Looking Ahead: Essential Property Managers Suggest Trends That Will Shape the Real Estate Industry 2023
Property Details
Property managers predict eight trends that will affect the business in 2022.
Waves of change rushed across the property management sector in 2021, seemingly from every aspect. Property management companies have had to cope with the effects of labor and material shortages, increased restrictions, industry consolidation, and the housing affordability problem. They’ve had to deal with rising demands and expectations from their tenants and customers, as well as the possibility of competition from institutional investors and management groups looking to enter the single-family rental market.
On the other hand, property managers have met each of these challenges head-on by providing the great customer service that has traditionally made them successful and by implementing new technologies to get more work done with fewer resources.
Trends in the Property Management Industry in 2022:
- Single-Family Rentals are attracting more attention.
- Property Management Industry Consolidation
- Increased Rental Property Regulation
- The Benefits of Using a Property Manager’s Services and Expertise
- Customer Relationships Changing for Property Managers
- Housing Affordability and Rental Demand
- Property Management Supply Chain Delays & Labor Shortages
- Increased Interest in Single-Family Rentals as a result of the Pandemic 1.
- Single-Family Rentals are attracting more attention.
The possibility to provide tenants with greater living space at more affordable costs than they can get downtown without the need to qualify for a mortgage has sparked a surge in interest in single-family rentals and suburban neighborhoods. People of all ages are on the lookout for rentals that can fit their changing requirements and preferences, and they may stay in the rental market for longer than prior generations. Even though the surge in interest has created some competition between small-business property managers and larger investment and management firms, the ability of smaller companies to provide personalized customer service will continue to set them apart from larger competitors.
Effect #1: Increased Pandemic-Driven Interest in Large, Low-Cost Rentals
According to property managers, renters are showing an increased interest in apartments with more interior and outdoor space at more affordable prices. Though renters’ interest in single-family homes and suburban neighborhoods had begun to rise before the pandemic, demand for these properties has exploded in the last 18 months, especially as remote work has allowed some residents to relocate further from city centers.
For example, among the people we poll, the percentage of renters living in single-family homes has climbed from 32% to 37% since 2018. The percentage of renters living in suburban and rural areas has gone from 56% to 63%. We expect the high demand for single-family rentals to continue as Millennials work remotely and add partners, children, pets, and relatives to their households, necessitating additional space. Baby Boomers seek houses where they may age in place without the stress of homeownership.
Effect #2: Larger companies are more interested in single-family rentals.
Some property managers are suffering the effects of an inflow of institutional investors, developers, and property management organizations in their local markets as the popularity of single-family rentals expand tremendously. Build-to-rent communities are springing up around the country, competing with single-family homes strewn about existing neighborhoods and serving as a key driver of the asset class’ current success.
The vast majority of rental properties in Nigeria, on the other hand, remain in the hands of small-portfolio rental owners, who will continue to rely on local property managers for advice and assistance in running these properties efficiently, profitably, and in compliance with changing regulations.
2. Property Management Industry Consolidation
Property managers are watching the industry converge around them, with money flooding into the single-family rental sector and the strong housing market prompting some small-portfolio investors and property managers to liquidate their holdings. On the other hand, property managers can use this opportunity to expand their portfolios by acquiring smaller businesses and investment portfolios.
What Does This Mean for Property Managers?
The first effect is an increase in the number of investors in the client base of property managers.
As many Accidental Landlords have chosen to sell their rental properties, the share of investors in property managers’ client base has risen from 67 percent to 71 percent since 2018. Many of these units have been purchased by investors, raising concerns about the effects of property ownership consolidation on the rental market, such as converting naturally occurring affordable housing owned by mom-and-pop landlords into market-rate housing owned by investment firms. However, as previously stated, small-portfolio investors continue to own most of Nigeria’s small rental properties.
The second effect is that there are more opportunities to expand through acquisitions.
Some property managers and investors are selling off their portfolios rather than responding to the high speed of change required in the current market. Others will be able to grow due to this: Over the next two years, 25% of property managers plan to expand through acquisitions of other companies’ or investors’ portfolios.
