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October 22, 2014
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LEADERSHIP SPOTLIGHT
Attend “BYB”, Earn AMO®

IREM® HEADLINES
Mega Trends Affecting Real Estate Investment
What’s Your Next Move to a Rewarding Career?
Lori Burger Installed as New IREM President
Special Introductory Pricing: Three Convenient New Online Courses
IREM Makes Magic in Orlando

INDUSTRY HEADLINES
Sears to Lease Space in 7 U.S. Sites to Primark
Philadelphia Joins Energy-Efficient-Building Race
J.P. Morgan Seeks Tax Aid on New York City Buildings
Proposed S.F. Law Would Put a Solar Panel on Nearly Every Roof
Foreign Investors Chase Yield, Safety in U.S. Office Sector
New Apps for U.S. Renters May Keep Lax Landlords in Line
Flu Expected to Keep More Workers Home
L.A. Agency to Urge Mandatory Quake Retrofits
Texas Artist Says Art Installations Could Attract Office Building Tenants
Lenders Like Strong Pulse of Medical Office Sector
Inside the Former Exxon Building's Transformation
How Online Shopping is Transforming the Apartment Industry


 

Leadership Spotlight


Attend “BYB”, Earn AMO®

IREM’s Build Your Business: A Leadership Retreat has now been approved to satisfy the education requirements for companies to become an ACCREDITED MANAGEMENT ORGANIZATION (AMO®).

Build Your Business: A Leadership Retreat is an exclusive opportunity for high-level real estate executives and leaders – two and a half days of business development and leadership training with an intensely personal focus. It is coming to Chicago this November 5-7.

You’ll get one-on-one coaching on growing your company, building your personal brand and increasing ROI. And you’ll have the rare chance to huddle with experts and share solutions with other top-level practitioners.

This intensive two-and-a-half-day retreat will help you grow as a person and an executive – and now it can even get you closer to earning the coveted ACCREDITED MANAGEMENT ORGANIZATION accreditation.

The ACCREDITED MANAGEMENT ORGANIZATION accreditation is the only recognition of excellence given to real estate management firms, and the requirements are now more relevant than ever to real estate managers, their clients, and the assets they manage.

Register now for IREM’s Build Your Business: A Leadership Retreat. You should also check out the benefits from obtaining your ACCREDITED MANAGEMENT ORGANIZATION (AMO®) accreditation.
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IREM Headlines


Mega Trends Affecting Real Estate Investment

At IREM’s Executive Edge session in Orlando last week, Dr. Glenn Mueller of the Franklin L. Burns School of Real Estate and Construction Management provided a look at the mega trends affecting real estate investment. Some of the highlights included:

Economic forecasts for U.S. GDP and employment growth continue to improve but are still expected to be at growth rates slightly lower than previous recoveries. It is believed that this slower, but steady growth rate is good for most real estate markets.

Occupancy levels should continue to improve. The one exception is the apartment market where supply is being added too quickly in 2014. Forecasts indicate that apartment oversupply should start to slow in 2015 and return to reasonable levels in 2016. If the economy continues to expand, apartment markets should move out back into a recovery or growth phase of the occupancy cycle.

Office occupancies are forecast to improve 0.2% in 2015, with rents improving 0.7% quarter-over-quarter. Industrial occupancies are forecast to improve 0.1% in 2015, with rents improving 0.5% quarter-over-quarter. Apartment occupancies are forecast to decline 0.1% in 2015, with rents improving 0.3% quarter-over-quarter Retail occupancies are forecast to improve 0.1% in 2015, with rents improving 0.8% quarter-over-quarter. Hotel occupancies are forecast to be flat in 2015, with quarterly room rates improving 3.0% quarter-over-quarter.

It’s important to note that real estate occupancy demand is driven by employment growth and real estate is a delayed mirror of the economy.

For more highlights from the Executive Edge event check out the Special eDition of JPM.
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What’s Your Next Move to a Rewarding Career?

From the IREM’s Executive Edge session in Orlando last week, presented by Dr. Debbie Phillips, CPM.

Most of us are always thinking about how we can “move up the career ladder.” Unfortunately, too few of us take the time to consider the most important, initial question: “Are we even on the right ladder?”

