Seismic Shifts in Global Property Management


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Property Management | 5 MIN READ

In markets such as Australia and the UK, residential management has always been an integral part of a general real estate agency. The branded groups are actively involved, and most companies hold a similar market share to what they enjoy in the sales side of their business.

In the US it’s a very different story, with a fragmented and primarily unbranded management sector. A huge segment of the market is still owner self-managed.

In Asia and other immature markets management services are often driven by corporate tenants and there is little in the way of services available to private landlords from the real estate service providers. What services that are provided are often done free of charge as part of a transactional service such as a sale or lease.

So 3 very different service offerings to consumers dependant on whether you are in a mature, semi mature or immature market.

However, we appear to have reached a point in time when the management sector across all markets is entering a period of seismic change. Technology has enabled us to redefine the way we deliver services, and in fact what services we can now offer. It’s allowing us to find the efficiency and process required so we can deliver a consumer driven product at a price that hits the sweet spot of our customers.

The US is still top heavy with owner managed properties primarily because the charging rates are considered to be too high by the average landlord. The normal charge for a combined lease and management service in the US is between 16-18% of the annual rental. Compare this to markets such as Australia where the charge is between 7%-12% for the same services and you can see why the take up rate is so small in the US.

As with any service you need to be able to deliver to the market in a price band that your customer is willing to pay.

The ability to efficiently manage larger portfolio’s is how you bring the costs down. It’s a process driven business that relies on volume to bring down the per unit management costs.

Technology is also providing the controls needed to manager larger scale operations, and potentially manage these operations across multiple markets and cities.

For the Agency sector this means that they can build larger rent rolls and get into the game much more easily and cheaply than was the case in the past.

In days gone by you needed expensive servers and in-office software, as well as highly skilled and therefore expensive staff to run the normally complex systems. With the advent of simple to use SaaS products, those days are over. User costs are now down to anywhere from .30c to $2 per property/month and getting cheaper and more feature laden by the day.

More and more we are seeing product where the costs are borne by 3rd parties (Tradies and the tenant) rather than the landlord or the Agency.

Forms are on line as are tenant checks, and even payment gateways are linked in on line.

There are products being developed now that will allow remote access to properties with full control and history at your fingertips – no more collection of keys by trades staff from the agency.

Technology is also driving the automation of basic administration tasks which is bringing labour cost down by as much as 50% or more.

The reality is that companies that can take advantage of these innovative technologies and build large efficiently run portfolios will be able to take the lion’s share of the market, those who hang on to old systems and charging paradigms will be left behind.

In undeveloped markets these changes will allow agencies to get into the management business and start to exert some control over the stock in their market, to date the Achilles heel of the sector. Beyond the regular fee base that management provides, it primarily gives the agency control of that stock, if its re-leased or sold the Agency can bank on seeing the fees.

This ‘new’ efficient residential property management model is a classic market disrupter.