Historically, the multifamily real estate industry has largely been managed using lagging indicators. Managing on the basis of occupancy, revenue, and NOI has been common, accepted, and until now, relatively effective. Today’s environment is more challenging. More unpredictable. Higher stakes. More difficult to manage, using traditional KPIs (key performance indicators), processes, and tools. And more ripe for disruption, including different focus areas and technology solutions.
Lagging indicators are typically financial outcomes that occur after a long-term trend has run its course. Perhaps only for a month, sometimes for months or even a year. Lagging indicators confirm long-term trends, but don’t help to predict or prevent them.
Lagging indicators confirm long-term trends, but don’t help to predict or prevent them.
For example, an occupancy problem may be 60 days in before it’s caught and evaluated. That type of problem could take 60-90 days to course-correct, given the number and diversity of factors contributing to it. This type of problem-solving can result in reactive, expensive corrective actions and dramatic and expensive ‘yo-yo’ performances with decreased cash flow. Not ideal.
Enter leading indicators. Leading indicators can help predict and forecast future trends and outcomes. Many of the most powerful leading indicators in multifamily sit with branding, marketing, and leasing practices. Property marketing leaders can help executive and ownership groups identify, prevent, or disrupt performance trends and possible negative outcomes before they become damaging, expensive, and difficult and time-consuming to reverse.
Negative or unusual marketing trends can be identified early in the prospective renter’s journey – measured in days, not months, and at the top of the funnel thereby 30-60 days before the end problem in the form of decreased occupancy presents itself. And marketing and leasing funnel trends can be reversed relatively quickly, sometimes within hours, as in the case of updating a broken link on a website, or re-allocating budget to higher performing channels. Even better, top-of-funnel trends can be corrected and reversed at relatively little cost, and sometimes even at a savings (e.g., re-allocating budget from a higher-cost, lower-performing vendor to a lower-cost, higher-performing vendor).
Top 3 Leading KPIs to Pay Attention To During the Coronavirus Pandemic, and Why
New Website Visitors
New website visitors, or ‘new users’ as Google Analytics calls them, are an important leading indicator, or KPI, that is often overlooked in favor or focus on leads or leases. As we all know, and especially in today’s COVID-19 environment, apartment searches are conducted entirely or almost entirely online. Virtual tours are more important than physical tours today, and those mostly occur on your websites. Website traffic trends can indicate a variety of things including online review and rating changes, advertising effectiveness, competitors’ pricing and availability, pricing strategy success or failure, and more. Viewing visualizations and insights into website traffic trends is key. Being alerted to changes in website visitor traffic can notify you about underlying causes you can and should be aware of. Long before the very top of the funnel impacts your occupancy or NOI.
Cancellations and Denials
Cancellations and Denials are other unsung leading indicator heroes in today’s environment. Trending cancellations can indicate that your competitors’ products are being priced more aggressively than yours, that they’re more likely to meet or beat your pricing and special offers, and/or that your product isn’t measuring up to the competition in terms of value for money. If a prospect has been approved for a lease, but chooses to cancel his or her application, that’s a strong signal that your competition may be beating you. Denials are also important leading indicators, often indicating lead quality coming from your sources. If your denials are trending up, you may need to consider that your audiences aren’t qualified where they’re being sourced, or that your pricing strategy isn’t appropriately suited to the market you’re advertising to and trying to attract. Looking into which sources are driving the highest numbers of denials can be instructive into which vendors are providing the best, most qualified leads for you and your leasing teams.
Looking into which sources are driving the highest numbers of denials can be instructive into which vendors are providing the best, most qualified leads for you and your leasing teams.
Notices to Vacate
Notices to vacate, and especially early terminations, can also be very important leading indicators for occupancy issues in training. Both clusters of NTVs during a specific time period, or increases among certain types of NTV reasons, can be highly instructive. For example, an abnormal amount of NTVs in a given week or month should be concerning during a period of time in which ‘seasonality’ is no longer as relevant or predictable as it used to be. There may be on-site and operational issues, major employer-based changes, or aggressive competitor activities that are disrupting your resident satisfaction and projected revenue. Keeping a close eye on NTV volume and reason trends could prevent major retention, revenue, and NOI trends in the future.
Remarkably is Built on Leading Indicators Remarkably was purpose-built for marketers to monitor portfolio and property performance, with a focus on leading indicators. Our marketing intelligence platform aggregates KPIs across disparate systems to give marketers an intuitive, single, and holistic view of trending risks and opportunities. Specifically, the Remarkably platform offers Configured Alerts that enable marketing and leasing professionals to receive notifications about funnel threshold- or anomaly-based performance issues as they happen, not days or weeks later. In addition, its machine learning-powered Forecasting feature indicates what’s likely to happen with funnel volumes and conversion rates long before prediction becomes reality – enabling marketing leaders to mitigate risk before it takes hold.