30 Key Trends for the Property Management Industry in 2023
As property management industry professionals adjust to the post-covid era in 2023, they have a group of legacy issues they may be taking with them into the next few years.
Rent payment delays, debt, fewer trained staff, higher costs, rent controls, and more continue to plague even the most capable landlords and management firms.
As we head toward 2023, property management companies must contend with continuing labor issues including higher wages, inflation, increasing industry regulations, competition from highly funded startups crowding into the sector, and affordability issues for renters.
As usual, managers must deal with a multiplicity of challenges. Some will continue to battle using outdated management tools, while researching to find the right digital management solutions for their companies. Some are diving into new SaaS software solutions and fully investing in new technology.
One of the Healthiest Market Sectors
Overall, the property management industry is healthy and thriving. In fact, it may be one of the strongest sectors going forward into the next 5 year period. Manager’s simply need business models, strategies, and the right tools to ensure good profitability and performance.
Macro and MicroTrends
We’ve listed the major trending issues for your review. It’s many more than other firms are looking at.
Issues such as acquisitions, inflation, work from home, hacking threats, lack of affordability, and rent controls are upon us now. The fallout from these will increase the business challenge for property management companies.
Acquisitions have picked up as smaller landlords run into financing, churn, and eviction issues as interest rates rise. Big property corporations are buying up available assets. Of course, any recessionary activity will only increase pressure on landlord’s cash flows and balance sheets requiring improved accounting and financial management.
Will the acquisition of poorly managed rental portfolios be the real trend in the second half of 2022 and into 2023?
Studying the Trending News and Technology
A lot of people take a light interest in trending market changes such as demand outlooks, price trends, new technology, and more, yet don’t act on that knowledge. 2022 should be a year of asking good questions, to deal with challenges of taxes, renter migration, economic swings, and more.
And in 2023, more lessons will be learned. You’ll be asking a lot of questions such as:
- should I buy or manage more rental properties?
- should we raise tenants rent price to recover pandemic losses and inflation this year?
- should we investigate additional digital amenities and services?
- is this the wrong time to upgrade/renovate apartments and houses?
- how can you capture more leads for your property management company?
- is a recession just ahead and how do we minimize risk and hedge our assets?
- is remote at-home workstyles going to persist and what do we need to capitalize on that trend?
- how can you automate more work?
- how much do Proptech Amenities/Services affect the choices of younger rental prospects?
30 Property Management Trends
1. Management Efficiency: Reductions in staffing, cash flow, revenues, and rising overdue accounts receivable means having to run a property management business efficiently. Thankfully, your property software is designed to come to the rescue.
2. Business Growth: Whether by design or growth hacking, some landlords and property management firms will be intent on growing a little. Many expect some challenges, yet even as the economy slackens, the scarcity of rental property and strong demand will support property management company revenues. There are many reasons why landlords decide to change their property management service provider, thus creating new business leads.
3. Cost of Doing Business: Inflation is expected to run high for at least a year or two, and will be more persistent than reported in the media. Wages will remain high for 2023, materials costs are up, green initiatives will make maintenance and repairs more expensive, taxes will rise, and energy prices may remain high. Containing property management costs is a priority.
4. Growing Demand for Multifamily: The persistent demand for single family homes and high detached house prices will dry up availability across the US. This is turn means Americans will pursue multifamily units in 2023. Construction was strong in the last few years, and this sector is providing profit opportunities.
5. Growing Demand for Property Management Services: Landlords are overwhelmed at the demands of the new era of rental property management and expectations of tenants. Expertise and digital management tools make professional manager’s services attractive. From background checks to turnover management and maintenance advice, to rent collection and government mandated compliance, it’s becoming obvious to landlords that property management companies can deliver real value.
6. More Staffing Challenges: labor market participation remains low and it’s become more difficult to attract skilled property management staff as well as find others who have good potential. While property management jobs can pay well, and technology has arrived, the shortage of good workers will persist.
7. Focus on Tenants: Smart property managers are working on better tenant advertising, screening, and creating an enjoyable tenant experience. Effective communications is key to developing rapport and delivering value in tenant’s point of view.
