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CoStar Group’s Apartments.com Idea Proposal (CSGP)

CoStar Group’s Apartments.com Idea Proposal (CSGP)
 

How will the lifting of the moratorium on evictions affect Apartments.com?

Report Available: July 23, 2020

 

Blueshift’s initial research found CSGP’s Apartments.com managing the pandemic well, at least through April. It noted increased revenue, a surge in impressions as residents sheltered in place, and higher year-to-year leads and revenue per listing as higher vacancy rates drive demand for its services. But as the moratorium on evictions is lifted and there is likely a flood of empty apartments in large cities from those who have not paid rent in several months getting kicked out of their homes, it remains to be seen whether there will be a surge in business for Apartments.com or whether financially strapped landlords and tenants will maintain as much of a need for the service, especially as residents flee larger cities for neighboring environs.

 

Observations

  1. CSGP’s Q1 beat earnings and revenue expectations, with revenue up 19% year to year. Apartments.com’s revenue growth was 20% in the quarter. It generated $48 million in net new bookings, its second-highest quarter ever of net new sales, up 34% compared to a year ago. CSGP affirmed its $250 million marketing commitment to Apartments.com in 2020 and generated 1.5 billion impressions in March as renters were beginning to quarantine, double the amount from a year ago as total visits to the site reached an all-time high. Unaided brand awareness climbed to a new high of 35%. New leads dropped in March but returned in April, registering higher than a year ago. Asking rents have fallen one percentage point since peaking in March against what would normally be up one percentage point. Search activity on Apartments.com in April was succeeding pre-outbreak levels. CSGP believes Apartments.com will do better in a downturn as higher vacancy rates result in more demand for leads.
  2. Revenue per listing is increasing for Apartments.com. In Q4, it averaged $500 per ad and was over $700 per ad in Q1. People are choosing Apartments.com’s Platinum and Diamond level signature ads in greater quantities. The company is shifting greater emphasis to its digital marketing efforts and online leasing tools as the physical leasing process has slowed considerably amidst the pandemic. April sales for Apartments.com were trending ahead of last year. Still, the company is seeing some softness in its business and expects cancellations to rise. In April, it said a number of customers had asked for forbearance on their bills and it had negotiated deferrals on about 160 customers.
  3. As the pandemic carries on, the top 10 most expensive cities for renters have seen a decline in average rental price and the demand for rentals is shifting away from these cities to neighboring, less expensive areas. Rent for a one-bedroom in San Francisco has fallen nearly 12% year to year, though the national average grew 1% as overall demand is growing.
  4. But in the larger cities, not only are rents falling, evictions are expected to rise dramatically in July and August as tenants who lost their jobs and have not been able to pay rent for two or three months are about to lose protections from the government. A moratorium on evictions in New York state expired June 20 and there are fears this will result in 50,000 to 60,000 cases filed in New York City’s housing courts on top of the backlog of cases that have now resumed after a pause since March. More than one million NYC residents lost their jobs or were furloughed since the start of the pandemic and their federal $600/week stimulus money is scheduled to stop July 31. Landlords are also struggling as 25% of tenants did not pay rent in April, May, or June. In Michigan, the State Court Administrative Office estimates that 75,000 landlord/tenant cases could be filed in district courts statewide once the pause in case filings ends. Eviction hearings resumed May 18 in Virginia with 2,200 cases scheduled in Richmond for the end of June/early July. Philadelphia, where almost half of residents are renters, resumes eviction hearings July 10, while evictions in Wisconsin jumped 42% over 2019 levels after the state lifted its ban on May 27.
  5. Blueshift’s 30, 2017, report said Apartments.com would continue to dominate the internet listing services (ILS) market for the balance of 2017. This finding was consistent with Blueshift’s Nov. 22, 2016, report, in which Apartments.com was cited as a top-performing ILS and an important part of top-tier apartment complexes’ multifaceted marketing plans.

 

Will the expected increases in vacancies help or hurt Apartments.com? Are landlords/property owners/managers increasing or decreasing their spending with Apartments.com? Is Apartments.com seeing an increase in business as vacancies rise? How much are property owners asking for forbearance on their bills? Which direction is that trending? How is Apartments.com handling these requests? What will it mean for Apartments.com if courts or the government extend tenants’ ability to stay in their homes without paying rent? What is the breakdown between Apartments.com’s higher-end customers and lower-end clients and how is that affecting the company’s revenue? Blueshift will gather data and issue a market research report from independent sources in the following areas: Property owners and managers, Competing rental platforms, and Industry specialists.  

 

Companies: CoStar Group (CSGP), Facebook (FB), Google (GOOG/GOOGL), RealPage (RP), Zillow (Z/ZG)

 

Research Begins: July 6, 2020

 

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