A consequence of this relationship change between tenants, landlords and property managers, is that client expectations of service have grown significantly, which in turn has driven the property management industry to become a business in its own right. “The sophistication of the property management industry has changed so that it is more than just an adjunct to sales, and one of the key catalysts for this change has been consumerism and the consumer’s approach to service,” added Ms Blayney.
The country’s top real estate executives have also seen the developing status of property management as a business, including Janusz Hooker, CEO of LJ Hooker, a company which has 118,500 property managements in its portfolio. “Astute agents have known for a long time that property management is a key element to the success of their business, but what we are seeing now is a broader market understanding of property management – it’s not just about sales anymore,” says Mr Hooker.
Macquarie Relationship Banking, Macquarie’s business banking division which conducts regular industry benchmarking surveys, underlines how property management has been integral to many real estate businesses staying afloat, particularly during tough financial times. In their most recent Real Estate Benchmarking Survey, the banking group found that while real estate principals have traditionally focused their time and energy on sales, in recent years there has been a shift towards property management as a means of providing consistent cashflow, regardless of how the sales market is performing. The survey found that nationwide, the average number of properties managed by each real estate agency totals 375, although Victoria outstrips other states with an average of 558 managements per office, due to a high proportion of independent offices specialising in property management (see Table 2 – Macquarie Relationship Banking Real Estate Benchmarking Survey 2009).
Furthermore, Macquarie found that on average, income from property management covers 48% of an agency’s fixed costs, which indicates a healthy percentage; although Macquarie also indicates that a fixed cost coverage ratio above 60% represents a stable property management focussed real estate business and a strong foundation for growth (see Table 3 – Macquarie Relationship Banking Real Estate Benchmarking Survey 2009).
And it is those businesses with a strong understanding of the value of property management who have survived during the GFC and even thrived in the years that followed, says Hooker. “In my previous role with real estate investment firm WP Carey, I gained a really good appreciation of the strength of a property management portfolio, because through all the ups and downs of the real estate cycle, and in particular when the GFC hit, our income was almost bullet-proof.”
Similarly, Mark Woschnak believes the growth in property management has been a must for agencies in the post-GFC world. “The industry is still suffering from the combined effect of what started out as the GFC and has translated into a slow property market, largely as a result of housing affordability issues and tougher bank financing criteria,” he says. “It’s created a natural (and much needed) shift to the areas of the market that are working and growing, such as the management of investment properties.”
As such, Woschnak sees Australia moving into what he calls the ‘era of property management’, with a distinct shift towards professional and separate property management departments within agencies, and an increase in the number of ‘rental-only’ businesses. “Agencies are now seeking to grow their property managements in order to sustain themselves financially, working hand-in-hand with property investors as their main clients.”
Undeniably, the arrival of the ‘property investor’ has been another key piece in the evolving property management jigsaw puzzle. Jan Malmstrom has seen the growth of ‘investor’ numbers first-hand. “In the past, landlords somehow just ended up with a house to rent, but they never had a real investment mentality. Building a portfolio was a foreign concept up until about 20 years ago, when the baby boomers really started that notion of investment,” she says.
The shift to an investment mindset has presented a range of new opportunities for savvy property managers, says Mark Woschnak. “We have moved from a landlord being just a client in a rent collection relationship, to that client now being a valued investor with whom the agent can build a relationship to provide a whole range of new services, such as insurance, maintenance services, property portfolio advice and further sales.”