8. Pursuit of Better Amenities: Renters are asking for more in lieu of fast rising rents and work from home requirements. Here’s what renters are looking for this year, as reported by Yieldpro (on the NMHC/Grace Hill Renter Preferences Survey).
- Washer/dryer in-units (92 percent of renters interested / $54.73 monthly premium);
- HVAC (91% / $54.73);
- Soundproofing (90% / $46.21);
- High-speed Internet (89%; $47.93); and
- Walk-in closets (88%; $43.46).
9. Rising Taxes and Closed Loopholes: Governments having overspent and facing rising costs, higher borrowing costs and materials costs, along with rising wage costs will need to charge more income and property taxes. They’ll also make changes to prevent tax evasion and to capture more revenue from real estate. In high tax states, the coming rise in taxes could threaten many landlords.
10. Renter Migration: The migration to low tax states, along with work from home workstyles has changed the demands of renters. Renters want more room, lifestyle, amenities and high speed Internet so they can work and live in the same space without sacrificing their health too greatly. Landlords who cater to their needs, especially in states such as Texas, Florida, Tennessee, and Montana stand to enjoy strong demand and higher rent prices in 2022/2023.
11. Choice of Location: In past markets, renters scrambled to capture slim pickings near where they worked. Many renters who are financially enabled now have a choice of where they might rent. And work at home workers demand to live in whatever towns or neighborhoods work for them.
12. Technology and Automation Trends: New cloud services, SaaS, Internet-connected devices, and automated services have arrived. Property managers and tenants like them. In fact, the work from home trend goes hand in hand with Proptech tools. Everyone needs the cost-efficiencies of remote work, digital service provision, and high-speed bandwidth will be a part of the solution. More fiber optic service is being implemented in neighborhoods, which will work well for property managers and their distributed staff.
Virtual showings, web-based services, tenant apps, online rent payment will ease workloads for busy property managers. The era of virtual property management is well underway.
The demand in 2022 is for all in one cloud based platforms that are easy to learn and use. Full SaaS platforms aid in workflow automation, meet changing rental regulations, optimize financial management, and offer lease driven accounting and expense management which reduces administration and improves confidence in financial and operations reports.
13. Demographic Trends: Millennial and Gen Z tenants are comprising more of the tenant market and they want high tech digital solutions. Without the technology, they consider a landlord backward or irrelevant. Landlords as well, choose property management companies based on tech expertise.
Without technology, a property management firm won’t possess the efficiency, competence and capacity to scale up to allow owners to achieve profitability.
In some cities, apartment rental demand will increase (e.g., San Francisco, Boston, New York, Miami, etc.) occupancy rates will likely shrink further as the pandemic ends. Workers quitting jobs and migrating to southern, low tax cities such as Austin, Dallas, Houston, Orlando, Tampa, Jacksonville, Charlotte) will mean challenges for the cities they leave behind.
15. Rent Negotiation: The market could be divided into 2 sectors: those who can afford rent and those who can’t. More high income renters will appear and they’ll be willing to pay much more. Yet they’ll want better services and amenities whether in a house or low-density townhouse/condo or apartment situation. There will be more rent negotiation, especially as renters threaten to move out in 2023.
Landlords and property managers will have room to negotiate higher rents in exchange for improved amenities. House rents are rising everywhere. You’ll want to improve your negotiation skills and understand the playing field.
16. Changing Economy and Trade Tariffs: The pandemic was a tough time with massive unemployment in Australia, US, UK, Germany and Spain. The tourism, restaurant, and entertainment sectors will recover and demand in tourism zones will increase as economies recover from the pandemic recession and deal with new economic threats.
17 . Government Restrictions: given how high housing prices are and how high rental prices have become in cities such as San Diego, New York, San Francisco and Los Angeles, the cries for rent controls will get louder in 2021. Restrictions on rent payment increases and eviction moratoriums will continue as rent prices race beyond what the market can afford.
18. New Construction Trends: besides big growth in new construction, and government programs can impact your future rents and income potential.
Large multifamily buildings had a good run in 2022, however developers are starting to offer concessions to get units leased. Big developments near key transit locations will receive priority from government and multifamily should have a good year in 2023.
