11.9.15: Future Apartment Rents to be Determined by Computer Software?

Many local apartment owners are following an industry trend by switching to algorithm-based leasing software. It calculates the price of a unit based on a number of factors — and the rate can unexpectedly peak and valley.

“Prices change daily,” said Dorna Davani, leasing consultant with Chartwell-owned The Lakes at Myrtle Park in Bluffton, South Carolina.

Chartwell recently started using YieldStar, a popular revenue management software by Texas-based RealPage. YieldStar calculates the rate of an apartment based on a number of factors. The most significant factors are supply and demand in the local market and current and future occupancy rates. It’s the type of dynamic pricing that airlines, hotels and online retailers such as Amazon.com have used for years. After analyzing many factors, the software produces the highest feasible cost, which fluctuates often and sometimes dramatically, in real time for a seat on an airplane or for a hotel room.

When applied to apartments, the rental rate produced by dynamic pricing methods is sometimes beneficial to the consumer. The quoted rent can plummet when demand is low and supply is high. But at apartment communities that use this type of revenue management software, the cost to lease can jump unexpectedly when units are in high demand, leaving current and potential tenants in the lurch — especially in a seller’s market, when rental rates are already very high.

Response from renters has been neutral thus far, but leasing agents noted that daily rental prices don’t move very significantly or very frequently. Agents estimate the YieldStar price for units change about every three days, and it’s usually no more than $50 lower or higher than the prior price.

This entry was posted in Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , , . Bookmark the permalink.

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