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Asset management: analyzing the needs of high-end apartment residents.

This article examines results of a survey of residents at "institutional-grade" garden apartments in several cities. The intent of the survey was to determine the characteristics of residents in high-end (luxury) garden apartments and their preferences regarding apartment living.

A better understanding of these residents and their opinions about apartment living can be translated into highly practical (and strategic) property management and acquisitions decisions. In property management, for example, this knowledge can translate into more focused

marketing efforts as well as specific ways to improve property features, amenities, and management services.

In property acquisitions, resident-based surveys provide extremely valuable information regarding the features, amenities, and services that garden apartment residents look for in selecting their apartment homes.

The analyses and conclusions made in this article apply to high-end (luxury) garden apartment properties and their residents and are not necessarily applicable to other classes or types of apartment properties or apartment residents.

Methodology

Our firm, Metric Realty, selected 13 institutional-grade garden apartment communities in its management portfolio to include in the survey project. The term "institutional grade" refers to high-quality properties that are typically located in upper-end submarkets or neighborhoods within major metropolitan areas.

The properties included in the survey are located throughout the country. They range in size from 148 to 734 units and their operating histories range from two to 14 years. Each property can be classified as garden-style, with two-or three-story buildings in a series of clusters on a site of several acres. The balance of a garden apartment property contains ample open space as well as recreational facilities such as pools, tennis courts, and a clubhouse.

Our on-site staff distributed 3,337 questionnaires, 1,821 of which were returned. The over-all response rate was 54.6 percent and ranged from 49.7 to 65.6 percent among properties. This high response rate is directly attributable to an incentive program, which was promoted at the property level by on-site staff. The questionnaires included 34 questions, three of which allowed for open-ended responses.

Demographic characteristics

The age distribution, marital status, income levels, and occupations of current residents provide important information about the present and future demand for garden apartments. Understanding the demographic composition of garden apartment residents is also essential for developing focused marketing plans for tenant attraction and retention purposes. * Age distribution, The greatest concentration of garden apartment residents lies within the 25-to-29 age bracket, accounting for 31.7 percent of all renter households. A sizable portion of renter households (63.2 percent) are headed by residents in the 18-to-34 age brackets. Expanding the age brackets to include renters aged 18 to 39 accounts for nearly 75 percent of all households.

Contrary to the belief that empty nester and elderly households comprise a significant share of garden apartment demand, Figure 1 reveals that renters aged 50 and above constitute only 11.9 percent of all renter households. * Gender. Approximately 60 percent of all survey respondents were female. * Marital status. Singles account for 65.5 percent of all garden apartment residents, with married households accounting for 30.3 percent. The high proportion of singles also explains why very few households reported to be living with children. Of all respondents, 90.6 percent reported that they did not live with children. For married households, 82.4 percent are reported to be living without children. However, in some instances the abundance of childless households may also be influenced by the lack of availability of larger apartments. * Income. While the vast majority of garden apartment residents have not yet achieved their peak income potential, they do constitute the more affluent tier of the renter population with incomes often exceeding area-wide average incomes.

As Figure 2 indicates, more than 75 percent of all renter households earn $30,000 or more. The distribution of households by income group suggests that the mean household income falls within the $40,000 to $45,000 range. The household levels of garden apartment residents typically lie well above the average household income levels for the metropolitan areas in which the properties are located. * Occupations. The high proportion of garden apartment residents who hold white-collar positions directly contributes to the relatively high household incomes of the group. As Figure 3 illustrates, 41.4 percent of all residents hold professional jobs and an additional 15.1 percent hold managerial positions.

Of course, the occupational composition of garden apartment residents is directly related to their ability to afford these apartments, as well as to the types of businesses and industries located within a given area. * Summary. Although the survey results do not apply to all residents of garden apartments, the preceding discussion suggests that young, single, white-collar professionals constitute the principal source of demand for high-end garden apartments.

The survey results also reveal that a very small proportion of garden apartment residents are families with children. The higher-end garden apartment, therefore, represents a housing form that appeals to relatively affluent households at early stages in their family life-cycles.

Moving behavior

This section examines the moving behavior of garden apartment residents. * Reasons for moving. Starting a new job/ job transfer was the most frequently cited reason for residents to move to their current apartment community (Figure 4).

