The Concession Dilemma
Concessions are powerful leasing tools—when used strategically. Offer too much and you erode revenue. Offer too little and you lose prospects to competitors. Add concessions too late and traffic has already dried up. Remove them too early and you miss the leasing window.
Most property managers make concession decisions based on instinct or panic. Traffic slows, so you add a concession. Occupancy improves, so you remove it. But timing and context matter more than gut feel.
Effective concession strategy requires understanding why concessions work, when they make sense, and how they fit into your overall pricing approach.
Why Concessions Exist
Concessions serve three strategic purposes:
1. Adjust Pricing Without Changing Base Rent
Lowering base rent sends a signal that your property is struggling. It's also hard to raise rent again when market conditions improve. Concessions achieve the same effect—reducing effective cost for prospects—while maintaining higher base rent for renewals.
2. Create Urgency
"One month free" feels like a limited-time opportunity. It gives prospects a reason to lease now instead of continuing to shop. Without urgency, prospects delay decisions.
3. Compete Without Eroding Long-Term Value
When competitors offer concessions, you often need to respond. But matching their base rent lowers your renewal baseline. Matching their concessions keeps pricing power for later.
Types of Concessions
Not all concessions have the same impact on revenue or appeal to prospects. Understanding the options helps you choose strategically.
Rent Concessions
- One month free: Most common, typically spread across lease term
- Two months free: More aggressive, used when occupancy is critical
- First month free: Helps with move-in costs
- Last month free: Encourages full-term leasing
- Percentage off (e.g., 10% off for 6 months): More nuanced approach
Move-In Cost Reductions
- Waived application fees: Low cost, high perceived value
- Waived administrative fees: Similar effect
- Reduced security deposit: Helps with upfront cost barrier
- No pet deposit/fees: Appeals to pet owners specifically
Value-Add Concessions
- Upgraded unit features: Quartz counters, stainless appliances
- Free parking: If normally charged separately
- Free storage unit: If available
- Free amenity access: Reserved parking, gym, etc.
Service Concessions
- Flexible move-in dates: Removes timing barrier
- Flexible lease terms: 10-month or 14-month options
- Early move-in incentive: Encourages immediate decision
When to Add Concessions
Adding concessions should be a strategic decision, not a panic response. Consider concessions when:
Competitors Are Offering Concessions
If three competitors within your market radius add move-in specials, prospects expect them. You don't necessarily need to match exactly, but you need to address the competitive pressure. Consider if your positioning justifies holding firm or if matching makes sense.
Traffic Is Strong But Conversion Is Weak
If tours are up but leases are down, concessions can tip decision-makers. Prospects are interested but price-sensitive. A modest concession (like waived fees or half-month free) may close the gap without significant revenue impact.
Inventory Is High for Specific Floor Plans
You don't need property-wide concessions if only one floor plan has excess inventory. Targeted concessions—like "One month free on 2BR/2BA units only"—solve the problem without eroding revenue across all units.
Seasonal Slowdown Is Predictable
If your market slows every winter, preemptive concessions maintain velocity. It's better to offer a concession in November than to hit January with empty units and panic.
Base Rents Are Competitive but Upfront Costs Are Barriers
Sometimes the issue isn't monthly rent—it's first month, security deposit, fees, and pet deposits adding up to $4,000+ upfront. Waiving fees or reducing deposits removes the barrier without touching base rent.
When to Remove Concessions
Removing concessions too early costs leases. Removing them too late costs revenue. The key is watching signals, not arbitrary occupancy thresholds.
Consistent Lease Velocity Without Concessions Being Mentioned
If prospects are leasing without asking about specials, the market can handle removal. If every prospect mentions concessions or brings up competitor offers, the market isn't ready.
Competitors Begin Removing Theirs
When competitors pull concessions, it signals market strength. You can likely follow within 1-2 weeks without losing momentum. Being first to remove concessions can be risky; being last leaves money on the table.
Tours-to-Lease Conversion Remains Strong
If 40% of tours convert to leases even with talk of removing concessions, the market supports it. If conversion drops below historical average, wait.
Occupancy Reaches Comfortable Levels
"Comfortable" isn't 95%. It's the level where you can afford to slow leasing slightly without operational risk. For most properties, that's 92-93%. Waiting until 95% means you left revenue on the table for weeks.
Renewal Season Approaching
If you're heading into peak renewal months and current residents see new residents getting big concessions, it creates friction. Remove concessions before renewal conversations intensify.