3. Increased Rental Property Regulation
Property managers are concerned that the regulatory burdens and financial struggles small portfolio owners faced during the pandemic have harmed the appeal of investing in residential rentals, especially as a strong seller’s market makes property sales an appealing option. However, most landlords intend to keep their properties for the next two years, and many even intend to extend their holdings.
What Does This Mean for Property Managers?
Effect #1: More Regulation Means More Risk for Rental Property Owners
Property managers are hearing from landlords concerned about the risk of managing rental properties in this day and age. As a result, they’re offering crucial advice on how to run a profitable business while adhering to new rules.
Effect #2: Despite the Seller’s Market, the Appeal of Residential Rentals Persists
As the hot housing market encourages rental owners to sell their properties, some property managers have seen their portfolios shrink. However, most landlords continue to view residential rentals as a good investment. In fact, according to our most recent poll of small-portfolio rental owners, 46% intend to purchase new properties in the next two years, the highest level of expansion we’ve observed in this category since 2017.
4. The Importance of Property Managers’ Services and Knowledge
The epidemic has brought attention to the importance of property managers’ services, especially in light of quickly changing rules and market conditions. 3 out of 5 property managers say their clients place a higher value on services now than they did before the epidemic. They are seeing an increase in demand for their professional skills beyond their regular responsibilities.
How Does This Affect Property Managers?
Effect #1: Increased Regulatory Anxiety Leads to Increased Dependence on Property Managers.
In the face of growing rules and resident-related difficulties, landlords are increasingly hesitant to self-manage their properties. As a result, the number of rental owners who use a property manager to manage their properties has increased. In particular, 25% of rental property owners who use a property manager said they do so largely to guarantee that current regulations operate their properties.
Effect #2: As the number of investor clients grows, the demand for expertise-based services increases.
Property managers are increasingly being looked to as trustworthy experts on local market conditions and effective rental property operations by investors. As a result, property managers see an increase in demand for expertise-based services, with the number of rental owners seeking financial, investment, and legal assistance rising by 7% since 2019.
Effect #3: Property managers have more work to do due to more resident-related issues.
In the eyes of rental owners, property managers’ ability to attract and maintain exceptional residents has become a major component of their value. In our most recent survey, 48 percent of rental property owners said they hired a property manager primarily to help them manage their tenants—an increase of 6 percentage points in just the last year. Property managers are using tenant screening to ensure that tenants have steady sources of income, and watertight agreements are being drafted to safeguard rental owners’ interests when evictions are restricted.
5. The Shifting Customer Relationships of Property Managers
In response to increased demands from renters and rental owners, property managers are devoting far more time and effort to customer relationships than before the pandemic. ‘Attracting and retaining exceptional residents’ rose from #9 in 2019 to #1 in 2021 on property managers’ priority lists; for third-party property managers, satisfying current customers and finding the ideal owners to work with was in third place.
What Does This Mean for Property Managers?
The first effect is more time spent communicating with residents and clients.
Due to the uncertainty of the last two years, property managers have spent significantly more time communicating with and devising solutions for their customers. Property managers, in particular, have performed an important role as a mediator between residents and owners during the pandemic, helping to balance their interests in the face of difficult financial and legal challenges.
Effect #2: There is an increase in the number of requests from renters who want to spend more time at home.
Renters have been making increasing requests to property managers due to pandemic-related lifestyle modifications that have caused them to spend more time at home, notably due to the rise in remote employment.
Effect #3: Customer Loyalty is Generated through Empathetic Customer Service
Many property managers believe that their relationships have become more personal due to advising and supporting their customers through the financial stress of the epidemic, resulting in increased loyalty but needing even more empathy (and time) than before.
Effect #4: Increasing technology does not imply a reduction in customer service.
Because so many client interactions are now digital, property managers believe that creating outstanding customer service is critical to set themselves apart from the competition. Property managers can use technology to reduce the amount of time they spend on repetitive tasks, allowing them to focus more on the aspects of their job that technology will never replace: customer service and industry knowledge.
6. Housing Affordability and Rental Demand
In cities across the country, rising rental demand and a scarcity of affordable housing options drive up rent costs and intensify competition for available apartments. Even though renters’ difficulties paying their rent have diminished dramatically since the worst of the COVID-19 financial crisis, 10% of renters in our most recent study were concerned about their capacity to pay their rent. The pandemic may have exacerbated these renters’ financial difficulties, but home price increase has long exceeded income growth. Though more rental competition may appear to be beneficial to property managers in the near term, high housing costs can eventually reduce rental demand by discouraging lower-income workers from starting their own families.