19. Interest Rates and Inflation: financing, wages, utilities, and operating costs will rise in 2022/2023 thus cutting into your net income. Smart financing will play a bigger role for larger landlord portfolios and property management service firms may see budgets shrink against rising business costs. Smart property management service fee designed and negotiated will help ease inflation losses.
20. SaaS Software Technology: Automation is the big ask in property management this year. Managers need to get tech to do more to easy their rising workloads and to scale up their business. New cloud based SaaS software technology is delivering the desired capabilities. Managers will see further improvements in property accounting, time management, tenant screening, virtual leasing, online payment, property maintenance and repair services. Some offer complete solutions while some with little more than simple apps are found inadequate.
21. Demographic Shifts: Baby boomers are finally retiring and the Millennial and Gen Z generations are out of their parents homes and into renting their own apartments. Some renters will continue migrating out of the cities to rent more roomier houses and cheaper locales. Your rental products and management style will gradually be reshaped to suit them in 2023.
22. Startup Property Management Companies: We’ve all heard about the growth in accidental landlords. Estimates are that 100,000 new startups will enter the rental business. Buying rental income properties is popular and many are realizing there is big money in property management. They will be cautious and knowing that property management automation and growing their portfolio are keys to operating a successful property management company.
These newcomers to property management won’t want anything to do with old PM practices involving spreadsheets, receipts, and paper check payments at month’s end. No, they’re not trained pros and they’ll want to simplify right away using property management software.
23. Industry Consolidation: Big property management conglomerates are entering the independent property rental market. What are they looking for in properties or in property management companies they’d like to acquire? What services will they offer (e.g., maintenance). Will investors be a threat to the rental market sector?
24. Property Management Specialization: Given growing complexity in PM licensing requirements, government legislation, lender regulations, insurance requirements, environmental constraints, and accounting and taxation property management professionals have begun to specialize. Will expertise in any area give you a business advantage? What training and licensing must you obtain?
25. Rental Property Insurance: Changes in legal liability mean more renters should have their own renters insurance, and they will. Yet, fraud is prevalent and premiums are rising fast in some regions. Similarly, landlords will also need to be sure of their own landlord insurance. Is insurance coverage for them a value add for your property management company?
26. Digital Amenities including Keyless Entry, 5G and Free Wifi: Here are some more benefits tenants love. It’s for large multifamily buildings or large portfolio managers to either provide free wifi or create it as an affordable option for tenants. 5G Wifi may be the coin-operated washing machine of the next 5 years.
27. Smartlocker Storage: We’re in the era of Amazon shopping. Amazon’s growing share of retail shopping is shocking. Tenants will need some way of accepting packages at their apartments, many of which don’t have suitable storage. Smart lockers allow them to pick up parcels when they can. The tenant receives a digital message and unlock code on their smartphone. Yes, another app.
28. Property Management Marketing: Given the complexity of property management today and how new client opportunities are happening as landlords scale up portfolios, property management companies realize they have to market their services better. Otherwise, competitors will gain marketshare.
Managers will look to integrated social media, PPC ad campaigns, SEO, and website content to build presence.
29. Greater Demands from Owners: Owners see what’s available via other property management services companies. They’re looking for better financial reporting, help with rent collection and evictions, and advice on financial management.
Some are turning to lead generation and brand building strategies. Using social media advertising and content marketing on their website, the best companies will be making noises this year. Building a brand and communicating services will drive new business in growing markets.
30. Affordability and Homelessness Become even more pronounced Political Factors: In election years, more attention is focused on the condition of the average family and individual. With rent prices staying high, although moderating, and unemployment on the rise, and vacancies very limited, affordability and homelessness will be an election issue. Landlords will experience more friction and the wrath of renters who have little power to improve things. Rental property pros will need to communicate better to show compassion and legal compliance.
Ever improving technology is the asset that gives property management firms a competitive advantage. Continuously applied, it pushes the modern property management company ahead one day at a time, until competitors simply can’t keep up. Be sure to stay updated on property management technology and strategy via our blog.
Please share the news and trends with your real estate associates and friends.
These are just a few trends in property management software to be aware of in 2022. More are coming and we’ll let you know right here. See the Reviews of the Top Property Management Software. Subscribe to our blog for continuing insight on technology and housing trends.
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