The rental market in '23 is an ever-evolving landscape for property managers. For many, the housing industry has experienced a major shift in recent years, with increased demand and rising prices. With this shift comes a number of new challenges that property managers must address. To help property managers stay ahead of the curve and make informed decisions, it is important to understand the current trends in the rental market.
The housing rental market is only expected to continue unprecedented growth through 2023, 2024 and beyond, as preferences for housing among Boomers as well as Millennials and Gen-Z continue to trend toward rental. Meanwhile, as tourism and travel resume their operations after COVID, short-term, recreational rentals are likewise growing. How is the property management industry responding, preparing and innovating? Many studies break down the trends many ways, down to the detail of appliance diagnostics, but starting at the high level, all reports are unanimous in this general summary: Property managers must grow their portfolios and improve efficiencies, and they can only do both successfully with PropTech software. An essential distinction on that last point is that property managers or owners have either adopted property management software already, or they will have to now commit to a software platform to handle the growth, or they will outsource to a growing number of property management companies who are software-based and market savvy.
The property management market is among the most robust sectors of growth in the U.S. economy. A property manager’s success and survival are being determined by opposing pressures of growth and reduction, requiring innovation, efficiencies … software. Limited supply, increased demand and increased price of single-family, detached homes, are pushing construction and renovation into rapid growth of multi-family rental properties. The tenants are likewise feeling the larger economic pressures of higher costs of living, so their attraction to rental space is as much for cost reduction as availability.
Property managers have to meet this growth in demand with growth of their inventory, while also facing overwhelming pressures of increased costs of labor, parts, taxes, insurance, and their own costs of living. Increase doors and reduce operating costs. This is first an imperative to the owner; If they don’t yet have a property manager, they will need one, so they will be choosing an individual resource with experience in PropTech software that reduces operating costs by improving efficiencies, or outsourcing to a growing number of software-based, property-management companies. According to Buildium’s 2023 Property Management Industry Report, rental property owners with property managers grew from 55% in 2019 to 64% in 2020.
Do owners have the option for status quo without growth? Probably not. If it’s given that owners and their property managers must create operational and energy efficiencies from software, or be swallowed up by increased costs and labor shortages, the investment in automation will pay off more quickly by adding units that add revenue will immediately taking less time and cost to manage. It also follows that the quickly growing number of large property management companies will be acquiring those units that are still managed manually. In the Buildium 2023 Industry Report, the survey results showed that the majority of property management companies plan to grow by a “significant amount” in ‘23, specifying growth between 26% and 50%.
Within the massively growing market of more efficiently operated rental units, what trends, challenges and opportunities are specifically facing property managers?
Rental Property Managers, still divided into those individuals or offices servicing one owner, and large property-management companies increasingly outsourced by the property managers or owners on contract to manage virtually all aspects of the business, are trending rapidly toward the latter. It is becoming less likely for one property manager to service one owner, unless they together decide to grow their own property management business beyond their own portfolio. An estimated 100,000 new owners/businesses are entering the rental property market; the consolidation of the property management industry will accelerate in 2023, as existing players of all sizes face the same following pressures to grow and acquire or outsource and grow.
Rent payment delays, debt, increased taxes, increased insurance costs, shortage of labor, shortage of appliances and parts, increased rent controls and regulations, increased competition, and rapidly changing marketing tactics to attract quality tenants … have all gone from headache to migraine during and since COVID-induced financial crises, not to mention an instant transformation to “virtual working”, resulting in constant migrations between geographic markets.
Simultaneously, we are experiencing the greatest “Transfer of Wealth” in the history of the U.S., with roughly $60 Trillion in assets shifting from Boomers to Millennials and Gen-Z … all of whom are moving to rental properties, spending more time in the home (retired or working) with higher expectations of updated, high-quality, high-efficiency, smart-home controls, wifi and appliances.
Not surprisingly, the pressure-cooker of challenges and expectations bring rental property managers of all sizes to the same conclusion (if not already there): Survival and growth will take smart home technology and appliances combined with “Proptech” appliance-management software.
Especially at a time of severe labor shortage combined with unprecedented growth of rental property demand, property management consolidation will shift toward those players with the most tasks automated under the fewest software platforms. The “techi-est” property management companies will grow the fastest with the greatest profitability. The smallest players in the short term at least need to integrate two or three software solutions to make office work, communications and maintenance more efficient.
The most critical decision today is which primary property management software to choose, and which additional platforms to integrate for the following functions:
Among the priorities in software features are cloud-based, wifi-enabled platforms with mobile apps that allow owners and property managers to remotely ‘plug-in’ new properties, tenants and appliances without a site visit, so growth itself is actually cost cutting.
Along with demographic emphasis of Boomers, Millennials and Gen-Z in the rental housing space, come the expectations and preferences for spaces that meet the needs for more time at home, work at home and the need to be plugged in with reliable internet service. The following are among the essentials for competing in the rental market:
Fortunately, these expectations require property managers to step up with the smart home and appliance technology that reduces their costs and time of management, enabling more profitable growth of inventory at a faster pace:
As the industry leader in the Smart Appliance and Appliance Management, Monitoring and Diagnostics space, GE Appliances' SmartHQ Management sees the tremendous build of momentum for property management software going into 2023. The pains of labor shortages are assuaged by reducing the time of required labor.
Where software-powered automations, remote controls and diagnostic capabilities leave less manual work to be done, the work still has to be done. Wrenches need to be turned, the landscape needs to be maintained, fixtures need updating, and appliances won’t install themselves (yet). Efficiencies make this work a smaller gap, and in this gap we will see more property-management and maintenance specialists emerging for this contract work. Some will be coming from former landscaping and handyman backgrounds, and some transitioning their property-management expertise into much-needed outsourcing opportunities.
Like their counterparts trending more cloud-based and remote in their operations, the on-site specialists will likewise utilize property-management and appliance-management software to optimize their growth and profitability. But additionally, being the remaining tenant-facing resources in property management, they will need to distinguish themselves competitively by the timeless sales attributes of people skills. As much as tenants are demanding higher standards of remote, virtual living, there will still be a premium on a genuine smile, punctuality and attitude of service when there needs to be a knock on the door. Where personal service is still needed, quality of service will always win.
Visit GE Appliance's SmartHQ Management, request a demo, and look at your appliance management options using SmartHQ Management. With appliance diagnostic software running within your business, your properties and renters get the proactive benefits of real-time tracking for the health of your residential appliance inventory.