Magazine article Journal of Property Management

Looks Matter

Magazine article Journal of Property Management

Looks Matter

Article excerpt

Visual merchandising closes leases before you open your mouth.

Tom Hopkins, acclaimed author and sales trainer, summed it up best when he said, "People make buying decisions based on emotion; then they use logic to justify the purchase."

Over the last 20 years, I have inspected more than 3,000 apartment communities, situated in hundreds of cities across America. That unique experience has caused me to draw some important conclusions about how merchandising and marketing multifamily housing affect residents' buying decisions.

In part, my frame of reference comes from years of designing and building high-end retail interiors. A successful retail client once explained why he was willing to invest a huge sum of money building a facility that did nothing to increase the actual value of the high-end products he was selling. He said, "I can sell this merchandise out of the trunk of my car on the street corner, but I can get a lot more money for the same merchandise if the people who purchase it can brag about, where they bought it." Similarly, a banker once told me that he could do business over a folding card table, but his customers feel more secure if his facility exudes confidence, stability, and security.

In reality, every apartment unit on every property I have ever visited is just a warm, dry space where people are sheltered. Some of these spaces are nicer or larger than others. Some have more amenities than others. Some are in better neighborhoods than others. They all fill the basic human need for shelter.

Then why do some of these spaces command rental rates double what others will bring in the same market? The answers are complex. Once the basic mechanical functions of the building are in place, one of the deciding factors in the potential resident's mind is the perception of how the property will fill all the "other needs" (like status, ego, security, and power). The justification for paying higher rental rates to some degree is based on emotions and perceptions, on whether the prospect can "see" him- or herself living on the property. These justifications are far more powerful than anything you or your staff can say about the property.

Kansas City Turnaround

The old cliche, "If you always do what you always did, you will always get what you always got," is particularly appropriate in today's market of repositioning older properties to take advantage of reverse urban flight. A client recently requested our evaluation of a newly acquired property in Kansas City. The property is located in a very desirable location near the intersection of two expressways. It has about one-quarter mile frontage on one of the busiest freeways in America. Twenty years ago the property was a "cool" place to live. It had a long waiting list. When the owner came to us, the property had less than 10 percent of the total units occupied. Where did the property go wrong?

The physical asset, while in need of some work, was not as rough as other properties we had worked on. Given that, and the fact that some of the most elegant and expensive apartments in the world are in the oldest buildings, the age of the property was not necessarily the problem.

The property was less than 15 minutes from downtown Kansas City (which has seen substantial new construction of high-rise office space), 10 minutes from one of the region's largest shopping malls, and five minutes from the Royals/Chiefs sports arena; so it was not the location.

Because of substantial overbuilding during the late 1980s, there was no question that competition had been a factor. But other properties in the market had not suffered such a dramatic decline during the same period. So competition was not the real problem.

The property's dilemma grew out of a series of flawed strategic operating decisions. The area immediately surrounding the property was an active crime area, but few measures were taken to insulate residents or prospects from this negative factor. …

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