The property management industry is extremely lucrative and is becoming more and more popular with the rise of renters. Let’s take a look at some of the top statistics from 2018 below.
Have you ever thought about renting your home or becoming a property manager? You’ve seen the job postings and thought, “I could probably do that!” But do you know the difference between property management and simply being a landlord?
What type of market is there for property managers today, and what resources are available to you?
We explore all that plus the current state of today’s rental market in the article below.
Before we dive into the realities of today’s rental market, we need to define property management and the roles of a property manager.
Property Management Defined
The main difference between a property manager and a landlord is that the property manager doesn’t typically own the property(s) they are managing.
Property managers can manage everything from single-family residences to apartment complexes, shopping malls, and private business buildings—basically any type of building that the owner doesn’t have the ability or desire to look after in person.
Property managers are still responsible for ensuring any necessary repairs and upgrades are taken care of, though these may be coordinated by the property manager and performed by a custodian or on-site maintenance technician, especially in a multi-family unit or business office.
In addition, they are also often responsible for overseeing and setting up new leases, ensuring rent is received from each tenant on time and deposited in the correct bank account, giving prospective tenants tours of display units, handling tenant concerns or complaints, reconciling the property’s accounts, and advertising vacancies.
On top of all that, the property manager must regularly communicate with and keep the property owner in the loop about any and all issues that come up with tenants or the property itself, and are sometimes asked to advise the property owner on the local rental market and how to stay competitive.
As you can see, over 90 percent of property managers are involved in collecting rents/fees, leasing units, and the coordination or performance of maintenance/repairs.
More than 80 percent of property managers also perform property inspections, advertise vacancies, and perform evictions.
As you can see, a property manager must wear many hats: accountant, mediator, marketing strategist, and advisor to name a few.
We next take a look at a few overall property management statistics below.
In 2018, the American property management industry generated around $76 billion in revenue, and that was expected to climb for 2019.
There were a little over 844,000 people employed by the property management industry in April of 2019, and roughly 281,345 property management companies in the United States at that time.
According to a 2018 research report by Buildium, property managers listed the following as their top concerns in 2018.
The number one concern was becoming more efficient/lack of efficiency when trying to get multiple moving parts and parties to work together. Maintenance followed closely with 31 percent of respondents citing this as a top concern.
One in five survey respondents noted their residents as a top concern in 2018, with only 14 percent concerned about technology (not having the right technology/access to technology/outdated technology).
Growth and vendors rounded out the top 25 percent, and were tied together with maintenance.
The more the property owners grew their capacity for new tenants, or added new properties to the mix, the harder it was for property managers to find good vendors to reliably and quickly fix property issues and keep the properties in good working order.
Portfolio losses for purposes of the cited research report mean the loss of rental properties the property management company currently works with. For residential property managers, this could look like property owners selling off their rental properties, leaving their former property managers to look for new clients.
The top concerns may lead you to believe that property management is becoming less profitable; however, the graph below tells a different story.
A full 83 percent of property managers surveyed stated that their revenues had gone up over the past two years, with only 4 percent seeing a decrease in revenue. Further, 91 percent of survey respondents expected their revenues to go up in the next two years.
That could be due to the current state of the rental market, which we look at in more depth below.
The Current State of the Rental Market
Is today’s rental market still strong? Is there still enough demand for property managers to make it worth pursuing?
The short answer is, “Yes!” We take a look at current industry trends below.
In 2009, rental vacancy rates (the number of empty units just waiting for someone to move in) were at 41 percent. That means 41 percent of all rental units in the United States were vacant and available to new tenants.
By 2018, the vacancy rate had dropped to 25.2 percent, meaning only one-quarter of all rental units in the U.S. were available to new tenants.
Surprisingly, 43 percent of all U.S. renters in 2017 were living in single family homes.
Around the world, it’s a slightly different story, with many renters in Hong Kong living in subdivided spaces as small as 50 square feet. That’s a smaller space than most American bedrooms.
We took a look at a few major global cities (and compared them to some U.S. cities) to see what renters were paying, on average, in 2018.
