Episode 17: Behind the numbers of the 2021 Industry Report
Welcome to Season 3 of The Property Manager Podcast! This go-round, we’ll be welcoming property managers like you, subject matter experts, influencers making noise in the space, and those at the top companies that impact your world. In the debut episode, Behind the Numbers of the 2021 Industry Report, we feature Robin Young, Senior Researcher at Buildium, as she reveals quantitative, in-depth research that puts the impact of COVID-19 into context, including: How PMs have changed their strategies in a COVID-19 world Why PMs are more essential than ever to both residents and owners What PMs have to say about the state of the industry (they didn’t hold back) Listen to all of the episodes from The Property Manager Podcast. Tell us about the 2021 State of the Property Management Industry Report. Robin: This year marks the sixth annual Industry Report, and the fourth year that I’ve worked on it. Every year, the Industry Report gets bigger and better as we find new ways of analyzing what the last year has meant for property managers’ business growth. And this year, with the pandemic and recession driving so much of what happened in the rental market, the report focuses on how property managers have shifted the way they do business in response to COVID-19. I know that I say this every year, but more than ever, this year’s report is packed with data and insights that I truly believe will help property managers craft a successful strategy for 2021. What was the experience like for you writing this year’s report? Robin: I’ve never enjoyed working on the report as much as I did this year—and that was for two main reasons. First: It was fascinating seeing how property managers’ strategies changed throughout 2020. We used survey data that we collected at three different points: May 2019, as a baseline for what things looked like before COVID-19 hit; May 2020, to see how the first wave of the pandemic had impacted property managers; and August 2020, to see how things had developed six months into the pandemic. This investigative part of my job—looking for patterns in the data that reveal trends hidden just under the surface—is my favorite part of what I do. Second: We like to use open responses to let property managers share their perspective directly with us in a way that multiple choice questions just can’t capture. We use this as a gut check for our analyses—making sure that we interpret the trends we discover in the data in a way that reflects what property managers are actually thinking and feeling. But because this year has been such an emotional rollercoaster, this round of open responses from property managers, renters, and rental owners will stay with me for a long time. Everyone was so candid about their hopes and fears—it really allowed us to create a report that captures the impact that COVID-19 has had on the rental market. Which stats stood out to you the most? Robin: There’s one stat that we’ve been shouting from the rooftops because of what it might mean for the future of the rental market: More than three-quarters of property managers anticipate portfolio and revenue growth in the next two years. This was a finding that surprised us back in May, when we looked at the survey data from property managers after the first wave of the crisis; and stayed steady through the summer until August, when we looked at our second batch of results. Even with six months of experience in a COVID-19 market under their belts, property managers are still expecting to grow their businesses in the years to come. And it’s not cheerful optimism that’s driving this—it’s the work that property managers have put into adjusting their strategies to succeed in a completely different environment than they’d planned on at the beginning of the year. So, all in all, 79% of property managers anticipate revenue growth in the next 2 years, and 77% expect to grow their portfolios—which is lower than they expected a year ago, but is a lot higher than we were expecting to see after this whirlwind of a year. On a macro level, how are most property managers’ businesses faring during the pandemic? Robin: After the shock of the initial shutdown in the spring, for the most part, property managers adjusted their strategies and got back to work, making whatever changes were necessary to protect their teams, their residents, and their clients. When we asked property managers in May which parts of their business had been most impacted by COVID-19, two-thirds told us that they were finding it harder to collect rents and run their businesses profitably, and almost half said they were having more trouble filling vacancies. But by August, those numbers had fallen. Collections and profitability were still areas of concern, but less than half said they were actively struggling. And the effects of COVID-19 weren’t uniformly negative for property managers. Property managers told us that their clients are seeing the value of their services more clearly than ever during COVID-19; and they’re also seeing residents renew their leases at a higher rate than in a normal year. They’re still worried about their residents’ ability to continue to pay rent now that many provisions of the CARES Act have expired; and they’re worried about how they’ll enforce rent collection with eviction off the table for the rest of the year. Profitability will