No matter what industry you read about, you are reminded the world is changing, and doing so at a rapid pace.
- Financial markets are faced with unprecedented levels of potential new regulation: from limits on their size (too big to fail), to limits on what will be considered “lawful” activities.
- Journalism is faced with competing delivery methods, the plaguing question of monetizing their content and the challenges of finite budgets in a world where news stories cross all man-made boundaries.
- Traditional television broadcasting models are now competing with a content world that narrow-casts on multiple technologies.
And each and every industry, from A to Z in the alphabet, faces questions and challenges never faced before. What does this mean for the traditional real estate service business model? How will real estate companies of all sizes compete in their changing environment?
Thirty years ago, property management was not a standalone service business. Typically, a brokerage house offered property management services in order to not lose control of a brokerage client. The profit was brokerage commissions. Property management services were, at best, a break even service offering.
The property management business of 2010 has emerged from the historical business model where it was only a tangential business division, to a reliable steady source of income stream, which in many companies stands alone. Today most developers, as well as owner-operators, have in house property management divisions. Many of them offer their property management services to third parties. This competition has kept property management fees competitive and property management profit margins very slim.
On the expense side, technology has increased overhead expenses. Government regulation has increased the complexity of even the simplest transaction. Increasing concerns over liability have resulted in a heavy obligation to document and report every action, and sometimes every inaction, on the part of staff members to protect the company and client from litigation.
Property management firms chase increased efficiencies, which results in increasing their reliance upon technology and ultimately overhead expenses. But they find that the cost of the “efficiency” forces them to grow, in order to justify the new overhead. Ultimately, it becomes a never-ending circular chase. You are forced to grow to justify the overhead that you have taken on because you have grown. What is the future of the small to mid-sized property management company?
If you are a property manager, what trends do you see?
- What changes have you made in your business model in the last twelve months?
- If you employ a property management company, what trends have you seen in the level of service or the quality of the service?
- If you are a resident or tenant, what changes have you seen? Is the digital age improving the quality of the service you receive, or the type of service? Are repair response times better or worse? Is it easier or harder to find and rent an apartment in 2010?
I invite all readers, owners, managers, tenants and residents to share their experiences and insights. Engage in the dialog and together we can explore the changing environment in which the business of property management exists.
And we can learn how it impacts the various stake holders: is the trend improving the property management experience, making it more user friendly?
My goal is to use the comments and the dialog as a foundation for a series of articles on the changing world of property management. You can also share your comments privately at Examiner@LightnerGroup.com.
This article has also been posted on Examiner.com.