The Changing Face of Property Management
Today`s Property Managers Move Beyond Collecting Rent.
A day in the life of a property manager today dramatically differs from that of a decade ago.
Modern office and multifamily property managers have greater responsibilities beyond traditional rent collection and bill paying. They now arrange insurance; provide tax information; design and collect renovation bids; develop marketing plans; hire, manage, and motivate staff; coordinate maintenance services; improve landscaping; oversee property security; ensure compliance with government regulations; and report income and expenses.
To accomplish these tasks, today`s property managers must evaluate and respond to changing market conditions and world events, be aware of new developments in technology, and find additional ways to increase fee income. At the same time, they must maintain the personal client relationships that are so integral to their business.
Adapting to Changing Times
In recent years -- and especially in the past few months -- numerous external factors have affected how property managers work.
As licensing requirements, government legislation, lender regulations, insurance requirements, environmental concerns, and accounting and taxation issues become more complex and property specific, managers have begun to specialize. In addition, the growth of real estate investment trusts and other large real estate companies has created a consolidated marketplace.
A result of this consolidation is increased use of branding, in which companies develop a unique image based on management services that translates across all properties. Property managers often are critical to developing and maintaining a company`s branding identity.
Branding strategies are key to surviving economic downturns. Building a positive brand image helps retain tenants; however, a negative image can do just the opposite. Thus, it is critical to ensure that customers have a positive experience with the brand at all times. Since property managers have an essential role in maintaining strong tenant relations, they should have plans in place to manage tenant or service provider problems quickly and easily.
For example, EpiCity has a problem resolution program that explains to customers how the company expedites problems and complaints through management. By informing customers of the process, more complaints are resolved without resorting to litigation, outside mediation, or arbitration.
Using e-mail and voice-mail for placing work orders is another general way to help customers gain a positive experience. One specific example, on a larger scale, is the Web portal offered by essention, a supplier of Internet-based property management solutions. The company stores important property information, including drawings of each suite and real-time operation of fan motors, heating, ventilation, and air conditioning registers, floor temperatures, and alarm systems. Also offered is a 24-hours-a-day help desk to answer basic tenant questions and dispatch on-site or third-party maintenance personnel as needed. Services such as this allow good management operations to expand into additional markets and eliminate the need for an on-site presence in each submarket.
Property insurance is another new wrinkle for managers. Since Sept. 11, 2001, insurance rates for investment real estate have risen as much as 75 percent on some product types. According to a southeastern regional insurance agency, since Sept. 11, there is 50 percent more capacity (dollars available to pay losses with) in the insurance business today. Moreover, some insurers have drafted terrorism exclusions that will not cover terrorist attacks in future policies. Managers traditionally have relied on the insurance coverage provided in the owner`s policy for their protection. If coverage is lessened, managers become more vulnerable and at risk.
As well as national trends, property managers also must be ready to adapt to local external factors such as changing urban and economic trends.
For example, in 1994, Atlanta was emerging from an economic recession in which the multifamily segment was especially hard hit. One spot tapped for economic improvement was the area surrounding the Lindbergh transit station, which was across the street from a 304-unit apartment community.
The building`s owner asked the property management company to represent its interests in meetings with resident and homeowner groups. The property management company formed a team of four key personnel to work on the project, including the site manager of the community, the senior property manager, the chief financial officer, and the president. The team developed a program to determine more specifically the objectives and potential outcome of the study and juxtaposed this with the needs of the client. Due to the property management team`s active role in the process, the building owner accomplished all of its objectives.
A property manager`s role in understanding the local leasing market also has changed. Leasing lead time is increasing. As lease rates rise, government regulation of construction and renovation increases, and technology issues become more complicated, it is critical that tenants see space "ready to go." Property managers must work with their clients and their leasing personnel to anticipate tenant needs and make infrastructure and other changes before a lease is signed.
Numerous advances in technology are helping property managers do their jobs more effectively.
As in most industries, computerization has provided some relief regarding data collection, manipulation, and storage, as well as new and better means of communication.
Many property management companies already have deployed terminal server platforms that allow their personnel to connect to company networks over the Internet and run applications in a Web browser or through a proprietary client. Citrix is one of the most prevalent companies providing these platforms. Excalibur Group in Atlanta has such a system. According to company president Mike Nelson, "This makes us tremendously more efficient. Our folks can get to what they need from home or even a client`s property if necessary." Nelson has taken this application even one step further. He currently is in the beta-test phase of allowing his clients to connect to the system to run reports on their properties using the Yardi software that his staff utilizes to manage their portfolio.