As might be expected, a higher proportion of residents in the 18-to-24 age bracket (46.3 percent) cited a new job or transfer as the primary reason for moving than residents aged 60 or older (20.8 percent).

Interestingly, only 6.8 percent of all residents indicated that the primary reason for moving was attributable to "family reasons," versus 24.8 percent for residents aged 60 and older * Means of finding apartment community. Survey results indicated that an apartment community's visibility from well-traveled thoroughfares is important from a marketing perspective (Figure 5). When residents were asked how they found their current apartment community, an overwhelming percentage (41 percent) indicated that they had driven by the community.

Although 9.2 percent of all respondents used locators or REALTORS[R] to find their apartments, it is interesting to note that 16.5 percent of respondents aged 60 years and older reported using these services. * Tenure. Garden apartment complexes experience relatively rapid rates of turnover Depending upon local market conditions, annual turnover rates typically range between 65 and 85 percent (Figure 6). In some cases, turnover rates exceeded 100 percent on an annual basis. When residents were asked how long they have lived at their current apartment community, almost 50 percent reported less than one year.

Predictably, younger residents exhibit shorter stays than older residents. More than 75 percent of respondents in the 18-to-24 age bracket had lived in their apartments less than one year versus 48 percent overall. Whereas only 13 percent of all respondents indicated that they have lived at their current apartment community for more than three years, this figure exceeded 50 percent for respondents 60 years and older

As Figure 7 reveals, few residents anticipate remaining at their current address for more than two years. However, most households simply do not know what their living situation will be beyond a one-to-two-year horizon. When residents were asked for the primary reason they might move from their current address, the most frequently cited responses included the purchase of a new home and the pursuit of a new job. * Future housing choices. When residents were asked about their future housing decision, 35.6 percent anticipate purchasing a home, 12.1 percent plan to purchase a condominium, 39.1 percent expect to rent another apartment, and 13.2 percent do not know.

Predictably, most respondents who plan to purchase a home or condominium fall into the higher income categories and the middle age brackets. The majority of respondents who plan to rent another apartment fall in the 18-to-24 age bracket and/or have lower household incomes.

Importantly, a significant majority of the respondents who plan to rent their next home ultimately plan to purchase a home or condominium sometime in the future. In fact, 60.3 percent of respondents who plan to rent their next home ultimately plan to purchase a home or condominium. Although responses were fairly homogeneous across different income groups, respondents in the 50-years-and-older age brackets who plan to rent their next home exhibited a much lower propensity to ultimately purchase a home. * Summary. The overriding theme of this section is that garden apartment residents view their living situation as transitory. Clearly, these apartments represent a convenient, "quick fix" housing option for individuals who relocate to a community as the result of a new job or transfer

The high rate of turnover experienced at garden apartments is also a reflection of the residents' life and career cycles; younger residents typically exhibit shorter stays than older residents. Again, the primary reasons for moving from garden apartments include the purchase of a new home and the pursuit of a new job.

For most residents, garden apartments do not represent a preferable alternative to owning a home. This sentiment is reflected in the high proportion of respondents who plan to purchase a home in the future.

Important features,

amenities, and services

In looking for a new apartment, prospective renters are often faced with a number of choices and decisions. Each and every garden apartment complex, for example, offers a distinct "package" of features, amenities, and services. The apartment shopper must evaluate how each property's package compares to the competition and also assess which property package best fits his or her needs and preferences.

The following section draws from the survey responses to assess how apartment shoppers rank the relative importance of different features, amenities, and services typically available at high-end garden apartments. * Overall perspective. Residents were asked to identify the single most important factor in their decision to rent their present apartment. Not surprisingly, location was by far the most important factor (Figure 8). * Locational factors. From a locational perspective, proximity to work was by far the strongest factor in residents' decisions to rent a unit at their present apartment community. Other important locational criteria included being in a specific neighborhood, being close to family and/or friends, and being close to work for spouse or roommate.

Appearance/attractiveness features. Most residents cited the unit floor plan/layout to be the most important feature. The second most important feature was room sizes (Figure 9).

