In Practice
A trade-out looks at one unit across two residents. Take the new resident's rent and compare it with the last resident's rent for the same unit. If the new rent is higher, you have a positive trade-out. If it is lower, it is negative. It is a quick read on whether pricing power is growing or shrinking.
Regional managers, asset managers and owners watch trade-outs in the monthly report, often next to renewal rent changes. Together they show blended rent growth. On the ground, the leasing team and the manager see it when a vacant unit is priced and leased, and a negative trade-out is a prompt to look at market, condition and concessions.
Example: a unit rented at 1,400 dollars before and leases at 1,455 dollars to a new resident. That is a positive trade-out of 55 dollars, or about 3.9 percent. If the same unit leased at 1,360 dollars, it would be a 40 dollar drop. Numbers here are only an illustration.
Common mistake: ignoring concessions. A higher face rent with a month free can be a lower effective rent. Compare apples to apples, and look at trade-outs by floor plan so one unusual unit does not hide the trend.
How to calculate it
Trade-out percent equals new lease rent minus previous lease rent, divided by previous lease rent, times 100. Example only: 1,455 minus 1,400 is 55, and 55 divided by 1,400 is about 3.9 percent.
Trade-Out: Common Questions
What is the difference between trade-out and renewal growth?
A trade-out compares a new lease with the prior resident's rent. Renewal growth compares a renewing resident's new rent with their own previous rent.
How do you calculate a trade-out?
Subtract the previous lease rent from the new lease rent, then divide by the previous rent to get a percentage.