Property management software also has exploded in the last 15 years. A few pioneers such as Yardi now compete with dozens of other applications that have become more specialized. (See "Technology Buyers Guide: A Man(ager`s) Best Friend," CIRE, May/June 2002.)
Advances in technology also have helped property managers analyze buildings` energy consumption and develop strategies to manage energy more efficiently to lower total operating lease costs.
For instance, by creating strategic alliances with Enerwise Global Technologies and Strategic Energy, Grubb & Ellis developed an Internet-based energy management platform that enables property managers to collect and analyze energy use data, share information and best practices, and help clients develop demand-side and supply-side energy management programs. Programs include designing purchasing programs customized to a client`s particular needs, conducting tariff and rate analyses, and acting as the client`s agent to procure energy in deregulated markets, including the use of aggregation to increase purchasing power. It also allows managers to isolate costs for individual tenants and allocate these costs based on actual tenant energy use.
Revenue Beyond Rent
To stay ahead of the game in 2002, property managers must continue to look beyond rent as the sole revenue source. Identifying new ways to add value to properties also is key to gaining and retaining tenants.
In the past, tenants paid common area maintenance fees for janitorial services and some utilities. Today, fees are more widespread, collected for services such as applications, administration, memberships, parking, secretarial services, furnishings, and construction management.
An emerging multifamily property trend is offering pay-as-you-go features such as high-speed Internet connections, wiring for surround sound, exclusive club memberships, fitness club programs, premium parking passes, and access to social areas and conference facilities with high-quality audio/visual equipment.
A similar trend is occurring in the office sector. For example, an Equity Office Properties` class A building in Atlanta has a built-in conference room, training room, and auditorium that tenants can rent.
Fiber-optic broadband service is another add-on that Equity Office includes in many of its buildings. It also has a "fast office lease" available in some areas for tenants that are in a hurry to move in and want immediate access to telephone and data lines, furniture, office supplies, and kitchen supplies. Many property managers also make flu shots, blood drives, book fairs, and other events available to tenants.
Aside from fees, property managers should look to new technologies to find additional revenue sources. For example, in certain markets, renting out rooftop space for telecommunications equipment has created a new and profitable revenue source. (See "Towers of Babble," CIRE, September/October 2001.)
Attracting and Retaining Tenants
Despite the numerous changes in property management, maintaining good curb appeal continues to be a critical aspect of getting prospects in the door.
But while pleasant buildings and landscaping add to a property`s visual appeal, other attractions have become equally important. For example, some office properties have added amenities such as restaurants, travel agencies, laundry services, and car washes to add to a facility`s allure.
Some multifamily properties now offer residents various amenities. For instance, prospective tenants at Oakwood Corporate Housing properties can choose from packages including furnished apartments, furnished offices, specialty kitchens, and even a kids` package. Fitness clubs, movie theaters, day-care centers, dry cleaners, car rental, conference rooms, and activity programs also are popular add-on features in many new multifamily developments.
Security issues are another significant factor in tenant relations. Multifamily communities in urban settings still struggle with how to increase security effectively. Property managers typically use paid security patrols or have a local law enforcement officer live on the property to provide security for a reduced rent.
In addition, many property managers believe that the best protection is an involved and informed resident group. For example, during a recent spate of break-ins and vandalism on Buford Highway just north of Atlanta, a coalition of 11 apartment community managers began to meet weekly to share information. The heightened awareness was transferred to the residents, whose involvement led to the apprehension of some suspects.
In another case, the property management team for Equity Office recognized the security exposure that a sprawling office park in a wooded, park-like setting in Atlanta presented. Restricted parking access and individual building security personnel were not feasible given the buildings` design, layout, and budget. To overcome these obstacles, the property management team added building access control systems to limit unnecessary, after-hours foot traffic. The company also contracted for a security patrol service and formed a close relationship with the county police department to provide focused attention on the office park.
Other aspects of security for property managers to consider include personal safety, building integrity, and systems administration. With heightened concerns since Sept. 11, 2001, it is prudent to study each of these areas for potential security weaknesses.
But clearly, good old-fashioned customer service is key to successfully attracting and retaining tenants. Many of the common-sense basics to achieve this haven`t changed: answering the telephone promptly and politely, returning telephone calls quickly, and resolving maintenance requests promptly.
As the real estate investment market matures, the pressure on professional property managers increases. Some 10 years ago, virtually no school offered a bachelor`s degree in real property management; today several do.
Technological advances, along with changing client needs, will affect the property manager`s role over the next decade. The job will continue to evolve as technology capabilities grow, infrastructures transform, and the world changes. Despite the numerous changes on the property management horizon, one constant will remain: The importance of personal customer service is an essential part of every property manager`s role.