continue to be a challenge in a low rent growth environment. But property managers report that both they and their clients are still interested in growing their rental portfolios in the years to come; and that the efficiency, effectiveness, and morale of their teams has held steady in the months since many began working from home. So, overall, property managers’ businesses seem to be doing all right, and in many cases, growing—after all, as many respondents told us, people will always need a place to live. Which steps have property managers taken to continue to run their businesses smoothly? Robin: So, we all know that the work of property management isn’t getting done in the way that it was at the beginning of the year. Back in January, most property managers would have told you that this is a face-to-face business and always will be. But as of August, 69% of property managers were on teams where at least one person was working remotely; and 60% had closed their office to visitors, either temporarily or permanently. With so much work being done remotely, there was widespread adoption of property management software and digital communications, as well as tools for document sharing, videoconferencing, property accounting, and project management. As of August, far more property managers said that working remotely had had a positive effect on their team’s efficiency, effectiveness, and morale than negative. An additional 25% of property managers have adopted a zero-touch leasing process in 2020. A majority of property managers were already making use of online rental listings, rental applications, and lease signing; but in 2020, they started to experiment with tools like virtual showings, 3D video tours, and self-service showings, which renters told us they really appreciated. Though property management has typically been slower to adopt technology than the rest of the real estate industry, the pandemic has sped up their adoption of tools that are making digital interactions and transactions just as effective as in-person. As a result, property managers, their residents, and their clients are all realizing at the same time that the benefits of doing business online far outweigh the challenges, which is really exciting for our corner of the industry. How have property managers’ relationships developed with their owners? Robin: The events of 2020 have had a really interesting effect in this area. We found that 44% of property managers believe that their clients view their services as more valuable now than ever before. We think this is because property managers are providing invaluable help to rental property owners in 3 main areas this year: Collecting rents and working out payment plans with residents; navigating a constantly changing regulatory landscape; and keeping owners up-to-date on the performance of their properties and local market in these uncertain times. With a full two-thirds of rental owners reaching out to property managers for help because they don’t live near their properties, you can imagine how helpful it is to have a professional partner in these areas right now. Property managers have been communicating with their clients more often than before, sending out regular updates on local market conditions, regulatory changes, and property updates. Owners have appreciated this uptick in communications, and would like to continue to be in the loop about changing conditions that affect their properties even when things have calmed down. Which services have gained popularity to accommodate owners’ needs? Robin: So, as you might expect, the services that owners most want their property manager to provide reflect the processes that have become more taxing and complex during COVID-19—things like rent and fee collection; maintenance and repairs; evictions; property inspections; and leasing properties and marketing vacancies. Beyond those popular services—which a majority of property managers already provide—we’ve seen a huge increase in demand over the last year for services like financial reporting; construction and renovation; accounting, bookkeeping, and tax preparation; cleaning; and purchasing, selling, and brokering property sales. We also saw an uptick in owners requesting that their property manager handle rental processes online—from standard offerings like online payments and communications, to technologies that saw major gains in 2020, like virtual showings and property inspections. This is another sign that both owners and renters will be on board with property managers’ use of ‘zero touch’ processes, even once the pandemic subsides. Rental owners want their property managers to do more for them than ever before—and this is a vote of confidence in property managers that gives them a golden opportunity to expand their services in 2020 and beyond. How has property managers’ relationship with residents changed during COVID-19? Robin: We’ve seen a huge shift in how property managers are spending their time in 2020, as so many of the pressing issues they’re faced with on a daily basis revolve around residents and their homes. They’ve been devoting extra energy to keeping units full, rents paid, and residents safe. But property managers told us that the #1 role they’re playing in 2020 is that of a mediator between residents and owners, doing their best to juggle their conflicting responsibilities to keep residents in their homes, and