Shore the Difference

One of the chief strategies that Conservice clients leverage to navigate chilled profit margins is a vigorous emphasis on wise staffing practices. To be clear, we’re not necessarily speaking to staff reductions, which often inflict operational and scaling issues in the long run. Rather, short-term operational gains and long-term fiscal growth can be achieved by centralizing repetitive, unpleasant, or inefficient tasks in order to redirect staff efforts to worthier projects.

Utility management, for instance. We’re the Utility Experts, so we weren’t NOT going to talk about the fact that centralizing, outsourcing, and automating utilities is a dependable way to shore up margins. Businesses in regions where rent stagnation isn’t as fierce may be looking to grow, and as any portfolio grows, so too does the complexity and regulatory exposures of utility management. And for businesses squeezed by flat or falling rents, lowering the cost and resource commitment of resident billback and invoice reconciliation is a surefire way to build new margin. From overcharges to late fees and outright savings opportunities, in-house utility management is an invisible leak that many multifamily businesses don’t know they’re paying for.

Better contract management. It’s not explosive or colorful, but contract management is absolutely an area where many multifamily businesses can streamline operations and reduce costs. Managing multiple vendors across various properties involves a tremendous amount of behind-the-scenes work. From tracking contract expiration and renewal dates to ensuring insurance documentation is up to date, it’s a big lift.

Outsourcing these responsibilities to a reputable vendor who focuses on this arm of property management (ahem…like your friends at Conservice), relieves your staff of the administrative burden. It also comes with the added benefit of legal indemnification, which can protect you from the very expensive and labor-intensive pitfalls of falling out of compliance.

Level Up Your Expense Recovery

There is no bold effect that is bold enough for the following sentence: recovering unpaid resident utility costs as quickly and efficiently as possible is crucial is maintaining profitability. The mechanical action of waiting for unpaid utility costs starves your institution of resources that can be far better leveraged as investments. The faster and more completely your residents are billed back, the better positioned you’ll be.

Beware the temptation of withdrawing resources. For some in the property management industry, centralizing expense recovery leads to the diminishment of resident-facing benefits. Less dedicated staff, fewer support resources, an overreliance on chatbots—these all provide short-term financial returns at the expense of a worse resident experience. As vacancy rates climb, you’re better off investing in a more efficient billback process that preserves or enhances this crucial touchpoint with your customers.

Additional considerations. While utility expense and contract management are two major areas where you can save costs, there are other strategies to consider as well. For instance, implementing energy efficiency upgrades can reduce your utility costs further, while renegotiating vendor contracts can lead to better rates and terms. Additionally, exploring new revenue streams, such as offering premium services to residents, can help offset the impact of falling rents.

Conclusion: Smart Operations for Sustained Success

The current market challenges in the multifamily housing sector, particularly in the Sun Belt and other high-construction areas, may seem daunting. But by being smarter about your operational and administrative workload, you can offset much of the cost of rent price declines.

Not only will these strategies help protect your profit margins, they will also lead to a more productive staff, higher operational performance, and greater resident satisfaction in the long run. As you navigate the ebb and flow of vacancy rates and rent prices, consider partnering with Conservice to streamline your operations, reduce costs, and position your properties for sustainable success.

Centralize Your Utilities

William Bailey

William Bailey is a veteran writer in the real estate industry and the Content Manager at Conservice. He’s obsessed with utility technology, tarantulas, and the ways that language and stories can bring industries together.