San Francisco isn’t far behind Hong Kong in monthly rent, and is the second-most expensive city on our list, beating out both Paris and London. New York City, the third-most-expensive city on our list, also beat the two European capitals.
Next we look at just how much Americans need to earn in order to afford two-bedroom apartments in their state.
As you can see from the chart above, renters in West Virginia, Kentucky, Arkansas, Mississippi, and Alabama needed to make the least per hour in order to afford a two-bedroom apartment. In those states, renters could make between $14.26 and $14.92 per hour and still afford a two-bedroom apartment.
Renters in states like California, Hawaii, New York, and Massachusetts weren’t so lucky. In those states, renters need to make anywhere between $30.76 per hour and $36.82 per hour to be able to afford a two-bedroom apartment.
In spite of lower vacancy rates and fairly high rental costs, nearly two-thirds of renters in 2016 (65 percent) were under the age of 35.
Millennials are leading the charge in renting, and are putting off homeownership, or foregoing it altogether for a variety of reasons, including dealing with high college debt which hurts their chances of qualifying for a good mortgage rate.
As you can see from the chart above, while the number of Americans who own their homes has dropped slightly since 2006, the number of renters has increased by 25 percent during that same ten year period.
The total market size for renters was 36.6 percent in 2016, and was projected to rise as home prices continue to increase in many areas of the country, driving home-ownership further out of reach for many Americans.
While the number of renters has increased across all categories, renters make up a larger percentage of the population in some groups than others. We take a closer look at two of those groups in the charts below.
As you can see from the chart above, while those under 35 make up the majority of renters, that age group did not have the greatest growth between 2006 and 2016
Renters aged 35-44 increased by 10 percent between 2006 and 2016, while renters under 35 grew by 8 percent during that same period.
Although renters over 65 also grew in the period between 2006 and 2016, they only grew by 2 percent, from 19 percent in 2006 to 21 percent in 2016.
As you can see in the graph above, the percentage of people renting in each group increased between 2006 and 2016; however, the percentage of black renters (58 percent) was more than double that of white renters (28 percent) in 2016.
The percentage of Hispanic renters (54 percent) was nearly double the percentage of white renters (28 percent) in 2016.
So, taking all the data together, today’s renters tend to be younger (under the age of 35), and are more likely to be black or Hispanic.
What are property managers doing to make the rental properties they manage to stand out to this group of renters? The chart below lays out their top strategies.
More than 55 percent of property managers stated they wanted to improve customer service, providing a more social face to the business, while 43 percent planned to update the properties they manage—which included services provided to their renters.
Interestingly, only 9 percent of property managers planned to offer financial concessions to potential tenants or existing tenants.
Bowing to the pressure of the tech-savvy Millennials, 42 percent of property managers stated that they wanted to adopt new technologies to keep their properties relevant to today’s market.
How are they planning on doing that? We take a look at a few programs and technologies below.
Technology and Property Management
New technologies aren’t just for the renters living in a rental property. They’re also being used by those in the property management business more than ever before.
There are many new property management software programs on the market, which help with efficiency. (One of property managers’ top concerns in 2018.)
These new products are offered by several newer companies, such as Buildium, AppFolio, Rentalutions, and VTS. These programs streamline and automate many previously paper-heavy functions, such as paying bills, collecting rents, and tracking maintenance performed.
Several artificial intelligence programs are also making their way to the forefront, ushering in a wave of virtual property management. Almost everything can be done with these programs without ever stepping foot on the property.
For example, programs like ZenPlace use AI and machine learning to calculate things such as water-heater life and can send automated messages to the property owner suggesting when to replace the water heater. ZenPlace also uses chatbots to answer tenants’ questions 24 hours a day.
In addition, services like ZenPlace integrate with Google Home or Alexa, making it possible for renters to share concerns about the property any time day or night—such as needing an emergency plumber to fix a water leak at two in the morning.
One Australian company, Happy Inspector, has recently released several mobile property inspection apps and is working on expanding its market. With these apps, the inspection process becomes much faster and easier—efficiency coming into play again.
