AppFolio released its 2022 Property Management Indsutry Pulse research report yesterday in partnership with the National Apartment Association (NAA) yesterday, outlining challenges faced by rental operators in today’s market and changes from last year.
It found that while COVID-19 pandemic changed the shape of the global economy in 2021, shutting down businesses and reinventing the concept of workspaces, property management companies also took a hit during this time and mostly faced challenges around HR, staffing and recruitment, and operational efficiency.
It states that rising inflation, worldwide conflicts and disruptions to the global supply chain ensued in 2022, followed by a dramatic rise in the cost of commodities. The report says these macrocosmic occurrences directly affected property management.
The 2021 response survey concludes that exhausted employees are demanding a raise in their pay, leading to challenges in hiring of staff and maintenance, along with changes in staff morale and expectations from residents. It states hiring became difficult when widespread layoffs dominated the market. But as soon as the economy reopened, there were more job roles to be filled than applicants, the report says.
Operational efficiency: delving into the challenge
According to the report, almost two-thirds (74%) of property managers in 2021 cited human resources (HR), staffing and management as a top three challenge (with 51% of respondents citing it as their top challenge). The second largest challenge for the industry was operational efficiency, with 53% of respondents saying it was their second or third biggest challenge.
However, in 2022, it took over as the top challenge with 62% of property managers saying operation efficiency was a top three challenge (17% listed it as their top challenge).
HR, staffing and recruitment struggles also diminished, with 48% of respondents stating it was a top three challenge in 2022. Despite this, 25% of respondents still listed human resources as their number one challenge in 2022, ahead of maximizing revenue and products (21%) and operational efficiency (17%). Those who cited it as the most prominent challenge, were also found to have larger teams in bigger businesses.
Attracting new applicants for jobs (garnering a rating of 3.8 out of 5 from respondents), with a demand for high compensations (3.7) and reducing staff turnovers (3.4) were some of the main contentions with this challenge. Cultural challenges including team training and developing a diversity and inclusion plan also were also listed as challenges.
“Finding high quality vendors” (3.6/5 in the index) emerged as the largest challenge in both 2021 and 2022 for operational efficiencies. The report says this reveals a shortage of skilled personnel in the field. Another challenge faced by the property management industry as per the report is “increasing material costs” (3.5) which is attributed to inflation.
These two problems are followed by “reducing costs” (3.5), taking into account rising prices of energy sources like gasoline and electricity. The report refers to the June 2022 Bureau of Labor Statistics’ energy index, which showed a hike of more than 40% year-over-year (YoY). This includes the price of gasoline rising almost 60%, electricity by ~14% and natural gas by 38%. Moreover it states fuel oil prices nearly doubled, rising almost 99% since last year.
Maximizing revenue and profits
The report found navigating rising inflation pressures to be the most challenging activity related to maximizing revenue and profits in 2022, which rose in rankings to second most pressing challenge for property management companies (third in 2021).
Among these activities are navigating rising inflation pressures (3.6), optimizing marketing ROI (3.2) and strategizing for the business (3.1), among others.
Meanwhile, the report indicates that the Federal Reserve has been increasing interest rates to tackle inflation and this could be a probable reason for the economy to slow down and contribute negatively to job growth in the country.
The report also says that due to an extremely tight labor market in recent years, there has been increased fear about unemployment. It says that as the number of jobs diminish, more job seekers will be unable to find employment, negotiate salaries and job hop.
“We’d like to see demand moderating. We’d like to see the labor market getting better in balance between supply and demand. Right now demand [for workers] is substantially higher than available supply. So we feel there’s a role for us in moderating demand. Those are the things we can affect with our policy tools,” Jerome Powell, chairman of the Federal Reserve said after the June interest rate hike.
The report states the biggest integration challenges faced are “influencing stakeholders” who resist learning new technology (averaging 3.6 in level of challenge out of 5), and creating systems that allow the business to grow (3.6).
