A new report released by Remit Consulting argues that property managers need to do the basics better and change the way they treat tenants if they want to remain relevant.

Facility management

Source: Shutterstock/ESB Professional

New structure: property managers are increasingly being employed by facilities manager integrators

Remit partner Andrew Waller says the company’s last report two years ago “highlighted the need for property managers to adapt their models to meet the expectations of their clients”.

Two years on, the majority of property managers still need to do more to meet client expectations, he says. Collection of rents and service charges has not improved over the years and the majority of managers have yet to become truly customer-centric.

The sector has also failed to keep up with changes in technology, according to the report. Waller says that one industry delegate at US real estate and technology conference Realcomm in June went so far as to say “the property manager simply gets in the way of digitising the company”.

As the flaws in their traditional business models become increasingly evident, why have the majority of property managers failed to move with the times?

All of Remit’s surveys since the first in 2010 have found that property managers struggle to collect 80% of rents on the due date – and the 2019 report is no different. Steph Yates, senior consultant at Remit, says that this “amazes us time and time again. If 20% of people didn’t pay their mortgage on the due date they could lose their house”.

Direct debit problem

One of the key barriers to change is that a significant majority of tenants still don’t pay rent using direct debit. When Remit questioned landlords it found that only 15% of their residential rents and 16% of non-residential rents are collected using direct debit.

Julian Bates, partner at property management company Workman, also points out that when it comes to late rent payment, property managers face factors beyond their control.

The past few years are not the best measure of performance  

Julian Bates, Workman

“There are some pretty strong headwinds at the moment where tenants are arguing that they’re not as profitable as they once were, which means they will take longer to pay their rent. The past few years aren’t the best measurement of performance,” Bates says.

The report shows a pyramid of traditional management with building management at the bottom, followed by facilities management, property management, asset management, fund management and the board.

Yates believes it is time for this hierarchy to change. As it stands, the decision-makers at the top of the chain are far removed from the tenants “who hold the most information about what they want”. She adds that “people are having their eyes opened by other sectors. There is a drive at the moment to look at things in a new way”.

A key role to play

Property managers that fail to treat their tenants as customers risk becoming irrelevant, the report warns. Property managers are already playing second fiddle or even being sidelined altogether under some new business models.

For example, under the integrator model, landlords employ the facilities manager to “put everything in place”, according to Yates, and they act as the main point of contact between the landlord and tenants.

WeWork NY interior

Source: Shutterstock/NYCStock

Working example: the report says property managers should learn from WeWork’s model of managing buildings with the end user in mind 

“The property manager is being put to the side of the pyramid,” says Yates. “They still have their role to play but they’re not a key part of the hierarchy.”

Legal & General is leading the way in changing the role of the property manager away from the traditional business model. Starting at the end of this month, it is embedding a facilities management integrator partner into its model.

Bates thinks it is important for the rest of the industry to make necessary changes to improve customer service. “There’s a stark warning here – those that don’t change will not survive,” he says. Turning office space into “a branch of the Four Seasons” is becoming a trend in London, he adds – but the real challenge is “how to apply that to an industrial estate outside of Hull”.

In addition to the integrator model, another alternative is the property management approach used for student accommodation, where an asset manager will appoint a specialist operating partner responsible for maximising return on the investment.

Customer service

Regardless of the model used, the level of customer service provided by newcomers to the office and residential market is putting the rest of the industry to shame, the report says. It points out that WeWork, regardless of its current difficulties, has also succeeded in showing that properties can be managed differently and with the end-user in mind.

People are having their eyes opened by other sectors 

Steph Yates, Remit

Build-to-rent developer Fizzy Living is a good example of a company that has taken this approach. All of its sites have a ‘Bob’ – its generic name for the on-site property manager and this is a main selling point on its website.

Perks for Fizzy Living tenants include free broadband; an annual complementary spring clean and maintenance check on all fixtures and fittings; on-site laundry and dry cleaning services; and an online portal for payments and repairs.

The question is whether the rest of the industry will follow suit and be able to meet tenants’ changing needs. Yates is not sure whether this will happen in the next five years, but hopes this report will “give the industry a kick up the backside”.