Last modified on June 23rd, 2023
By Brittany Benz
The last several years have presented new challenges for property management businesses. Now, as we head into the second half of 2023, those existing industry challenges have been amplified by the sting of inflation, tight labor markets, and softening rents.
But even in the face of economic uncertainty, there are still ample opportunities and solutions available to help property management teams future-proof their business, as revealed at the AppFolio-led Apartmentalize session, “2023 Industry Challenges: Navigating (Another) Economic Downturn.”
During this session, a panel of industry experts — Neil Cadman, President at Cadman Group, Paula Munger, Vice President of Research at National Apartment Association (NAA), and Stacy Holden, Industry Principal at AppFolio — explored how to best adapt to volatile economic environments by implementing proven solutions. The following are highlights from that session.
1.) Operational efficiency starts with understanding your KPIs
Although there are numerous challenges facing the property management industry today, Apartmentalize attendees agreed with the survey findings and ranked operational efficiency among the most critical issues to solve.
Before diving into implementing solutions or making major operational changes, panelists urged businesses to first look at operational efficiency key performance indicators (KPIs). As Stacy noted, “We can’t make it better unless we can measure it.” In addition, identifying and analyzing your current KPI benchmarks is the only way to know what’s truly working.
With so many operational efficiency KPIs to track and so many data points to review, where should property management businesses start? Here are a few examples the speakers recommend:
- Renewal and retention rates: Even during peak leasing season, it can still take an extraordinary amount of effort and time to attract qualified leads and convert them into residents. Retaining residents costs significantly less overall and takes up less of your team’s time, so higher renewal rates should be a primary goal. In addition to residents, look at renewal and retention rates for property owners and vendors, too.
- Controllable vs. uncontrollable costs: When looking at budgets and overall spend, review both controllable costs (e.g., vendor contract pricing, and late payment fees) and uncontrollable costs (e.g., insurance, taxes, and utilities). While reducing budgets may seem like the simplest way to increase net operating income (NOI), some costs realistically cannot be cut or negotiated.
- Task completion and handoff time: Rather than focusing merely on how quickly team members can complete tasks, focus instead on KPIs that show how effectively they can work. Significant positive results can come from simplifying workflows, streamlining task handoffs, and removing unnecessary barriers. Not only will these KPIs demonstrate how to do more with less, you’ll also improve employee happiness and increase retention — all of which are critical when an economic downturn is paired with a tough labor market.
While there are nearly infinite KPIs your business could measure, prioritize what you must measure to better understand where your business is today, what areas of operation need improvement, which efforts will make the most impact, and where to place new benchmarks for success. Also, when looking at these metrics, consider how to optimize efficiency and automate manual tasks with purpose-built property management AI, which can also help improve overall task completion and handoff time and free teams up to do more high-value work.
2.) Customer service is essential for maximizing revenue
More than 61% of property management professionals polled during the Apartmentalize session said maximizing revenue was also one of their toughest challenges, especially with economic uncertainty and stubbornly high inflation rates driving up business costs.
When it comes to maximizing revenue and profit, Neil’s proven solution to success doesn’t come from slashing budgets or scaling back. Instead, he finds ways to consistently deliver exceptional customer service and experiences:
“Our tenants are our lifeblood, our partners. We tell our team that we’re not a property management company first — We’re actually a customer service company first, and keeping our tenants goes right to NOI. A vacancy is like tearing up money: You will never get it back.”
In addition, as Stacy explains, committing to customer service can also be a massive differentiator when competition is fierce:
“There are markets where you’re looking at negative absorption, with a record number of units coming online today. The competition for renewals and maintaining occupancy is difficult in general, but in certain markets it’s going to be a big deal so customer service is very important.”
The best part about leveraging exceptional customer service and experiences to maximize revenue is that all it costs to deliver is kindness. As Neil explains:
“Be the company that returns the phone call and text. Be the person that shows up to the showings. Be the property that has more open houses. Don’t worry about the building down the street; worry about being the one where tenants want to live.”
3.) Attracting and retaining top talent requires improving employee engagement
While perhaps less acutely felt than during the height of the “great reshuffling” in 2021, nearly half of property management professionals today still rank human resources, staffing, and recruitment as a top challenge and more than one-third of the audience at the Apartmentalize session were in agreement.
- Proactively grow your employees’ skills: Instead of simply asking employees to focus on day-to-day roles and checking to-do’s off lists, give them opportunities to grow and learn new skills. This can keep them more engaged and interested in property management as a whole, while better understanding how your individual organization works for long-term success.
- Encourage a career in property management: When hiring the next generation of employees, having a defined career path, competitive compensation, and job flexibility are incredibly important. Help all team members see that the property management industry can provide what they’re looking for and that your specific company can support their goals.
- Rethink your recruitment approach: Neil explained that companies from other industries have shifted their recruitment approach, and property management should follow suit. For example, SpaceX recruits high school and college graduates to keep the talent pool fresh and account for natural leave rates from retirement and shifting careers. The panelists recommend a similar approach: Managers should look for promising young professionals within multiple fields, not only from existing property management talent pools.
Most importantly, there is no one right or single solution to attracting top talent or retaining employees. A recent U.S. Chamber of Commerce Report on today’s labor shortages confirms it’s about evolving your approach to better meet your team members’ needs and wants. Neil says:
“Employers need to look at their structures. Do we understand the dynamics of the people that we hire? If we as property managers don’t understand it, we’re going to fail. Our companies need to adjust, adapt, and be more open to other people’s viewpoints to become more successful.”
4.) Affordable housing brings unique opportunities and challenges
With a shortage of 7.3 million affordable and available rental homes for extremely low-income residents in the United States today, property management companies are also uniquely positioned to solve an urgent housing crisis.
However, there can be a steep learning curve for businesses that don’t already manage affordable housing. Neil addressed this on the panel:
“Affordable is the next avenue of growth for our industry, but affordable housing and managing affordable property is not something we all know how to do. Item number one is the regulatory issues. These are things we as an industry or as professionals need to understand to take advantage of the affordable space coming up.”
Regarding unique affordable housing challenges, compliance is one of the specific areas where businesses will need to spend more time. Fortunately, based on conversations with Jayme Deal, Regional Property Manager and Compliance Director for Artisan Management Group, the compliance learning curve shouldn’t scare property management companies away from affordable housing:
“It’s a lot of information, and it doesn’t change very often to be honest, but there are new things that come out. It’s really just about helping people along and showing them, because once you know [about compliance], you know.”
To property management businesses still on the fence about whether or not to add affordable housing units to market-rate portfolios, here’s what Neil had to say:
“Affordable housing doesn’t mean ‘cheap housing.’ Affordable housing doesn’t mean renting to people who are somehow less than others. Everybody deserves a safe, clean, quiet place to live. That’s what we need to provide and understand how to manage; get educated because it is the growth opportunity of our industry.”
More ways to solve property management’s top challenges
Apartmentalize highlighted some of the industry’s top challenges and solutions, but there’s much more to explore. For additional insights, expert advice, and opportunities across property management in 2023 and beyond, download our 2023 AppFolio Property Manager Renter Preferences Report.