Competition is fierce in many rental markets. Nationwide, median rents are down year-over-year, ranging from 0.2% for two-bedroom apartments to 2.3% for studios. To attract renters, many owners are turning to short-term concessions, such as free amenities or giveaways.
Concessions can help shorten vacancy cycles and generate buzz about new developments to fill new units quickly. A surge of newly built multifamily developments in the Sunbelt, which stretches across the southern and western states, is prompting even more owners to consider concessions.
Are concessions right for your portfolio? It depends. In some cases, smart pricing—using AI tools to analyze rental pricing data and adjust rates to reflect local conditions—may provide a stronger long-term strategy. In this article, we’ll compare concessions and smart pricing to help you choose the best approach for your portfolio.
Last month, 14% of apartment listings nationwide offered concessions. In some markets, the number was much higher. For example, 30.5% of apartment listings in Austin, TX, included concessions. Like other Sunbelt locales, Austin saw an unprecedented surge in new multifamily supply over the past few years. While construction has slowed and the population is growing, it will take several years for the market to absorb all the new units. Meanwhile, concessions can help owners attract renters with many other options.
Popular types of rental concessions include:
Concessions offer the following benefits in competitive markets.
While concessions have benefits, they may also come with drawbacks. The biggest downside is that they’re a short-term strategy. That means relying too heavily on them may keep you from implementing longer-term strategies for filling vacancies. It’s also worth considering the following potential risks.
Concessions attract renters in the short term, but they’re a temporary solution. Competitive pricing, on the other hand, addresses the primary concern many renters have when apartment searching: affordability.
Nearly two-thirds (63%) of renters in RentCafe’s study said affordability is a significant factor in their decision to rent. In the 2024 NMHC Grace Hill Renter Preferences Survey, rent affordability was the leading reason residents cited for wanting to move to a new location. About half (49%) of respondents planned to relocate for lower rent. That’s significantly higher than the 20% looking for better features or amenities.
These studies suggest setting rents at competitive levels may be a better strategy for attracting renters and reducing turnover than offering short-term concessions. Smart pricing uses technology to help you set competitive rents for your market.
By analyzing large quantities of data, smart pricing allows owners to adjust rates based on real-time market demand. Rather than relying on annual rent reviews to set prices, owners automatically shift rents continuously based on conditions.
ApartmentAdvisor ASSIST factors in data like unit square footage, features, location, and real-time market comps to model pricing options that align with your priorities. Instead of wondering if you’ve left money on the table or overpriced a unit, it gives you a clear view of the market as well as pricing strategies based on your specific goals, whether that’s to lease as quickly as possible or to maximize returns.
Concessions help attract renters in tight markets, but it’s worth weighing whether smart pricing is a better long-term strategy. To compare each strategy, estimate the net effective rent (the total rent minus any cash concessions) and adjust for expenses from giveaways, fee waivers, or other perks. If you have historical data, you can estimate your vacancy losses by comparing past vacancy cycles with and without concessions.
Also consider market trends. Concessions often peak in the fall and winter and decline in spring and summer. And keep investor or buyer perception in mind, since heavy concessions can lower valuation.
If concessions make sense for your portfolio, you may get the best results by combining them with smart pricing for a balanced, long-term strategy.
ApartmentAdvisor ASSIST uses pricing analytics to optimize rent and renewal rates. Fill out this form to learn how it can help you boost occupancy and revenue.