In answering that question you first have to identify your career goals, your values, your vision, and your interests. Does the ladder you have chosen lead to fulfillment of those aspirations? Once you have identified the right ladder you can start looking at the skills you need to start climbing it.

But, be careful assessing those skills. Too often we focus only on the skills we lack, instead of looking at how we can best use our strengths. We need to match our strengths to opportunities – and figure out how to use those strengths to compensate for our weaknesses. If we find there are skills that we cannot master, nor compensate for – then we should look at where our ladder leads to, and whether it is going to the right place.

The biggest mistake we can make in building our career is not allowing enough time for reflection. We need to reflect on where we are headed, and what we need to do to get there. Self-awareness is the cornerstone for developing the emotional intelligence we need to reach the top of the ladder we have chosen. It is usually not the career obstacles that we know about that ends up derailing us – it is the obstacles we aren’t even aware of that block our success.

Start building momentum towards your career goals – but make sure that momentum is pointed in the right direction first. And always remember, if you are engaged in what you do and like your job, you will never have to work a day in your life.

For more highlights from the Executive Edge event check out the Special eDition of JPM.

Another way to build your career is to attend the Build Your Business: A Leadership Retreat coming to Chicago this November 5-7. It is a new, unique conference and experience for high-level real estate management executives.
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Lori Burger Installed as New IREM President

The Institute of Real Estate Management (IREM), an international community of nearly 19,000 real estate managers across all property types, installed its officers for 2015 during its just-concluded Fall Leadership Conference held in Orlando, FL. Lori Burger, CPM, PCAM, CCAM, CAM, of Rohnert Park, CA, is the new president, following in the footsteps of her father-in-law Eugene Burger, CPM, CRE, who served as IREM President in 1981. Christopher Mellen, CPM, of Dedham, MA, is the new IREM president-elect; and Michael T. Lanning, CPM, of Kansas City, MO, is the new secretary/treasurer.

Burger is a Senior Vice President and Director of Eugene Burger Management Corporation (EBMC), AMO, headquartered in Rohnert Park, whose portfolio consists of more than 6,500 residential units, 20,000 association homes, and 2 million square feet of commercial space. She has managed the full spectrum of residential and commercial property types, and is responsible for assisting in the day-to-day operations of EBMC, a family owned and operated company with 450 employees located in California, Nevada, and other western states.

Burger earned her CPM designation from IREM in 1984, and has been active in the organization locally and nationally. A past president of IREM chapters in Northern Nevada/Tahoe and San Francisco, she was honored as the chapters’ “CPM of the Year” in 1988 and 1996. She received the Franklyn D. Lyons Award for Outstanding Career Service in 2001 and was inducted into IREM’s Academy of Authors in 2008.

Burger has served IREM as a senior vice president and regional vice president and has been a member and chair of numerous national committees. Along with her CPM designation, she has earned credentials from other professional real estate organizations at the state and national levels. As well, she serves as a member of the National Association of Realtors (NAR) Global Business and Alliances’ Committee and its Resort and Second Home Real Estate Committee.
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Special Introductory Pricing: Three Convenient New Online Courses

Three new convenient online courses, three new opportunities to strengthen an essential skill, three limited-time bargains: each of these courses is only $69 for IREM Members, or $89 regular price.

Take them yourself to learn or brush up on a new skill, or pass the bargain along to new team members, colleagues, or anyone who might benefit from IREM’s renowned education.

Understanding Loss to Lease
Can you define the term loss to lease? This vague financial concept can be difficult for real estate managers to explain and even harder to calculate. This course will help you to:
  • Define gross potential income
  • Calculate loss to lease
  • Differentiate between physical vacancy, economic vacancy, and collection loss
  • Determine net rent revenue
Once you’ve explored the case study property and other examples in this course, you will be able to calculate loss to lease and ultimately, net rent revenue, for the properties you manage.

