With the prospect of thousands of rental units hitting the market in the next couple years, following a robust four years of new construction, landlords in all sectors of the residential market are facing the prospect of slower absorption rates and a cyclical shift to a tenants’ market.
For nearly a decade – and even with a recession occurring halfway through – vacancy rates for apartments citywide remained at historic lows, with rents at historic highs.
Despite an impending blip in the rental market, New York remains one of the most sought after cities in the world, hence well inhabited! Moreover, owners have the opportunity to continue maintaining well-occupied buildings with little turnover simply by meeting the criteria of in-demand buildings.
What defines an in-demand building, after factoring in location, rent rates, unit sizes, building amenities and proximity to public transportation, is curb appeal, cleanliness and presentation. The appearance of the common areas is key to attracting the right tenant.
The first thing a prospective tenant sees is the sidewalk, façade, lighting at the entrance and décor of the lobby, especially if it’s a mid-range, non-doorman building; and that initial impression sends a direct message about a building’s management.
A substantial share of the multi-family housing portfolios in the five boroughs are “owned-and-operated” by a single entity, while many are managed by third party service providers.
Either way, a well-managed building is self-evident and from my perspective as a broker and landlord representative, much easier to rent. To ensure stable rent rolls, there are criteria that every landlord should expect their managing agent.
According to John Ambrosini, Executive Vice President and Director of Property Management at Sierra Real Estate & Cogswell Realty, who is responsible for management of the Sierra-Cogswell portfolios, as well as several third party buildings, “It is incumbent upon building management to prepare organized, informational, detailed operations and capex reports on a regular basis. This then provides a well-defined narrative of what occurs in the property on a day-to-day basis. It’s all about reliability and accountability, so no detail is unimportant or trivial.
“Consistent and effective communication with tenants is another sign of a well-run building. Such services as 24/7 call-in lines and tenant interface on company or building websites definitely contribute to the success of residential, retail, and commercial sites. That same standard of communication applies to building staff, too. The best-maintained buildings earn their status – not in small part – because of the proactive approach and quick response time of Superintendents and the building management team – to all issues, great and small.”
Today, landlords and their leasing agents and managers have tremendous access to credit reports, court records and social media when vetting a prospective tenant.
But financials do not necessarily tell the whole story; and the advantage of face-to-face interviews cannot be emphasized enough, which is where an experienced landlord representative and management company are especially instrumental to the process.
Added Mr. Ambrosini, “Beyond a credit report, an applicant’s attitude and curiosity about a building can be a significant indicator as to the successful tenancy of an individual. From a management perspective, paying rent on time is important but should never be a free pass to damage the apartment, cause disturbances, or flagrantly disregard building rules.”
About a year ago, our management affiliate Sierra Real Estate was awarded the contract for a Gramercy Park multi-family building in serious disrepair. Their first initiatives were to make all necessary repairs and cure any violations. They then embarked upon discovery and removal of illegal tenancies, which are common in many older buildings.
Pointed out Ambrosini, “This was a prewar building with tremendous infrastructural problems and many illegal tenants. Within six months, we fixed the boiler and leaks, dealt with rat and roach infestations and terminated several illegal tenancies. Then we renovated the vacant apartments to qualify for market rents and refurbished the common areas. We also removed 40-year-old security gates from the windows of most of the units, which instantly allowed in light and removed the repressive attributes of a bygone and less secure New York City. The turnaround, which took under a year, has been dramatic. There are also a lot more market rate residents and the building is fully leased.”
A well-maintained building, while important in any market, will be the best way to ensure a steady and profitable occupancy with stable tenants through the next cycle.
In this day of Yelp and other social media review sites, it will be especially important for landlords and management to communicate with tenants.