The property management industry is growing, but pressure on margins is also increasing. Without innovation, property management firms are likely to either go out of business or get caught in the wave of consolidations that are also being forecast.
The Property Management Market
According to Statista.com, the prediction for the market is strong. Revenues in 2020 are forecast to be over 48 billion dollars. At the same time, mergers and acquisitions are on the rise due to pressure on operating margins and increased regulatory issues.
To take advantage of the strong market, property management firms will need to streamline their operations and use technology innovations to combat the downward pressure on margins.
Innovative Firms Will Gain the Upper Hand
Innovative firms will see their competitive edge increase as technology gives these companies several advantages. For example, an innovative firm will use property management software to streamline operations, eliminate manual processing and hold the line on overhead.
Notably, coordinating with tenants and vendors is a big part of any property management firm’s operation. Here’s an illustration of the process without automation:
- The staff is contacted by a tenant concerning a maintenance issue.
- The staff must then communicate with vendors to schedule maintenance work.
- The staff needs to keep the tenant informed of the status of the job.
- The staff must track the job, monitor completion and update internal records.
- The staff needs to follow up with the tenant to confirm that the work was done to their satisfaction.
You’ll notice the number of times “the staff” is involved in this simple process. You can see how increased staffing is in your future. You’ll need to increase your overhead, which will increase the downward pressure on your operating margins. You won’t be as competitive as the innovative firm that uses technology.
Innovative Firms Will Maintain Stronger Margins and Grow Faster
An innovative firm will use automation to streamline and automate their business processes such as property maintenance. Maintenance software can automate the entire maintenance process, allowing these firms to reduce the cost required to manage each property. In addition, their staff will have the time to do other things that ensure tenant satisfaction and attract more business.
With lower costs, your competition will be in a stronger position to compete on price to increase market share. As your competitors grow, it will be even more difficult to fend off acquisitions. The strongest players in the market will survive.
Your Competition Will Out-Price and Out-Perform You
In summary, innovative firms will be able to lower pricing while still generating a profit. The slower you are in adopting automated tools and establishing state-of-the-art business processes, the more difficult it will be to remain competitive.
Not only will you be outdone by your competition, but you’ll have a more difficult time attracting tenants. By 2017, the millennial generation (16 to 34-year-olds) will have the largest buying power of all generations. Millennials are notoriously technology-oriented, and will expect to be able to submit a maintenance request online. They won’t want to be bothered answering a telephone call to let you know if they’re satisfied with the work that was performed.
What will happen if you don’t innovate? You’ll be outperformed by your competition and abandoned by your potential tenants. Start now to avoid that situation by using automated property management maintenance software such as Property Meld to secure your future in the property management.