Starting a Property Management Company
Are you thinking of starting your own property management company? In this course, you will explore key decision points on your path. You will also learn from experienced property management company owners on tips, best practices, and lessons learned. This course will help you to:
  • Identify key success factors and other requirements for starting a property management company
  • Determine your market niche
  • Explore components of a business plan
  • Determine strategies for business development
  • Describe various types of management fees
  • Recognize variables that affect company structure and staffing
Delegating to Empower Your Team
Learning to delegate effectively is a skill that managers often find difficult to master. This course will help you to:
  • Identify the barriers to delegation
  • Understand the key benefits of delegation
  • Assess the abilities of team members
  • Develop the steps of the delegation process
  • Evaluate team members’ effectiveness at handling delegated tasks
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IREM Makes Magic in Orlando

For one week in October, Disneyworld and Universal Studios weren’t the hottest tickets in Orlando. Real estate management leaders and professionals from around the world took over the city last week for IREM Executive Edge and the IREM Fall Leadership Conference.

Be sure to check out the Special eDition of JPM, featuring exhaustive coverage of conference highlights and education sessions, and featuring exclusive video.

Speakers at the apex of the industry focused on leadership development, asset management, management of the company, attracting talent, and building operations in dozens of rewarding, surprising and enthusiastically received sessions.

Highlights included:
  • “Live! With Industry Leaders: A Generational Sea Change” – A panel of industry experts examined how demographic changes are impacting the real estate business. “Real estate is no longer just an expense, but more a tool to accelerate business goals,” said Marc Allen, principal, Tenant Advisory and Project Management at Transwestern.
  • Steven Rea, CPM, on “Presentation Delivery: Getting Beyond the Paper and Power Point” – tips included limiting visual distractions and maintaining good vocal inflection using variety, tone and pace.
  • IREM CEO Russ Salzman, CAE, IOM, RCE, discussed “Lessons in Leadership: Innovation is Everyone’s Business.” He imparted three crucial tips to stay ahead of the curve: 1. Embrace an opportunity mindset, 2. Challenge assumptions and 3. Be a standout collaborator.
  • In “Medical Marijuana: It’s a Hazy Situation,” Fred Prassas, CPM, established that an opportunity exists to establish best practices among varying state and federal laws. “We are the pros in the field,” said Prassas. “We need to help establish best practices, and continue to discuss and debate this topic, but we need to be flexible as laws and legalization evolves.”
It’s never too soon to start getting excited: next year’s conference -- still the only industry event addressing the needs of both multi-family and commercial real estate managers -- will be in Salt Lake City at the Grand America Hotel, October 20-24, 2015.
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Industry Headlines


Sears to Lease Space in 7 U.S. Sites to Primark
MarketWatch (10/20/14) Calia, Michael

Sears Holdings Corp. has agreed to lease seven of its department-store locations to European fashion retailer Primark, which is owned by Associated British Foods. The deal, terms of which have yet to be disclosed, calls for Primark to lease approximately 520,000 gross square feet of retail space over the next 12 to 18 months in mall-based Sears locations throughout the Northeastern United States. Sears expects to maintain a presence at six of the seven locations, with streamlined store formats of as much as 100,000 selling square feet at each store. Sears will no longer have a presence at the Simon Properties Group-owned King of Prussia Mall outside of Philadelphia. The Staten Island Mall Sears location will also make room for Primark, with Sears continuing to operate roughly 70,000 square feet of selling space at the site. The other five locations in the deal will be announced later, Sears officials stated.
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Philadelphia Joins Energy-Efficient-Building Race
Philadelphia Inquirer (10/15/14) Bauers, Sandy

Philadelphia Mayor Michael Nutter recently announced that his city is joining the U.S. Department of Energy's (DOE's) Better Buildings Challenge -- a move that has subsequently launched an energy race of sorts among the city's biggest buildings. The challenge is to reduce energy use 5 percent by the end of next year's third quarter. At the end of the challenge, the three top-performing buildings in the city will be awarded $5,000. Nutter recently remarked, "We know that there is a significant opportunity to cut energy use and costs, as well as reduce greenhouse gas emissions through more efficient operations." According to Alex Dews, policy and program manager for the mayor's office of sustainability, buildings in Philadelphia account for 62 percent of greenhouse gas emissions locally. The latest DOE research shows that more than 190 participating organizations are witnessing a nearly 2.5 percent decrease in energy use per year -- an amount that would eventually total savings of $80 billion a year if all U.S. buildings and homes improved at the same rate.

