Apartment industry expert, Steve Lefkovitz talks about consumer influence, high investor demand and the hottest tech trends impacting the industry
Steve is President and CEO of Joshua Tree Consulting, which he founded in 2001 and Joshua Tree Conference Group founded in 2008. He is also a partner at RealtyCom Partners, LLC, the apartment industry’s leading asset manager of telecom marketing rights on behalf of property owners. From 2000 to 2001, Steve served as Senior Vice President of BRE Properties, Inc. and from 1997 to 2000 as Vice President of the National Multi Housing Council. Steve started in multifamily as a Vice President of the New York State Housing Finance Agency, and served briefly as an associate at Prudential Securities in New York.
Steve is a frequent speaker at industry conferences and has presented at events sponsored by the National Multi Housing Council, the National Apartment Association, Multifamily Executive Magazine, Multihousing News and many of the leading apartment management companies.
Steve is a graduate of Yale University (BA) and Princeton’s Woodrow Wilson School of Public and International Affairs (MPA.) Prior to real estate, Steve was a staff photographer at the national newspaper USA Today, and a photo intern at the New York Times. He is an avid landscape and nature photographer whose work may be seen at Pacific Landscapes.
Placester sat down with Steve this week for an exclusive talk on the multifamily real estate sector and the hottest marketing and technology trends on display at the upcoming Apartment Internet Marketing conference.
Placester: Tell us about how you came into the multifamily real estate industry and how your career has evolved?
Steve Lefkovits: I started in multifamily working for the New York State Housing Finance Agency and the State of New York Mortgage Agency. I caught a lucky break after a couple of years there and was invited to join the staff of the National Multi Housing Council as the capital markets lobbyist in Washington, D.C. That’s really where I got my start. That break gave me an opportunity to meet a lot of the folks that are still active in the multifamily industry today. From there I worked at the NMHC for about four years and then joined BRE Properties in my home base of San Francisco. Since leaving BRE I have been a strategy consultant for the industry and purchased the Apartment Internet Marketing conference in 2007. In 2008, I also started working with RealtyCom Partners, the apartment industry’s leading telecommunications consultant that represents apartment owners in their negotiations with telecommunications companies.
P: Everyone is talking about multifamily being one of the hottest asset classes in real estate right now. What are the positive indicators that you see playing into the sector’s performance and investor interest?
SL: Right now I’d say that performance and investor interest are a little bit decoupled. Investor interest is stoked because the multifamily asset class historically has very low volatility. It’s proven to be less volatile than other asset classes again in this past deep recession, and so investor interest remains high. Liquidity has returned back to the market on the equity side with quite a roar, and happily at the same time operating performance has increased in most markets from four to 10 percent year over year 2010 to 2011. That’s provided justification for a lot of investment activities over the last 6 months that will probably continue through 2012.
I think there is more and more micro targeting of prospective residents and we are going to see a greater understanding of the different demand drivers and why people rent.
P: Can you talk to us about how the apartment industry has evolved from a technology and marketing standpoint over the past decade and what the primary influencers have been in that evolution?
SL: I think the primary influencers of technology in the multifamily industry have been consumers. Quite simply, renters are consumers that expect to have certain experiences when they shop online for apartments. Unlike other industries, the value creation in multifamily real estate does not come from operating gains: it comes from changes in interest rates. Real estate is a highly leveraged product and the cost of interest is the single biggest expense at most communities. So with the lowering of the cost of debt comes value creation: operating efficiencies and operating improvements are very much secondary in creating value in real estate.
So the driver really has been consumers, and multifamily consumers typically shop once a year, it’s not a frequent purchase, so the pace of innovation has not been as great as in the retail business, where people shop everyday. On the other hand, the pace of innovation in multifamily has been somewhat faster than in the office or industrial sector where there is no consumer to speak of and most deals are still done on the phone.
The other piece of the perspective is that there are an awful lot of innovative people in multifamily and an awful lot of people who have jumped out of being property owners and managers to solve a particular problem that annoyed their day-to-day lives. So many of the entrepreneurs that we see in the multifamily business starting technology and process improvement companies are also property owners or managers by background. They’ve experienced first hand the challenges: the information challenges, the customer challenges, the operational challenges. So we have a tremendous body of talent and diversity of interest and capability. Renting apartments is similar enough across the country that someone in Massachusetts can innovate an idea and solve a problem for someone renting apartments in New Mexico.
Over the last decade technology has evolved from single point of pain solutions to integrative solutions that address an entire workflow, not unlike the rest of the business world. It’s been a little bit slower going and the need for enterprise systems has not been as compelling as it has been in businesses with 100,000 plus employees. The employee to valuation ratio in multifamily is quite low. So the types of changes we are seeing, the evolution of technology over the last decade, is a little bit derivative.