What Does This Mean for Property Managers?
Effect #1: Increased Demand from a More Diverse Renter Population
Young renters creating new households and would-be purchasers priced out of the market are driving up demand for apartments for property managers. Our annual renter surveys have revealed that property managers serve a more diverse population than in the past, with an increase in the number of older adults, children, and multigenerational families living in rental homes, necessitating the creation of properties that can accommodate a wider range of occupants.
Effect #2: As affordability deteriorates, fewer qualified applicants apply.
Due to a limited supply of vacant units in many regions, property managers spend more time sifting through rental applications and evaluating potential tenants. Some landlords are concerned about the pandemic’s influence on housing affordability and renters’ financial security. Some are having more difficulty than usual locating qualified candidates for their properties.
7. Property Management Supply Chain Delays & Labor Shortages
Property managers’ capacity to get work done swiftly and cost-effectively is strained by labor shortages and supply chain problems, potentially affecting their clients’ satisfaction with their services.
What Does This Mean for Property Managers?
Effect #1: Increased employee turnover necessitates improved employee retention and operational efficiency.
Due to human resources scarcity, property management organizations work with smaller teams. As a result, they’re focusing more on attracting and retaining talent and investing in technology to help them accomplish more with less.
Material and labor shortages endanger project timelines and budgets.
Due to a shortage of suppliers, materials, appliances, and other necessary resources, property managers and rental owners face higher property costs and project delays. It has hampered their ability to promptly respond to property issues and resident requests.
8. Adoption of PropTech During a Pandemic
The pandemic has forced property managers to digitize interactions with customers, staff, and vendors that they were previously conducting face-to-face. Even as changing epidemic conditions have allowed some in-person encounters to return, property managers maintain the technology that has resulted in increased productivity for their teams and better convenience for their consumers.
What Does This Mean for Property Managers?
Effect #1: The property management technology allows for increased operational efficiency.
Property managers have discovered how much more efficient their operations can be with the right technology in place while maintaining a high level of service. Thirty percent of property managers predict that harnessing technology to increase efficiency will be crucial for their revenue growth plan in 2022.
Effect #2 Customer Acceptance of Technology is Widespread Among Property Managers’ Customers.
Renters and landlords have become more receptive to technology as they witness firsthand how much easier it makes processes like payments and communication. Property managers’ clients and inhabitants of all ages now prefer customer-facing technology such as online payments, email and text conversations, electronic rental applications and lease signing, and online maintenance requests. Even as some face-to-face engagement resumes, property managers concur that these technologies are here to stay.
(Effect #3) Reduce the amount of time you spend on recurring tasks.
The pandemic has brought the leasing process online in ways that property managers and rental applicants could not have imagined before, lowering the amount of time and energy that property management teams must commit to this area. Electronic rental applications, listings, and lease agreements are already widely accepted industry standards, and other technologies such as virtual and self-service showings have gained favor during the epidemic.
2022 Trends in the Property Management Industry
Property managers’ business operations, communication patterns, technology use, and growth outlook have all been reshaped by the events of 2021. During a year that has been extremely difficult for almost everyone, it has also affected how property managers and their residents and clients interact with one another. Under normal circumstances, however, property managers enjoy the constant change because it means that every day is a new chance to beat their records and outperform the competition. As a result, property managers will do everything possible to stay on track with their objectives and meet the needs of their tenants as they push through this uncertain period.
Property managers’ and owners’ relationships have improved due to the pandemic. Property managers devised rent collection strategies while prioritizing both the residents’ and rental owners’ financial needs, making property management services more valuable to clients.
Increasing regulations and standards have made property management even more difficult for everyone. The legal experience of property managers aids owners in navigating the post-pandemic lawsuit environment.
Furthermore, property managers have a good opportunity of leveraging their knowledge in profit maximization for the owners by compressing cap rates. The importance of property managers and their services has been highlighted by COVID-19.
Property managers must be ready to adapt to the latest trends in the property management sector. Only those companies that embrace advanced property management technologies for a competitive advantage will be crowned in the future.