Missy A. Quinn, chair of the Building Owners and Managers Association of Philadelphia, praised the move. She states, "We have often said, 'Don't legislate change; incentivize us.' While energy efficiency is one of the areas where we already place a tremendous focus, this will allow our true champions to shine." Many of BOMA's 400-plus members have already made improvements, such as retrofitting their buildings' lighting and upgrading their air-conditioning systems. In accepting the Mayor's challenge, Quinn issued one of her own, saying that she was so confident in BOMA's capabilities that "I would be willing to wager our top three member buildings will outperform the city's top three participants. What say you, Mr. Nutter? You in?"
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J.P. Morgan Seeks Tax Aid on New York City Buildings
Wall Street Journal (10/19/14) Brown, Eliot; Kusisto, Laura

New York City Mayor Bill de Blasio denounced city tax breaks for large corporations when he was running for office. Now, though, he is considering a pitch by one of his city's biggest employers for fewer New York jobs instead of more. J.P. Morgan Chase & Co. has indeed approached city government with a request for tax breaks and other incentives valued at hundreds of millions of dollars to help erect a two-tower headquarters on Manhattan's West Side. Under terms of the deal, which requires a land purchase from developer Related Cos., the bank would reportedly maintain a corporate head count of at least 16,000 in the city -- less than the approximately 20,000 corporate employees the bank has in New York currently. However, if the bank does not receive the incentives, its total headcount could shrink even more as it looks for alternative ways to slash costs. Since the economic downturn, New York's large banks have been moving thousands of jobs to places where real estate costs and wages are significantly lower than Manhattan. In turn, this has left vacant office space and strained a sector that has long been an engine of the Big Apple's economy.
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Proposed S.F. Law Would Put a Solar Panel on Nearly Every Roof
San Francisco Chronicle (10/17/14) Baker, David R.

San Francisco could soon require solar panels on most new construction citywide and push owners of existing apartment communities to plant photovoltaic arrays on their rooftops. David Chiu, president of the San Francisco Board of Supervisors, plans to introduce a resolution by the end of the month mandating that all new buildings include solar panels, rooftop gardens, or both -- a requirement that would apply to both commercial and residential buildings wherever feasible. He remarks, "If you ever go to the top of a tall building in San Francisco and look down, you see the potential for sustainability on every single roof in the city." Chiu, who is running for a seat in the California Assembly, has conceded that it indeed might not be feasible everywhere. Many of the towers rising in San Francisco's downtown corridor, for example, have limited roof space, often occupied by heating and cooling equipment.

Dubbed Solar Vision 2020, Chiu's proposal seeks to curb the City by the Bay's greenhouse gas emissions and boost a thriving local industry in one broad stroke. It would establish a goal of roughly doubling the amount of solar electricity generated throughout the city to 50 megawatts in 2020 from 26 megawatts currently. To meet the goal, San Francisco building owners would have to install enough panels every year to generate as much energy as 500 individual home solar systems. Chiu concludes that this will almost certainly require some new incentive program, stating, "Many [building owners] have told me that if we just had the right financing mechanisms, they'd be interested in doing this."
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Foreign Investors Chase Yield, Safety in U.S. Office Sector
National Real Estate Investor (10/15/14) Carr, Robert

New Avison Young research shows that foreign buyers increased their investment in the U.S. commercial real estate markets in the first six months of this year, pouring in $85.4 billion in property purchases compared to $76.7 billion in the first half of 2013. Approximately $37.8 billion in foreign investments have gone into the office market, as buyers continue to vie over trophy properties in major markets. The report found that sales volume was highest in New York City, at $9.4 billion; in Los Angeles, at $4.6 billion; and in Boston and Washington, D.C., with just over $3 billion each.

Mark Rose, chairman and CEO of the firm, says there are two reasons why foreign investors are throwing money into U.S. office buildings: yield and safety. Indeed, investors looking at the United States to stash away some cash have become top contenders for assets in the major markets. But instead of getting into bidding wars with numerous other rivals for prime office assets in top markets, Rose says smart investors are looking more and more at secondary markets that are experiencing strong job growth, activity in the oil and gas sectors, and/or a technology boom. The general rule of thumb is the more jobs added to a population, the better the office market will perform. Rose concludes, "We've been pretty good at putting people back to work, and that should lead to better pricing for assets. That is, until interest rates go up."
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New Apps for U.S. Renters May Keep Lax Landlords in Line
Reuters (10/15/14) Malo, Sebastian