Professionals that are able to manage the reputation of their companies and their communities best are driving more qualified traffic and cheaper costs than others, simply because people buy from people.
P: Tell us about the Apartment Internet Marketing Conference and what role that has played in informing multifamily thought leaders?
SL: The AIM history has a great provenance going back to its start as the brainchild of internet visionary Mike Mueller, the CEO of Realty DataTrust, who put together the first AIM conferences as their user group meeting but also as a forum to help inform and engage the multifamily market and broaden the use and understanding of the Internet as a multifamily marketing tool. My company Joshua Tree Conference Group bought AIM in 2007 and our goal was to expand the Internet marketing knowledge base broadly to help the thought leaders in the industry get up to speed in a very actionable way—to get outside of thinking about opportunities in silos, to get them to think about all of the possibilities of the web as an integrated whole.
So since 2008 our group has owned and operated the AIM conference and intend and hope for it to be the very best conference in the multifamily industry in terms of educating the decision-makers and the thinkers and doers of apartment portfolios how to best use this tool to market apartments, find targeted opportunities, create efficiencies in marketing. The intent is to create an understanding of how to better spread and publish their creativity to tell their own stories of their own properties in their own words and profitably engage with their residents and prospective residents in ways that make sense with their technology.
This year’s AIM conference is April 24-47 at the Sheraton Phoenix Downtown and we hope to continue what we have started and build on a legacy of very focused education for the more serious and more successful marketing executives in the multifamily industry.
P: What are some of the hottest trends apartment marketers will be engaged with in 2012?
SL: We think that the number one trend for 2012 is reputation management. It has become a very big need and a very big opportunity. Professionals that are able to manage the reputation of their companies and their communities best are driving more qualified traffic and cheaper costs than others, simply because people buy from people. Online reputation management is nothing more than what we used to do in the analog world with public relations and marketing to get your own story out in a positive way. The obvious hook is that now the customer talks back with you in public. It has upped the ante a little bit but has created opportunities.
Another trend that we see is revenue management. Revenue management has traditionally been seen as separate from marketing activity, but understanding how to use revenue management to deliver the right offer to the right customer at the right time has begun to be understood as part of a marketing function, largely because of the efforts of companies like Archstone, Equity Residential, Carmel Partners and others who are at the forefront of integrating the thinking about pricing and marketing. Both of those disciplines involve understanding demand that can be generated through various activities.
The third trend that is related to that is segmented marketing. I think there is more and more micro targeting of prospective residents and we are going to see a greater understanding of the different demand drivers and why people rent. Marketing I think will continue to become a narrow cast activity and segmentation will be a hot trend. I think we’ll continue to see a focus on finding low-cost ways to get individualized messages out there. Companies like low cost, and they like broad messaging, but they want to try a lot of different things to fit their personality, and the web enables that.
This year’s theme for the AIM conference is Customer First, and I think listening to customers and putting customers first is going to be another trend, particularly as we listen not just to what customers say but how they behave. Behavioral listening is something that we focused on before at AIM, it’s something that we will continue to focus on. How people behave in reaction to our offerings, our marketing, and to our websites and their associated tools will be very important trends.
P: How about specific technologies? What are the three things an apartment marketer can’t live without?
SL: That’s easy.
- Google Analytics
- Cheap traffic from their Internet Listing Service (ILS) partners.
Hands down those are the three things you cannot live without.
P: Any technologies or technology trends from other industries that might have an impact on real estate in the near future?
SL: We expect to see any trends to involve creating greater convenience and an easier transaction for the buyer to take hold in real estate. In multifamily we often look to the hotel and travel industries for innovations. I think we’ll see continued integration of ratings and reviews with company listings a’la TripAdvisor. Technology wise, I’m not a believer that technology makes a specific difference to real estate. I think it is going to be in the application layer where most of the innovation is happening: those innovations will be impacting real estate customers and marketers and they will all be things that drive convenience for the customer.
P: What more could be done to adapt technologies and marketing efforts to the customer of the future?
SL: This is a really hard question because the customer of the future is an occasional buyer of real estate products and services and don’t really know what they want or what they need. I think the number one adaptation will be mobile shopping: I think people will continue to find ways to innovate on their handset. Whether that’s the augmented reality being tested in commercial real estate to show off large brokered spaces or something else is hard to answer. I guess the question is who is going to pay for innovation and what are they going to get out of it? I don’t know that the customer is asking for innovations yet specifically because of the pace of their purchasing activity.
P: How can people connect with you?
The AIM 2012 – Customer First Conference will be held April 25-27 at the Sheraton Phoenix Downtown Hotel. Visit the Apartment Internet Marketing website for more information or to register.