MPF Research’s Jay Parsons walks attendees through a cluster analysis of resident demographics during the 2016 NMHC Research Forum.
Attendees of the 2016 NMHC Research Forum got a good look at how apartment researchers and data providers are starting to leverage the power of big data to drive business decisions.
Richard Hughes, senior vice president, strategic revenue systems for RealPage, and Jay Parsons, vice president of MPF Research, conducted a cluster analysis of their investment-grade, market-rate apartment households by a variety of demographic factors, including age, income, familial status and event pet ownership, to reveal eight major renter subsets and their share of the total universe.
- Starting Out. At 27 percent of apartment households, this group is what many might consider the traditional renter-young twenty-somethings, not making a ton of money, more likely to be single and less likely to have pets or kids.
- Starting Out Faster. This group, which makes up 15 percent of apartment households, is in many ways similar to the first group, only its members tend to make more and count more women among them.
- Young Couples. These households tend to be a little older, with an average age of 33, with higher incomes and, in some cases, children and make up 13 percent of all apartment households.
- Pet People. While only comprising 8 percent of apartment households, this group can be considered a “loud majority” in some respects, as they are often outspoken about their likes and dislikes-especially when it comes to their children, errr, pets.
- Familiar Family. With roughly two kids per household, this group of renters is focused on their budgets. Median income hovers at $47,000, making this group spending the highest percentage of their earnings on rent.
- Miscellaneous Elites. This group is the true renter by choice, these top earners are important in markets like Manhattan, San Francisco and downtown Chicago. But they are a small group, accounting for just 5 percent of apartment households.
- Perma-Renter. An often overlooked group that still makes up 16 percent of apartment households, perma-renters are disproportionately single guys with medium incomes who once they find value don’t move around a lot.
- Boomers and Independent Seniors. The oldest of all renter households, this group, about 10 percent of apartment renter households, are middle-income earners and increasingly single, with just 18 married adults per 100 units.
Once identified, Hughes and Parsons compared the size of each segment with their lifetime values, meaning the total amount of time a group rents times the average rent paid, to get an estimation of market opportunity for each segment.
Moreover, having a deep enough data well also allowed Hughes and Parsons to look at each renter segment on a map (they used Dallas as an example), showing where geographically in a market renter segments tended to congregate. So, for example, while starting out faster households tend to live in urban areas or high-rent suburbs, families, perma-renters and boomers end up in lower-rent suburbs.
While still a work in progress-there’s some data lag-the data is leading to more resident insights and suggesting that certain segments have some shared characteristics when it comes to housing needs and choice.
“When you know your customer segmentations, you can better prospect and finish/fit,” explained Hughes.