Paul Polman, the CEO of the consumer products behemoth Unilever, was recently quoted in The Wall Street Journal as saying, "Where we had activist investors in the 2000s, we will see activist consumers this decade." Over the past few months activist consumers armed with a social networking infrastructure have over-turned what appeared to be arbitrary and capricious debit card fees at the Bank of America and billing fees at Verizon Wireless. What the B of A and Verizon have in common is high switching costs. This same factor holds true, even more so, for apartment tenants.
To be sure the apartment business is far more decentralized than wireless services and banking, but make no mistake it is certainly susceptible to the same type of consumer activism. Afterall what can seem more arbitrary than tenants paying different prices for essentially the same apartment unit; a phenomenon created by the use of airline-type yield management software now utilized by large landlords. Furthermore with hotter markets on both coasts exhibiting rental increases well in excess of wage growth, it doesn't take a genius to figure out that tech savvy consumers will soon link up to share information and start to raise a ruckus.
Because of decade low vacancy rates and rising rents, apartments have been the darling of real estate and REIT investors over the past few years. Although rent growth has slowed somewhat in recent months, most investors continue to project out-sized increases over the next few years, especially in Manhattan, Washington, D.C. and the greater San Francisco Bay area. I would doubt that not one in a hundred real estate investors are factoring in the liklihood that their industry will soon be the target of the new activist consumer. The bottom line is that it is highly likely that the apartment sector will soon face headline and in some cases real economic risk to the rosy rent projections now being forecast.