Lease-Up Funnel With High Traffic but Slow Conversion
Northgate Flats is a 180-unit lease-up that opened four months ago. It has 81 leases signed (45% occupied), 620 recorded visits, 190 completed applications, and 81 approved leases. Monthly marketing spend is $42,000: 70% broad billboard and radio, 15% internet listing services, 10% social media, and 5% referrals. The competitive set is offering one month free on a 13-month lease; Northgate's effective rent is $1,450 versus $1,395 at the closest competitor. Three leasing consultants handle traffic, and two were hired within the last 60 days. Prospect surveys say the model and amenities are strong but cite price and a slow application process; average time from application to decision is 72 hours. Monthly vacancy loss is estimated at $65,000. Ownership wants 90% occupancy within nine months and has not approved a rent reduction.
1. Diagnose the lease-up funnel. Which metrics are strong and which are weak, and what hypotheses should the manager test?
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Funnel metrics: traffic is 620 visits over four months, or about 3.4 visits per unit; that is not the main constraint. Visit-to-application is 190/620 = 30.6%, application-to-lease is 81/190 = 42.6%, and overall visit-to-lease is 81/620 = 13.1%. The weak links are application-to-lease and speed: a 72-hour decision time gives prospects time to lease elsewhere. Hypotheses to test: price and concession gap, application fees or screening criteria, poor follow-up by new staff, unavailable floorplans, and source quality. Break results down by marketing source, leasing consultant, floorplan, and denial reason. Also review whether prospects are being quoted net effective rent or only face rent. Do not assume the problem is traffic until conversion and speed are fixed.
2. Propose a 90-day action plan with measurable targets and a revised marketing mix. What should not be cut?
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Ninety-day plan: set targets of 24-hour application decisions, 55% application-to-lease, 18% visit-to-lease, and at least 12 leases per month; track weekly. Shift 30-40% of billboard and radio spend to internet listing services, social, referral bonuses, and local employer outreach; measure cost per lease by source. Retrain the two new consultants on follow-up within two hours, tour scripts, objection handling, and fair housing consistency; secret-shop and review call recordings. Add evening and weekend appointments and a dedicated application concierge. Do not cut on-site staffing, curb appeal, or maintenance response; those affect conversion and retention. Keep a small reserve for targeted concessions only on slow floorplans. Report cost per lease and net effective rent weekly, not just traffic.
3. The owner asks whether to match the competitor's one-month free concession or reduce rent by $55. Compare the economics and recommend an approach.
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One month free on a 13-month lease at $1,450 is $1,450 / 13 = about $111.54 per month, or a net effective rent near $1,338. A $55 rent reduction is $55 per month, or $660 per year, and it permanently lowers the rent roll. The concession costs more upfront and may need to be repeated, but it preserves face rent for future increases, appraisals, and renewals. Recommendation: do not cut face rent across the board. Offer a limited, approval-based concession on selected units, ideally shorter than one month or tied to a 14-month term, while fixing the 72-hour application process. Compare cost per lease rather than headline rent. If conversion improves, the concession can be phased out; if not, revisit pricing with a market study.