The responses point to residents' sensitivity to the spatial characteristics of individual units. It is also interesting to note that kitchens are not nearly as important a factor as is usually found in home-buyer surveys. * Apartment management/marketing services. Over 46 percent of all respondents ranked the appearance and attitude of on-site staff as the most important factor in their decision to rent their present apartment. As Figure 10 reveals, this factor was considered far more important than the apartment's leasing promotion, the management company's reputation, and the apartment's brochure/advertising. * Important unit features. Residents were asked to identify which unit features they consider to be important when selecting a new apartment. Interestingly, the two most important items were the presence of washer/dryer connections and the provision of a washer/ dryer in the unit. These items were considered to be far more important than a secondor third-floor unit (versus a first-floor unit), an alarm system, a fire-safety system, a private garage, a view, a carport, a fireplace, ceiling fans, an outside storage closet, or a microwave oven.

Residents' responses to this question suggest that older apartment properties with communal laundry facilities are at a significant competitive disadvantage, at least from the perspective of the more affluent renter * Community features and services, Respondents identified security (defined as on-site patrols) to be one of the most important community services to look for when selecting a new apartment complex (Figure 11).

Combining residents' responses regarding the importance of security (on-site patrol) and controlled access clearly reflects the high premium that garden apartment dwellers place on a secure living environment. * Summary. Although location will always rank as one of the most important factors in selecting a new home, garden apartment residents are sensitive to the availability and quality of various features, amenities, and services, such as security and external appearance.

Conclusions

While the results of our firm's resident survey have primarily confirmed long-held beliefs regarding residents of high-end garden apartments and their opinions about apartment living, the results have also yielded some new and interesting information that is directly applicable to the areas of property management and acquisitions.

From a property management perspective, one of the most interesting (though not surprising) results of the survey is the high significance residents place on staff appearance and attitude.

These conclusions clearly suggest that property management should devote considerable attention and resources to screening potential hires as well as developing first-rate training and incentive programs. Moreover, these training and incentive programs should place as much emphasis upon resident retention efforts as upon efforts to attract new residents. A resident manager or leasing agent with a "bad attitude" may, in some residents' minds, be reason enough to move elsewhere.

The survey results also suggest that location is one of the most important marketing assets; more than 40 percent of all residents found their apartment community by driving by. Although a property's location is a "fixed" characteristic, ample signage and a listing of a property's location can go a long way in attracting tenants.

The survey also suggests that advertising dollars are perhaps best spent in apartment guides rather than the local newspaper Property managers also should be sensitive to how many residents find their apartments via word-of-mouth.

Finally, prospective residents place an extremely high premium on security. If a property has controlled access or on-site security patrols, leasing agents should emphasize these features to prospective residents. If a property has little to offer in terms of security features, management should assess whether it is losing prospective residents to apartment complexes perceived to be more secure.

In terms of property acquisitions, the survey results emphasize the three most important criteria in real estate: location, location, and location. Ideally, garden apartment properties should be located near (or accessible to) centers of employment and, as suggested above, be located in areas which offer excellent visibility from drive-by traffic.

From a demographic perspective, acquisitions should be targeted for growing areas with a high proportion of singles in the 18-to-35 age brackets.

Of course, the overall appearance of a garden apartment community, its recreational amenities, and its rental rates are all important in the minds of prospective residents. Nevertheless, the survey results also reveal that residents pay the most attention to the unit floor plans/layouts, room sizes, the community's security features, and the availability of washer/dryers (or connections) in the individual units.

While managers should understand how residents view the relative importance of different features, amenities, and services available in garden apartments, they also should keep abreast of how competitive properties differentiate themselves in the marketplace.

Finally, property managers who plan to undertake similar surveys should communicate the results to residents. By using the survey as a means of communication, the research also may serve as the catalyst to improve and foster positive, ongoing relationships between property managers and residents.

James P. Lynch is an urban economist with Metric Realty in Foster City, California. He is responsible for conducting real estate-oriented economic and demographic research to provide timely guidance for Metric's investment, acquisitions, and property sales activities.

Mr. Lynch holds an M.B.A. and a master's of city planning, both from the University of California at Berkeley. He received his B.S. in urban studies from Cornell University.
COPYRIGHT 1992 National Association of Realtors
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Author:Lynch, James P.
Publication:Journal of Property Management
Date:Jul 1, 1992
Words:2595
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