A new web application, Heat Seek NYC, tracks ambient temperatures inside apartments with an Internet-connected sensor. Created by two roommates who were left without heat for more than a month by a negligent New York apartment owner, the app is currently designed to be used by those New Yorkers who rent. Such households filed approximately 214,000 complaints last year alone, according to the city's Department of Housing Preservation and Development. The data recorded on the application creates a log that can be printed and taken to housing court. The application is among a growing number of tech-based tools for residents to force lax owners and operators to improve living conditions. Another is SquaredAway Chicago, which was designed to bolster resident requests for repairs by recording them on a third-party server. Also under development in Los Angeles is an app called Tenants in Action, which will report housing violations in English and Spanish directly to city agencies. In the end, these and other apps will establish a paper trail -- albeit electronic -- said John Bartlett, director of the Metropolitan Tenants Organization. He concludes, "One of the issues that we continually come up against with [residents] is that everything is verbal, so there's no way to properly document what's happened."
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Flu Expected to Keep More Workers Home
Buildings (10/15/14)

With the arrival of cold and flu season, the health of building occupants becomes a significant concern for both in terms of safety and productivity. According to the annual Flu Season Survey by Staples, even though 88 percent of office managers encourage sick employees to stay home, 60 percent said they go to work anyway; while 40 percent said they were too busy to stay home; and 31 percent believe their manager appreciates it when they are sick, but still present. The survey also found that recent virus outbreaks are affecting occupant behavior, with 53 percent saying they will take extra precautions to protection themselves this winter and 70 percent reporting they now have involvement in cleaning their personal work spaces. The survey recommends three steps to stop the spread of germs in the workplace: one, provide appropriate sanitation supplies; two, offer telecommuting options; and, three, insist that sick employees stay home until well.
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L.A. Agency to Urge Mandatory Quake Retrofits
Modesto Bee (California) (10/16/14)

Los Angeles' building department is set to recommend mandatory retrofitting of thousands of older wood apartment buildings that would be most vulnerable to collapse in the event of a major earthquake. This decision comes after months of studies on so-called "soft-story" apartment communities, reports department head Raymond Chan. Such buildings are wood-framed structures whose upper stories are typically built above carports and have minimal support. City officials estimate that there are about 5,800 such buildings throughout L.A. A full survey, recently ordered by the City Council, is on pace to be completed early next year. The proposal requires the backing of both the City Council and Mayor Eric Garcetti, who has previously expressed support for the idea of mandatory retrofitting.

If approved, the retrofitting could be completed in four to five years, Chan estimates. In that event, L.A. would follow San Francisco, Santa Monica, and several other, smaller California cities in ordering apartment owners to strengthen their buildings -- a step that can cost anywhere from $60,000 to more than $130,000 for each building. Some local apartment owners said they now expect the city to pass a mandatory retrofitting ordinance, but are holding out hope that it comes with some form of financial aid.
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Texas Artist Says Art Installations Could Attract Office Building Tenants
Houston Chronicle (10/14/14) Mulvaney, Erin

Artist Tim de Jong of Wimberley Glassworks asserts that displays of colorful, hand-blown glass lighting installations can draw tenants to office buildings in Texas and elsewhere. His designs can be seen in commercial building lobbies throughout the Houston metro area. In the Briarpark Building in west Houston, for instance, de Jong's "River of Glass" installation is a series of blue colored lights meant to look like Central Texas' Blanco River. According to de Jong, the 110-foot long project was inspired by the river know for "its idyllic scenery, wandering water flows, and clarity." Another example is the "Sunrise at Matagorda Bay" in the lobby of the landmark Petrobras America building, also in West Houston.