Even insurance companies are beginning to invest in property management technologies since they’ve seen the value they provide to the property management industry.
So who’s leading the pack when it comes to property management companies? We find out below.
Top Property Management Companies
According to research conducted by Commercial Property Executive and Multifamily News, the top ten commercial property managers in 2018 (in ranking order from top to bottom) were:
- Cushman & Wakefield
- Colliers International
- CBRE Group, Inc.
- Newmark Knight Frank
- TCN Worldwide
- Lincoln Property Company
According to that same report, the top ten residential/multi-family property managers for 2018 (in ranking order from top to bottom) were:
- Pinnacle Property Management Services
- Lincoln Property Company
- TCN Worldwide
- Alliance Residential Company
- Bozzuto Management Company
- Balfour Beatty Communities
- Edward Rose Building Enterprise
- Related Companies
You’ll notice that two companies (Lincoln Property Company and TCN Worldwide) made both top-ten lists.
Commercial Property Executive and Multifamily News have provided this data for the past several years, and you can see how the rankings have changed over the years by checking out their website, which offers the results for all years for free.
How can your company move up the ladder? Check out some trends to watch for below and try to incorporate strategies that embrace these new opportunities and challenges.
Trends to Look Out For
What’s on the horizon for the property management industry? We take a look at five things to keep an eye on below.
As noted above, new tech is on the rise, and cloud services, artificial intelligence, and integrated devices are making it easier than ever before to be connected to tenants, vendors, and to provide high-tech options, like free Wi-Fi in all rental units or smart home systems for renters.
This trend is not going to go away, as younger tenants demand the conveniences of connectivity from their landlords/property managers.
We also noted the Millennial push toward technology; not only do they expect you to provide them with things like free Wi-Fi, but yes, they’re judging your websites, mobile apps, and overall online presence.
How are you marketing your company’s properties? Are you with the times or woefully behind when it comes to your online marketing? Mobile apps and a strong social media presence may be the way to go if you want to attract that large Millennial market share.
Rent Controls may be coming to a city near you in the near future, as rental demand continues to drive rent prices higher in high-demand locations. Legal intervention may be in the future. What strategies do you have in place to combat this potential loss of income and offset operating costs?
New construction seems to be trending toward large multifamily units to meet the demand of low rental inventory. If you aren’t in the multifamily property management business now, you may want to expand your company’s reach to take advantage of this soon-to-be-booming market share.
Consolidation may be the future. Many companies are taking note of the lucrative nature of the property management industry and jumping in. They don’t necessarily want to start from scratch, and are more interested in acquiring and combining existing companies that offer great service to their clients.
And smaller companies may be looking to join together to handle a larger market share, broaden their demographic reach, or expand into locations they haven’t been able to on their own.
Property management is a multi-billion dollar industry, with plenty of growth opportunities for those companies that are willing to dive head-first into technology and embrace the Millennial market.
With renting at a high not seen in decades, and demand up due to lower inventory, the property management industry is expected to continue to grow for the next several years.
New innovations in technology, including the use of AI to increase availability and efficiency are streamlining the industry like never before, making it easier to take care of client needs, and keep property owners up-to-date on the day-to-day operations of their properties.
All signs point to it being a good time to be a property manager.
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- Statista, “Where Renting a 2-Bedroom Apartment Costs a Fortune.”
- Statista, “Hourly Wages Needed to Afford a Two-Bedroom Apartment in the United States in 2019 by State (in U.S. Dollars).”
- Statista, “U.S. Rental Market – Statistics & Facts.”
- Bankrate, “Rent vs. Buy: Millennials Take a Different Path to Home Ownership.”
- Statista, “Distribution of Residents Who Live in Rental Accommodation in the United States in 2017, by Structure Type.”
- Pew Research Center, “More U.S. Households Are Renting Than at Any Point in 50 Years.”
- Forbes, “Property Management May be the Next Frontier for AI.”
- Commercial Property Executive, “2018 Top Property Managers.”
- ManageCasa, “Important Property Management Trends for 2019.”