More than 100 interested parties per apartment in attractive locations are not uncommon. In other regions, however, demand is completely absent. The result - apartments and houses stand empty.
The issue of vacancies is more topical than ever due to the corona crisis: collapsing profits could increase the vacancy rate, especially for offices, restaurants and retail space. Housing companies with already high vacancy rates will have to overcome major challenges in the coming months.
Vacancies have reasons and are not always easy to manage. We provide you with tips and information on how you can reduce vacancies.
"In general, we speak of vacant apartments if they are offered on the housing market and no (new) tenants have been found after at least three months". - Klebsch, 1997, p.536
In simple terms: vacancy describes real estate that could be rented out but is not.
There are various causes that can cause vacancies:
1. fluctuation-related vacancies - people move and the next tenant is not always found immediately. In technical terminology, this short-term vacancy is called fluctuation reserve.
2. structural vacancy - properties that cannot be sold or rented despite good condition and good economic situation are often the result of structural vacancy. This often occurs when businesses and people move away from an area. Then the supply of real estate exceeds the demand.
3. latent vacancy - space that is currently still rented but not used by the tenant. These areas are often sublet or vacated. When the contract expires or the tenant becomes insolvent, they fall vacant.
4. speculative vacancy - the property is usable and there is demand for it. However, it is deliberately not let. In such a case the owner often hopes for an increase in the purchase price. He does not want to sell or rent at the current time. The result - the property is empty.
5. vacancy due to a monopoly - the prerequisite for this is that a single market participant has a monopoly position, for example in a city district, or a market niche, e.g. student apartments. Depending on the monopoly, a higher average price can often be achieved if some apartments are vacant. A monopoly market should not occur in Germany.
While the latter cases are mostly planned vacancies, there are ways to counteract fluctuation and structural vacancies:
Is used when the structural conditions are good and other properties in the same area have no problems. The problem child in this case is usually a single property.
This type of vacancy management describes how to deal with a larger number of vacant properties that are vacant due to structural problems.
Once the property has been identified as vacant, the next step is to determine the possible reasons for the low interest.
Is it due to the property? Your equipment, is the bathroom or other rooms in need of renovation? What are the price expectations of the sellers/landlords? Are they clearly too high for the location and the property?
Or is it possibly due to the marketing? Is the exposé meaningful? Do the pictures and information correspond to reality? If there were interested parties, why was there no conclusion? Where do they advertise the property? Does it have enough reach?
Software solutions that you use in the marketing and rental process help you to analyze and evaluate this information and data. You can already see at a glance how many interested parties your ad generates. As the marketing process progresses, it becomes clear where interest is declining.
If you receive too few inquiries, the exposé will not make a good impression. If you lose interest after the viewing, then it is probably due to the object, the asking price, the surroundings, etc.
Data on the marketing status, which you can read for example at EverReal:
- Age of the advertisements
- Number of interested parties
- Number of appointments: outstanding, booked
- Reasons for rejections
- Number of applicants
Now for the supreme discipline in vacancy management - structural vacancy management. Solutions here are often not easy to find and are often beyond your sphere of influence. Perhaps the following ideas will be the right one for you?
In most communities and cities, citizens are very concerned about preserving their homeland. Therefore, innovative ideas against structural vacancies can be found here again and again. A good example of this is the community of Hiddenhausen in North Rhine-Westphalia. With the support program "Young buys old", young families are supported with up to 9,000 euros to purchase their own property that is at least 25 years old. In addition, an appraisal of an old building is also subsidized up to 1,500 euros.
The initiative seems to be showing its first effects, as the number of inhabitants, which was about 19,800 in the 2011 census, is now back above 20,000.
However, financial incentives are not always necessary to counteract structural vacancies. Art & Culture also promotes local life. Old barns have been converted into theaters, painting competitions have been held, and concerts have been organized. Communities and cities that have a lot to offer also attract more young families.
Business Improvement Districts (BIDs) are areas in which a large number of stakeholders, such as real estate owners and tradespeople, join together to form Public Private Partnerships (PPP). Here, it is common for them to pay a levy to the PPP. The money is in turn used to upgrade the area through various measures. This could be a marketing campaign, for example. Other measures are the maintenance of the area, in which graffiti and garbage is removed. But also building measures are possible.
The advantage of this model is that in the PPP there are employees who are responsible. Thus participants are not dependent on voluntary commitment, which can also vary from time to time. A further advantage is that there are no free riders due to the obligatory contributions.
Managing vacancies is not easy. Nevertheless, there are ways of tackling this challenge. From classic solutions, such as property enhancement, or cooperation with local people, to digital vacancy management. The latter in particular should not be underestimated, as it provides data that can lead to better management decisions.
To whom should the pretty three-room apartment in the heart of the city be rented, and who is the right candidate to sign the lease for his house today? Real estate agents and property managers have to deal with questions like these every day, because living space is scarce, but the number of interested parties is rising steadily.
At this year's ZIA Energy & Innovation Congress, EverReal, together with MEAG MUNICH ERGO AssetManagement, will present how PropTechs and established asset managers can cooperate successfully in practice - using the example of a letting solution developed by EverReal that revolutionises the entire letting process.
The letting of dwelling is a complex affair: Exposés provide, prospective customer inquiries answer, the credit-worthiness of potential tenants examine. Whether you are real estate owners yourselves or as house and housing management the interests of landlords and tenants represent: Manual processes in the letting costs a lot of time.