Property managers are at the center of the collision between rising rental demand, declining profitability, changing regulations, and the nationwide shortage of affordable places to live, according to the fifth annual survey of 1,738 property managers by Buildium and the National Association of Residential Property Managers.
In addition to the property managers, the report also surveyed 1,118 renters, 603 rental property owners and 217 association board members in 340 metro areas.
Chris Litster, CEO of Buildium, and Gail Phillips, CEO of the National Association of Residential Property Managers (NARPM), presented The 2020 State of the Property Management Industry Report in a recent webinar focusing on key macro trends.
The report said property managers who “are prepared to refocus their businesses on the rapidly evolving preferences of their residents and clients will be best positioned for success as the industry enters a new chapter.”
Still, the report makes the point that relationships remain at the heart of effective property management.
“Property managers have found themselves at the center of the collision between rising rental demand, declining profitability, changing regulations, and the nationwide shortage of affordable places to live,” the report says.
“It’s evident that these socioeconomic forces, along with the very real and immediate demands of their owners and residents, are changing the role of the property manager for good.”
Legislation and regulation are issues in many markets
The effect of legislation and regulation was a top issue mentioned in the webinar and the report, as rent control and other local and state policies begin to show up in many areas.
The report notes that “in the midst of changing regulations, property managers have the opportunity to market themselves as experts who can help owners navigate an increasingly treacherous legal landscape”
Phillips described how this affects the property management business.
“This is not about politics,” she said. “This is how these policy changes impact our economies. As laws become more restrictive, we are focused to take additional precautions in our leasing-process and resident-retention policies.
“This is not always perceived well by owners and residents,” she said. “Our company is exploring options for educating owners about landlord-tenant laws. We hope by doing this we will strengthen our relationship with our owners,” Phillips said.
The report used survey data and in-depth market research to look at the following questions:
- “How should property managers adapt their strategies for success in response to changing conditions in the local markets where they operate?
- “What role do property managers play for their clients as the nation’s largest rental markets face a less-profitable, more-regulated future?
- “How can property managers balance the explosion of property-technology options with the vital “human element” at the heart of our industry?”
Top priorities include both efficiency and growth
The report says “property managers are laser-focused on growth and efficiency above all else—as they have been for four years straight.
“In our recent seller’s market, growth hasn’t come naturally. Property managers have had to fight to maintain their profitability and client base—their third and fourth most-selected priorities for the coming year,” the report says.
In addition, “many have renewed their focus on facilitating effective communication with their residents, owners, and employees in this fast-moving era where technology both facilitates and hinders our relationships.”
Areas that cause stress for property managers
In addition to being property managers’ top priorities, the pursuit of increased efficiency and growth is a top source of stress.
Together with maintenance, these three areas were selected as “the biggest challenges by nearly 1 in 3 property managers for three years in a row.
“Now more than ever, property managers are faced with conflicting demands for ever-more-efficient business processes and human-centric customer service—all in a market where profitability and portfolio growth require additional effort,” the report says.
Skills wanted in a property manager?
Here is what the report says:
- “78 percent of owners want regular updates from their property manager on their rental properties; 43 percent want to receive those updates in real time.
- “72 percent of renters feel that it’s very important that their property manager is easy to get ahold of and resolves issues quickly.
- “60 percent of renters say it’s very important that their property manager provides great customer service and keeps things running smoothly.
- “44 percent of rental owners agree that quick response times and good communication skills are among the most important qualities a property manager can possess,” the report says.
Fewer entering the property manager field
Property-management jobs are in high demand, the report says, and an ongoing challenge in a tight labor market.
“The field is changing fast, and property-management companies face a dwindling supply of employees and vendors.
“The current labor shortage underscores the importance of retaining staff with a positive company culture, bolstered with the training and mentorship they need to have successful property management careers in the decades to come,” the report says.
“Due to understaffing, current employees are stretched thin, creating high-stress working conditions that cause burnout and turnover. To add to the issue, property managers may soon begin to retire faster than others are entering the industry; IREM estimates that the average property manager is in their 50s,” the report says.
Though current property managers often found their way to their career by accident, it’s a profession that many come to love for the independence and day-to-day variety it provides, Litster and Phillips said on the webinar.
“And it’s a good time to be a property manager: The profession is in high demand as renting becomes a way of life for a growing portion of Americans,” they said.
“Whether you entered property management from another part of the real estate industry; from within a family business; or through a passion for housing issues, you’re in good company,” they said on the webinar.
Litster said the number of people entering the industry has dropped in half in the last few years.
“Property management needs a serious public relations campaign. We need to pay attention to how we coach and mentor young people and show them all the ways this job is not only critical but really an ideal opportunity for those with an entrepreneurial spirit and ones who want to take control of their careers,” he said.
3 top takeaways from the property managers’ report
No. 1: Property managers have a critical role
“The demand for affordable places to live has outpaced the supply for years, causing rents and home prices to grow faster than residents’ salaries can support. Property managers are put in a difficult position, trying to balance the profitability of their clients’ investments with rent prices that keep units filled with qualified residents. There’s no simple solution to this crisis on the horizon; but property managers can play an advisory role to property owners by staying on top of changing regulations aimed at easing affordability issues in their market, such as up-zoning and rent stabilization,” the report says.
No. 2: Keeping up with issues in the local market
“With cap rates compressing in overheated markets like New York and San Francisco, investors are discovering higher yields and faster growth in mid-sized cities and suburbs— though prominent secondary markets like Austin and Nashville are becoming less lucrative as investors flood in. Some residents are discovering strong job growth and an appealing standard of living by migrating to rising markets like Phoenix and Dallas. Property managers can be an invaluable asset to their clients by keeping abreast of socioeconomic changes in their local market, ensuring that their properties are positioned effectively to attract and retain high-quality residents,” the report says.
No. 3: People are the heart of property management
“Technology makes it possible for investors to automate many aspects of running a rental property, from DIY landlords with a handful of multi-family units to institutional investors buying up thousands of single-family rentals. This has put property managers in a position to prove that the service they provide can’t be replaced with an app. Property managers can get ahead by shifting their strategy to account for their residents’ and owners’ experiences, and reinforcing those relationships with technology. There is no technology that can replace the human element in property management—it can only enhance it,” the report says.
More renters will continue coming
“In 2018 the number of people who rent their homes surpassed the number of people who owned their homes for the first time in the U.S.,” Litster said. And that trend is only expected to continue.
He said it is a great supply and demand story for the industry.
“The good news is,” Litster said, the U.S. Bureau of Labor Statistics is “predicting a 10 percent increase in property management jobs by 2026” compared to other professions expected to grow by 7 percent.
Phillips said property management is becoming more like the hospitality industry.
“Customers are drawn to high-touch personal experiences” that property managers can create with excellent tenant customer service, she said.
“Keep learning and stay connected and take advantage of learning opportunities, such as NARPM, that are out there,” Phillips said.