A few months ago, I joined Patrick Antrim, Founder of the Multifamily Innovation Summit, on a podcast to share some of the early learnings we’d had after speaking to multifamily executives about remaining operationally efficient in current times.
After countless conversations with some of the most innovative leaders in multifamily, I recognized that there are a few topics on everyone’s mind. Many of these topics stem from the current operating climate of high interest rates and shaky fundamentals where appreciation alone is simply not enough to get folks to their operating goals.
The multifamily industry is currently facing its most challenging operating environment in over a decade. The combination of increasing supply, high interest rates, and declining rent growth is forcing many owners to shift to a cash-flow focused strategy. As a result, multifamily property managers are facing a unique organizational challenge that requires them to adapt their strategies to stay competitive.
To navigate this market environment, those in charge of managing multifamily properties really need to stay alert and think creatively. When market conditions take a nosedive, owners and asset managers become more hawk-eyed, requiring a full breakdown of every decision made and a thorough explanation for each unmet goal. It's like being in a race, where property managers must go the extra mile to stand out. This can be achieved by proving deep market understanding, demonstrating a consistent success in strategy execution. Remember, performance hinges on the people behind the scenes. Boosting the financial and business acumen of on-site teams is critical to keeping a competitive edge and technology will play a critical role.
During a market downturn, property managers face intensified scrutiny from owners and asset managers who demand justification for their operational decisions and seek explanations when objectives are not being met. This increased pressure stems from the fact that most property management agreements have a 30-day notice period, allowing owners to easily replace underperforming managers. As a result, there is a growing trend of owner-managed groups transitioning their management responsibilities to third-party providers. This shift is driven by the desire to reduce expenses and streamline operations by outsourcing to more efficient or specialized companies.
To succeed in this competitive landscape, property managers must differentiate themselves in several ways. First, they need to establish themselves as market experts, demonstrating in-depth knowledge of the market and an understanding of the specific challenges posed by the downturn. Second, they should have a track record of successfully executing particular strategies, proving their ability to deliver results even in challenging market conditions. Lastly, technology will play a crucial role, as providers with a robust tech stack and a cost structure aligned to outperform the market will have a significant advantage.
Property management firms are currently undergoing a significant transformation, largely driven by an influx of data. Historically, the skill sets of on-site managers were centered around leasing and customer service. However, today's market is increasingly data-oriented, necessitating these managers to elevate their business and financial expertise. The shift in expectations, propelled by asset managers and corporate leaders, has created a challenging gap between traditional job requirements and the new demands of being adept at data analysis.
This evolution underscores the need for on-site managers to enhance their financial and business knowledge. The most competitive firms are recognizing the importance of re-skilling their workforce, allowing them to effectively interpret and utilize the data that's now integral to decision-making. Technology is anticipated to play a major role in facilitating this transition, offering the essential tools for navigating the increasingly intricate world of property management.
And it's not just about survival in the existing market conditions. It's about empowering on-site teams to adapt their strategies, leverage their data literacy to optimize property performance, and be prepared for future challenges. Seasoned executive leaders, who have experienced previous market fluctuations, are tasked with championing this upskilling initiative. By doing so, they can ensure their on-site teams are equipped with the necessary knowledge and skills to manage not just the current downturn, but also anticipate and navigate future market cycles effectively.
There is a gap in the market when it comes to tools specifically designed for analyzing the financial impact of different operational strategies within the multifamily industry. While SaaS companies have provided numerous solutions for micro-optimization, such as revenue management, business intelligence, and marketing automation, there is a need for a comprehensive tool that can evaluate the financial implications of various decisions.
Currently, property management companies have limited options to address this gap. One option is to hire a dedicated Financial Planning and Analysis (FP&A) team, which can be costly and may not be feasible for smaller organizations. Another approach is to burden support services teams like IT with additional workload, which can strain resources and distract them from their primary responsibilities. Lastly, the responsibility of analyzing operational strategies often falls on the executives, who may already have a multitude of responsibilities to oversee.
Adopting tools that automate the financial forecasting process like Vizibly offers several significant advantages. Firstly, Vizibly function as predictive lens for the organization. It allows leadership to preview the financial outcome of strategic decisions before a full commitment is made, helping to prevent any potential financial missteps.
Once a strategy is chosen, Vizibly proves invaluable in disseminating the plan to the team. It breaks down complex strategies into manageable tasks, ensuring everyone knows exactly where to direct their efforts when operational challenges arise, which makes operations run much more smoothly.
While forecasting and communication is an integral part of strategic planning, it's not the be-all and end-all solution for effective decision making in property management. On-site teams need more than just a glimpse into the future; they require a recommendation engine that presents them with strategic options for enhancing their decisions. These recommendations can serve as a digital playbook, offering solutions for various operational issues that might crop up.
This level of automation means that property management firms can streamline their operations, reducing the need for constant guidance from corporate team members. The result is a more self-sufficient, agile, and efficient on-site team that's empowered to tackle challenges and make informed decisions, ultimately driving better outcomes for the entire organization.
That’s the mission of Vizibly; to connect the dots between operational performance and financial results that serves both executives and corporate team members who need to analyze scenarios, and on-site teams who need to execute on the strategy. The collective effect across the organization can lead to significant value creation, contributing to a noticeable improvement in the overall performance.