Do you keep track of your turnover rate with reference to tenants moving out? Do you know how long they stay as your tenants before they move? Do you know where your tenants go when they move out? Do your tenants stay within their residential area or move to another area? And what turnover rate is optimal? Is a 10 % yearly mover rate enough? Is a 30% yearly mover rate too high?
Why is it important to keep track of your moving currents?
In my opinion, the work linked to moving currents should be included in your strategy. The more knowledge you have about movement patterns, the more you can act upon the information. In other words, you should build your strategy based on data-driven insights.
Some movements are essential in a healthy stock. That your tenants move, and change accommodation, is natural. The housing needs are different between different segments of customers and the needs are different between different stages in life.
Understanding the movement patterns could make it possible to track down the non-healthy mover rates that you would need to act upon. High mover rates might be a sign of areas with problems that make people want to move from the problems. If the perceived security level is low, people tend to move. And in areas with high mover rates, the tenants are not bonding with their neighbours and the tenants are not caring about their area as much as within safe, healthy areas. It might also be the rental levels being too high and as a consequence the turnover rate high. Moving currents is also driving costs (actual costs for renovation and administration) and the residential areas are less stable when people are in constant motion.
Your strategy should include the work towards stable areas, where people would like to stay. On the other hand, some areas might be too stable and if people do not move, there will be no apartments available for new families. In those areas you would want to nudge movement, instead of preventing it.
To understand why people are moving and where they go, it is important to be able to exploit the right areas and work with the areas where there is a problem. If you know your baseline, you could set targets and follow up on your work.
What could you do?
Start using your data! You should use the information on your tenants’ contracts. The end date of the contract will tell you when somebody is moving out and this is the first easy step to take. If you also look at the start date of new contracts and link them to the old, on customer level, you will be able to track movement currents from A to B and measure how long each tenant is staying in their apartment.
You could track all moving rates within your real estate portfolio. When linking old and new contracts, it is possible to visualize the degree of new, relocated, and lost tenants. You could build simple charts with moving patterns or make a regression analysis to determine the relationships between different variables. And with this, you are in the process of being truly data-driven.
And with insights at hand, you can act. The tenants in areas with low turnover rates could be nudged to move to other locations. The areas with high turnover rates should be treated carefully to increase satisfaction levels. Follow your KPIs carefully and measure your progress.
With data available, you could track different segments of apartments and/or tenants. Movements from student dorm rooms and your expensive segments are naturally at a higher level and should be presented separately. You would also like to follow your customers based upon age groups and/or personas. It will make it possible to e.g. discover if your elderly segments are leaving their big apartments for smaller ones and letting younger families take over. Data from customer surveys regarding why they move to and from different apartment and/or areas could also be added to the full picture.
And to answer the question regarding the optimal level of movements: It depends on what segments you are following, what strategy you have implemented and what goals you have defined with your residential areas. An important benefit of getting started with measuring the movements of your portfolio is that you could also use these insights in other parts of the organization. For instance, what type of apartments have the highest demand, and what kind of services makes people want to stay longer.
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About the author
Pernilla Klein is a Business Consultant and Industry Lead within Real Estate, working at Stratiteq where she facilitates workshops to fulfil the needs of the client’s data-driven solutions. She is passionate about combining strategy with a technical solution and about the data that can be used from moving patterns within Real Estate. Extracurricular; she loves takes ice-cold baths regularly during winter and is often seen attending live concerts with some obscure post-punk band (that no one has heard of).
Industry Lead Real Estate
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