sustain their clients’ and their own businesses during this crisis. Their skills as problem-solvers and negotiators have really come in handy—for example, as they’ve worked out payment plans that both residents and owners are willing to agree to. It’s been an exhausting time for property managers—particularly during the flood of uncertainty and anxiety that we all felt back in the early months of the pandemic—but feeling like a source of stability, comfort, and knowledge during this period has been gratifying, too. They’ve always felt like the glue that holds this entire ecosystem together; but in 2020, their owners and residents are realizing that, too. Which technologies are property managers using to serve residents better and keep them safe? Robin: So, overall, property managers who had been slower to adopt technologies like electronic payments and digital communications have realized the benefits of bringing these standard rental processes online in 2020. With employees working remotely and residents trying to limit in-person interactions, these offerings have made a definitive shift from “good idea” to “necessity” in 2020. And residents have told us how much they appreciate being able to get in touch with their property manager using whatever method they prefer, whether it’s via text, FaceTime, email, or resident portal. As I mentioned earlier, one area where property managers have been focusing a lot of attention is leasing. They’ve added new technologies to bring their leasing process online from end to end—moving beyond standard offerings like digital lease signing and online rental listings, to emerging technologies like 3D videos, virtual tours, and self-service showings coordination. One technology that’s not seeing widespread adoption just yet, but that there’s a clear need for in 2020—particularly in larger communities—is amenity booking tools. This capability might help property managers decrease risk while reopening amenities and common spaces; so we wouldn’t be surprised at all to see an uptick in use over the coming months. Every year, you gather a lot of open responses and that allows you to really hear what’s going on in property managers’ words. What were your favorite quotes? Robin: As I mentioned earlier, it’s the combination of quotes and analysis that really bring this report to life—it’s so valuable to get to hear the experiences of property managers, renters, and owners in their own words. There’s one quote that I think of a lot when people ask me to describe how property managers have reacted to the challenges that have arisen in 2020. One property manager said, “No one could have predicted a pandemic, but no one predicts earthquakes, tornadoes, or hurricanes, either, and property managers weather those conditions, too.” This quote sums up the attitude that so many property managers have had toward the pandemic and recession—they feel like, “Yeah, we never expected that THIS would happen, but we deal with unexpected challenges every day—flooded basements, conflicts between neighbors, pandemics—what are you gonna do about it?” That blunt, even-keeled attitude gets me every time. And moreover, what I think it brings up is that the best property managers aren’t just those who avoid disaster—because sometimes, you can’t avoid it. The property managers who succeed in the long run are those who build a business that adapts well to constant change. My favorite quote was this one: “Our level of compassion for our tenants and homeowners has increased during the pandemic. Not only tenants, but our homeowners have lost jobs and income. It has affected all levels of society. Our role has become one of a steady hand, providing reassurance that everything will be OK, even if we are not being paid. It got messy and terrifying for everyone for a while, but providing a source of stability and comfort has been something we have had to step in and do, rather than being 100% staunch on following procedures. This culture will absolutely stay within our company going forward.” This quote perfectly sums up the bind that property managers have been in this year. Every day has been an exercise in balancing business with compassion. Many chose to put their own goals on the back burner in service of their customers’ well-being. Even when things return to whatever we consider “normal,” many property managers are determined to approach their work with an even stronger sense of empathy than they had before, with many believing that they’ll succeed not in spite of their compassionate customer service, but because of it. What’s coming up next in Buildium research? Robin: We’ve just started working on an Associations version of the Industry Report that specifically digs into survey responses from community association managers and board members. Because COVID-19 had a very different impact on HOAs and condos than it did on the rental market, we felt that it was important to create some association-specific content this year. The report will help community association managers to see the challenges and opportunities that their peers around the country have experienced in 2020; and will also give them an idea of what association board members are looking for from a community association manager in this new environment. We expect to release it in early December, so keep your eyes on the Buildium Blog for this and other great research releases!