In the 2021 the resistance to adopt new technology was negligible, occupying the lowest rank. This is attributed to the pandemic, which forced property management companies to resort to technological advances. While organizations resisted these changes at first, these companies are now investing in technology and as a result, getting budgets and buy-ins are now ranked as the least challenging issue.
Multifamily vs. Single-family
Difficulties faced by property management companies are also categorized by the housing portfolio type in the report.
Multifamily rental businesses (MFR) face more challenges with the HR, staffing and recruitment, with 30% of respondents citing it as their top challenge. This is attributed to the larger sizes of these businesses, with respondent companies having an average of 180 employees. Single-family rental (SFR) property businesses, on the other hand, averaged around 60 employees and therefore did not experience as much challenges with HR and hiring (12% cited it as top challenge).
When compared to SFR, which have been performing well in the remote work setting, it is more difficult for MFRs to generate revenue and profits. The survey shows 21% of SFR companies rank revenue and profit maximizing as their top challenge, compared to 15% of multifamily property management organizations.
Implementing new technology and innovation are listed as equally challenging for both MFRs (11%) and SFRs (9%).
Operational efficiencies (25%) and stakeholder experience are the top two challenges for SFR, owing to the scattered nature of these units. The report says because SFRs are performing well, they are “less concerned about dollars coming in,” and can focus on stakeholder’s experience.
In addition, both rental property segments cited maximizing revenue and profits, as well as operational efficiencies as top concerns. SFRs were more likely to prioritize operational efficiencies (24%) over maximizing revenue and profits (15%) this year, while MFRs tend to prioritize revenue (21%) over operations (19%).
How helpful is technology to property management?
40% of property management companies responded they are not satisfied with their current technology’s capability to addressing their top challenges of operational efficiencies and maximizing revenue and profits. 43% of the respondents are “somewhat satisfied” with the way tech helps in revenue generation, while 40% think it helps in logistics.
Data sharing: payments, accounts and more
The AppFolio survey found that the most used point solutions for property management companies are for payments (58%) and accounting (50%).
It also found that with the integration of point solutions, problems arose with sharing of data between the primary property management and data points, as well as among the data points themselves. It says this creates risk and inconsistency, and can only be tackled with “top-notch” technology.
43% of respondents also said integrations do not meet the expectations, with 47% believing integrations do not support overall functionality and 51% believe that integrations do not create a “single reliable source of information” for all important data. In addition nearly 50% of respondents think integrations are unable to provide a seamless experience when it comes to maintenance (43%), and marketing and leasing (45%).
On the flip side, 60% of respondents stated satisfaction with integrations and 53% believe this technology supports advanced functionality, according to the survey.
The report has also included information regarding faulty integrations, defined as those that fail to facilitate a two-way sharing of data and act as a single source of information for companies. It says these faulty integrations create issues when trying to solve operational problems, and are unable to support advanced functionality. The report says this creates distrust for technology among property managers, and resistance to adopt new technology
Technological glitches are also a leading frustration for these companies, with 32% saying that errors present the biggest frustration with tech solutions. This is followed by frustrations with integrations (15%), technical issues (11%) and overall negative sentiments (9%).
AppFolio’s analysis says the answers in the survey are also dependent on the role and seniority of the respondents.
While property management executives (31%) consider revenue generation a top challenge, frontline staff are more likely to find HR, staffing and recruitment as main priorities (26%).
Frontline staff also consider technology more challenging than executives, with only 1% of executives listing “implementing new tech & innovation” as a top challenge, compared to 11% of frontline staff respondents. The report attributes this discrepancy lies in their job descriptions, saying that executives are more focused on business results, whereas frontline employees prioritize groundwork and efficient technology.
In other recent proptech news, HOVER expanded its digital twin solution to include blueprint uploads and new construction projects. Peek also announced hiring James Straub as its new Chief Technology Officer.