How to Adjust Concessions Strategically
Concession strategy isn't binary. You don't need to go from "one month free" to "nothing." Strategic adjustments maintain velocity while protecting revenue.
Reduce, Don't Eliminate
Move from "one month free" to "half month free" before removing concessions entirely. This tests market response with less risk than full removal.
Shift to Lower-Cost Concessions
Replace "one month free" with "waived application and admin fees" (total $400 vs $1,500). Perceived value remains high, but cost to you is much lower.
Extend Deadlines Gradually
Announce concessions will end on specific dates. This creates urgency while signaling market strength. Extend the deadline if needed, but communicate clearly.
Target Concessions by Floor Plan
If 2BR units are leasing strong but 1BR is slow, remove concessions on 2BR while maintaining them on 1BR. Floor-plan-specific concessions match strategy to inventory.
Test Removal on a Sample
Remove concessions for one week and track impact. If traffic and tours remain steady, proceed. If conversion drops significantly, reinstate and wait.
Calculating the Real Cost of Concessions
"One month free" sounds straightforward, but the real cost depends on how it's structured.
Spread Over Lease Term vs. Front-Loaded
Most properties spread concessions over the lease term. $1,500 rent with one month free becomes $1,375 effective rent for 12 months ($16,500 total instead of $18,000). Cost to you: $1,500.
Front-loaded (first month free) means you collect no rent in month one but full rent thereafter. Cash flow differs but total revenue impact is the same.
Impact on Renewals
Concessions don't apply to renewals (usually). A resident who leased with one month free pays full rent on renewal. This means concessions impact first-year revenue but not long-term value—assuming the resident renews.
Opportunity Cost
If you offer one month free to lease a unit, but could have leased it two weeks earlier at full price, the real cost is higher. Conversely, if a concession prevents a unit from sitting vacant an extra month, it saves money.
Concessions and Net Effective Rent
Prospects compare net effective rent (NER), not base rent. If your base rent is $1,500 and competitor is $1,400 with one month free, their NER is $1,283. You're actually more expensive despite appearing competitive on base rent.
When comparing to competitors, calculate NER for everyone:
Formula: (Base Rent × Lease Term - Concession Amount) ÷ Lease Term = Net Effective Rent
This helps you understand true competitive positioning and whether your concession strategy matches reality.
Common Concession Mistakes
Offering Concessions Too Early
Adding concessions preemptively costs revenue unnecessarily. Wait for clear signals—competitor moves, conversion drop, traffic softening—before responding.
Property-Wide Concessions for Localized Problems
If only one floor plan isn't leasing, don't offer concessions on all units. Target the problem specifically.
Removing Concessions Based Only on Occupancy
Hitting 93% occupancy doesn't mean concessions should end. If competitors still offer them and market is soft, removing concessions risks momentum.
Inconsistent Communication
Prospects talk to each other. If one gets "one month free" and another (who leased a week later) doesn't, complaints follow. Announce changes clearly and honor commitments made.
Ignoring Market Context
Competitors aren't the only context. Local employment, seasonality, new supply, and interest rates matter. Adding concessions during strong market conditions costs revenue for no benefit.
Concession Strategy Decision Framework
When deciding whether to add, adjust, or remove concessions, ask:
- What are competitors offering? Are you at competitive disadvantage?
- What's our conversion rate? Are tours turning into leases at historical rates?
- What's our inventory position? Do we have excess units or specific floor plans struggling?
- What's our occupancy trend? Are we improving or declining?
- What's the seasonality? Is this temporary market softness or sustained pressure?
- What's our renewal risk? Will concessions create friction with renewing residents?
- What's our pricing flexibility? Can we adjust base rent instead, or is that off the table?
How PriceWatch Supports Concession Strategy
PriceWatch doesn't tell you what concessions to offer. It provides context so you can decide:
- Which competitors are offering concessions and how aggressive they are
- How your net effective rent compares when concessions are factored in
- When competitor concession patterns change (added or removed)
- Whether pricing adjustments might work better than concessions
- Floor-plan-specific recommendations based on competitive pressure
Final Concession Strategy Principles
- Concessions are tools, not failures: Use them strategically, not reactively
- Context matters more than rules: No "always remove at 93%" policies
- Target concessions precisely: Don't use a sledgehammer for a nail
- Calculate true cost: Understand NER, not just base rent impact
- Adjust gradually: Test market response before full removal
- Communicate clearly: Avoid surprises and inconsistency