David Cunningham, director of development for Granite Properties, has commissioned de Jong's art for several of his properties in the city. In fact, he and and de Jong recently wrote a paper together about the importance of lighting in architecture and design of commercial spaces. This paper states: "Tenants decide to lease in an office building over others based on a multitude of factors including cost, location, quality of space, furnishings in public areas, amenities, the landlord's reputation, and more." To this end, they assert that lighting contributes significantly to the first impression of any potential tenant during the site selection process. Cunningham and de Jong conclude: "A custom art glass lighting installation can instantly transform what otherwise would be a purely functional space into a welcoming beacon that's striking and inspirational.It differentiates a building from competitive offerings and helps a real estate company distinctively brand its portfolio of properties."
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Lenders Like Strong Pulse of Medical Office Sector
Finance & Commerce (10/15/14) Jossi, Frank

The medical office market continues to show exceptional strength as systems consolidate and federal reform brings in new patients and transforms the way care is delivered. Among the big banks financing deals in this market are Bank of America, U.S. Bank, and Wells Fargo, states Chris Jacobson, an associate at CBRE specializing in medical office development. He states, "It really runs the gamut, from local lenders to insurance companies to national lenders who go after this kind of building. It's a good, stable, long-term investment that's part of many lenders' platform." Colliers International's Medical Office Trends and 2014 Outlook report published earlier this year echoes the sentiment that the medical office sector's light is far from dimming. Investors particularly like the medical office market because absorption for new buildings is relatively easy and because tenants typically sign long-term leases of 10 to 15 years.

Stephen Brown, executive director of the Healthcare Advisory Group for Cushman & Wakefield/NorthMarq, points to health care reform. The Patient Protection and Affordable Care Act is rewarding care providers for better results and is encouraging consolidation. In turn, keeping people out of hospitals is expected to result in less expensive care delivered in attractive clinical environments that are more comfortable for physicians and patients alike. New clinics are also part of a plan to have patients receive all their health care at one clinic rather than several, potentially boosting per-patient revenue while locking them into a care system for all their needs. Brown concludes, "This is the integrated care model, with everything under one roof."
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Inside the Former Exxon Building's Transformation
Houston Business Journal (10/14/14) Agee-Aldridge, Jenny

According to Transwestern, another tower will soon be added to the ever-growing lineup of new buildings on tap for downtown Houston. Known by its address, 800 Bell, the 45-story tower occupied by Exxon Mobil is being reconstructed. Transwestern's Houston office is marketing the property. According to Eric Anderson, executive vice president at Transwestern, the new design will include floor-to-ceiling windows, nine-foot ceilings, widened floor plates, a three-floor expansion of the existing parking garage, a 12,000-square-foot fitness center, a food service area, an outdoor courtyard, a conference center, and a connection to the city's underground tunnel system. "It will be a newly developed product," said Anderson. "It will have all the same attributes of the new office buildings being constructed downtown."

A number of older buildings in downtown Houston, most notably Pennzoil Place and the Esperson Building, are currently undergoing major renovations in order to better compete with new office structures being erected. Such investments could really pay off. Of the 13 major downtown office markets in the United States, Houston ranks among the three with the lowest vacancy rates and remains one of the most expensive. Downtown Houston’s average office vacancy rate decreased from 9.2 percent in this year's second quarter to 8.7 percent as of Sept. 30, reports CBRE.
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How Online Shopping is Transforming the Apartment Industry
Property Management Insider (10/10/14) Blackwell, Tim

Recent statistics have shown that as many as 10 million Americans work more than 60 hours per week. Due to their increasingly busy and tight schedules, consumers are growing more and more dependent on online shopping. Late this past summer, the Census Bureau of the Department of Commerce announced that non-adjusted e-commerce retail sales increased 15.9 percent from the first nine months of 2013. This turn to the Internet has had an impact on the apartment sector, as well. Ideally, property websites should allow consumers to complete the online leasing experience without requiring a leasing agent to intervene, states Debi Cole, Vice President of Product Management for RealPage Resident Services. Cole says a friendly user interface should offer shoppers as many details as possible regarding floor plans, real-time pricing, and apartment availability.

The best sites seek to build a relationship with the consumer. To this end, comparison shopping should be embraced -- i.e. offering side-by-side comparisons in the hopes that consumers will not leave the site and do their own analysis. Cole notes, "Prospects don’t like to click back and forth between apartments they are interested in and lose their place. Being able to compare side by side what makes one home different from another allows consumers to understand differences." Furthermore, recent industry data shows that prospects spend one to two minutes on a page where pictures are the most prominent visual and the zoom option is available. "In the end, it's all about realizing that the apartment industry is an evolving product in the online shopping world," concludes Cole. "We have to stay fresh. Customers demand it."
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