Mid October, a group of us from FRPM attended the National Association of Residential Property Managers (NARPM) Convention held in Phoenix. One of the sessions I attended was the 2019 State of the Property Management Industry Report. This report was a collaborative effort with NARPM and Buildium. Buildium is a web-based property management solution.
The report examines how property manager's goals, challenges, and priorities have evolved and reveals their outlook for the year to come. It lays a foundation for what the property manager's role and the property management industry will look like in the future. The fusion of relationship-centered, technology-powered customer service with the on-the-ground industry expertise that technology can never replace. The survey participants included property managers, association and community managers, tenants, and owners and investors from cities across the nation. Below are some highlights from this 77 page report. Over the next few blog posts, I will elaborate further on a few of these topics.
What the Property Managers are seeing:
1. Urgency around finding operational efficiencies so that property managers can refocus their time.
2. The importance of the "human factor" with the pivoting market.
3. How the industry has refocused around "empathy-driven, service-oriented, tech-enabled" property management.
4. And most of all, how things are changing.
The industry is changing:
The Property Manager is in the middle and surrounded by two layers. The first layer consists of the daily property management tasks, such as: Screening tenants, marketing vacancies, maintenance of properties, generate financial reports, manage contractors, evict tenants, develop new business, inspect properties, manage clients, provide tenant insurance, write and execute leases, collect rent, and lease enforcement.
At the macro level, which is the 2nd layer, property manager are dealing with: increase in cost of housing, legislative and regulation changes on the local, state, and national level, institutional investors, industry consolidation, shifting renter demographics by generation and geography, and technology versus the human element where tenants want the technology but miss the human element.
1. Cost of Housing:
Housing prices remain at an all-time high
Costs related to managing housing are steadily increasing
Cap rates continue to compress
Owners are selling. I assume this pertains to single family rentals. The report shows that property managers are reporting a 7.2 point drop in growth and revenues are expected to drop 4 points in next 2 years.
2. Legislation and Regulation:
Upzoning and bans on single-family zoning
Rent caps and rent stabilization
Changing laws that impact the lead-to-lease cycle
In the words of a property manager in Colorado Spring, CO. " Increased labor costs have made maintaining properties exponentially more expensive. It’s more and more difficult to market the concept of real estate investment and becoming a landlord to investors and property owners.”
“Increasingly restricted laws and ordinances will dissuade many rental property investors from trying to manage their own properties. Well-educated, technically trained, and highly ethical property managers will be in greater demand.”(Kansas City, MO)
3. Industry Consolidation:
Institutional investors are becoming ‘national landlords’. Their top 3 concerns are:
1. 43% Maintenance
2. 32% Filling Vacant Units
3. 31% Finding a good property manager
Investors are consolidating into larger conglomerates
Developers are building “single family, built to rent” communities
4. Tenant Demographics: Large US metros are losing tenants due to domestic migration
Millennials and Gen Z are renting longer
40% of renters are 45 or older
Baby boomers are the fastest-growing renter segment
5. The Proptech Wave. Investments in the space to provide technology to the industry are projected to be $26 billion dollars this year.
Tenant tech preferences in order of preference:
Paying rent online.
Communicating with manager via text/email
Finding rentals online
Online resident portals
Filing a maintenance request online
Signing documents online
Smart home technology
Property managers use of tech in order of priority:
Property Management Software
Smart home tech
Property Manager's future:
There will be a 10% increase in demand for professional property managers
Since 2018, more people are renting versus owning
Property managers play a critical, more consultative role as regulations complicate ownership.
Relationships are still the heart of the property management, despite proptech hype
Creating high-touch, personalized experiences are critical
The number of PMs entering the field is diminishing. In 2017, 21% of the property management segment consisted of PMs with than 2 years' experience, compared to the 10.3% reported in 2019.
Chairman, First Rate Property Mgmt.