Apartment Operators Adjusting to the Lone Star Population Surge
Synopsis
The “Lone Star Surge” is seeing statewide population increases, with corporations and jobseekers finding much to like in Texas, having direct and positive effects on apartment operators. In recent years, Texas has become the home to more jobs (including C-suite positions) and submarket apartment inventory development booms throughout the state.
To meet the demand and lasso these opportunities, apartment companies are navigating shifting demographics by upping their game and using new ways to drive appeal while also combatting rising challenges such as higher expenses, staffing shortfalls, and application fraud.
At the TAA ONE Conference & Expo in April in San Antonio, moderator Allison Nesbitt, CAS, Zumper, led a panel that included Scott Hoover, Allied Orion Group; Seth Sellers, BH; and Ali Mask, Willow Bridge Property Company.
The group identified strategies needed to succeed, including more training; diverse amenities, policy shifts; and executing marketing strategies, and brand consistency.
Welcome to Texas
The top five states from where people are moving to Texas are California, Florida, Louisiana, New York, and Colorado. The top five Texas metros gaining new residents are Dallas-Fort Worth, Houston, Austin, San Antonio, and McAllen.
“It’s not a ‘build apartments and they will come’ market, it’s a build a corporation headquarters and they will come,” Mask said. There currently are 55 Fortune 500 companies with headquarters in Texas, and more companies are on the way such as SpaceX, PGA, Chevron, Amazon, Boring Co., Oracle, and Tesla. And as these companies come, programs offered to employees to become residents of apartment communities, generally offering a 3% discount a month off rent. “We’ll make that concession to get those great, qualified residents to lease with us,” Hoover said.
“There’s so much to like about living in Texas. The mountains, deserts, and coastal areas. People wanted to come here during the pandemic because they saw that they could get more apartment space for less rent. Many of the people who relocate here are moving into their very first home.” Apartment inventory increases are highest in these submarkets: San Antonio 104.8%; Austin 151.6%; Houston 162.6%; Dallas-Fort Worth 258.1%
Several markets have a considerable percentage of their overall inventory under construction. For Austin, it’s 14%; San Antonio is 8%; Dallas-Fort Worth 6%; and Houston is 4%.
“We’re strategic about what we’re building and where we’re building it,” Hoover said. “Our marketing is hyper-focused on our neighborhoods.”
Driving the migration to the Southwest are the high rates of inflation and increased cost of living across the country. For example, San Francisco’s is 79% higher than the national average. During the pandemic, workers given the opportunity to work from home found that Texas offered lower housing costs, no state income tax, and fewer restrictions during the pandemic.
Thinking about the cost of living, here’s how these Texas markets recently compared to the national average: Houston -8%; San Antonio -8%; Fort Worth -5%; Arlington -4%; Austin +1%; and Dallas +3%.
They found more and more attractive housing options such as larger apartments and spacious single-family home rentals or the chance to live in new build-to-rent communities.
In doing so, Texas’ population further became a melting pot. The increase in non-Texas renters came from global inbound residents and rising numbers from various generations, currently comprising Millennials at 40.5%; Gen Z at 29.9%; Gen X at 16%; and Boomers at 11.4%
The “average” new Texas resident is single, a Millennial, a renter, and earns $50,000+ in annual salary. Meanwhile, Texans weren’t leaving. Since 2021, 82% of its residents are still in the state.
Younger audiences have further become a primary renter segment – with their parents and grandparents likely to follow.
Focus on Resident Experience
To serve these growing resident cohorts, the panel said the key was to first support online teams with more training; updating policies to lift pet restrictions and fees, for example; and offering everything from conventional to affordable housing types.
“We’re focused on the resident experience and resident retention,” Mask said. “Your actions speak louder than your words. We are sure to train our employees so that they understand our brand and our white-glove service.”
Today, “renters pay more, expect more, and deserve more,” Sellers said, “and we’re doing that while simplifying that experience, making it ‘Amazon-Easy’ to apply and rent with us.”
When it comes to amenities, the thinking is to expand amenities to include things such as “wellness” for those moving from coastal states; yoga and meditation training; bicycle-friendly perks to give them an alternative form of transportation; and adding convenience to younger-generation renters such as dedicated “work from home” spaces. By hosting onsite events, they are creating a greater sense of community.
Apartment communities can also provide services such as dry cleaning and dog walking. Smart technology is no longer a luxury – it’s a requirement, Mask said.
Sellers said one of BH’s mission statements is to embrace evolution.
“We’ve done that with the evolving makeup of Texas residents,” he said. “You have to have an above-and-beyond mentality in how you operate. Our goal is to create spaces where people live and thrive.”
Sellers said BH is moving past some of the tired amenities – such as dog-washing stations and breakfast-on-the-go – and is offering things like yoga classes and wellness space.
The panel also suggested turning business centers into work-from-home spaces.
Be thoughtful in thinking about what your residents really want and give it to them, they said. Expand the reach of those whom you invite to your events – like your prospective residents – and share those events via social media.
Seismic Shifts in Apartment Search
There are seismic shifts in shopping behavior, and in turn, apartment search, the panel said.
The onset of artificial intelligence and generative AI means more prospective residents are turning to platforms such as OpenAI or Microsoft’s Co-Pilot to get the information. Using ChatGPT, these consumers will prompt, “Apartments near me.”
With generative AI, Mask said “You can’t game the system to have your results come up more often than others. ChatGPT has become an apartment searcher’s little helper. We see that AI will deliver results much like a Google search. More important, it’s not ‘single touch’ attribution. The most important thing you need to do is to make sure your online listing information is consistent.”
After all, there are more housing options today, the panel said, and renters visit an average of four properties during their search before touring. They look for the best “move-in deal.”
The new renter journey includes 20+ touchpoints with the onsite staff before signing. Mask said it’s crucial when messaging prospects to be consistent.
Sellers said it’s best to use brand messaging to capture “the right” renters for your communities – it’s no longer cost-per-lead but quality and reach.
Contrary to the customary strategy taken by many apartment marketers, Sellers said strategic demand generation at BH does not involve a “top-of-funnel” approach, it’s rather a “leasing tunnel” approach.
Apartment companies must be “mobile-first” because that is how most searches are conducted.
The panel said to utilize tools and services targeted to mobile users; use pay-per-click, virtual tours, online leasing, Google Business profile optimization, social media, and third-party support where needed.
Application Fraud Never So Sophisticated
Fraud has become a growing and evolving area of concern.
Verifying application documentation for paystubs and W-2s, for example, has never been more important.
Operators realize that there are dedicated social media groups focused on providing forged documents. Be curious if their documents seem odd or are not from familiar, known employers.
A tell-tale sign of potential fraud is when facts don’t line up – such as the applicant rushing the process and making things happen on their terms. Or they are avoiding face-to-face meetings or meeting with all the onsite team members. Opting to lease sight unseen or via Facetime is another red flag.
These culprits might also be unwilling or less willing to share personal information or to talk about themselves.
As for fraud, there are Facebook groups out there helping others obtain and use fraudulent documents. Criminals are able to prompt ChatGPT to create fraudulent documents. “Make me a paystub that says this…”
Nonetheless, Texas will remain a top destination for many corporations, employees, and renters by choice.
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