Meticulous bookkeeping, capital projects that have to be supervised, endless documents to be generated and signed – the business of managing co-ops and condos is complex and labor intensive. And the to-do list just keeps growing and evolving. The 2021 Business of Management Survey, an annual wrap-up conducted by Habitat, captures the changes happening now in the management industry.
This year we’re reporting trends that we’re seeing after more than three decades of surveying management companies. Our first survey was in 1989, and as the years have progressed we’ve added new questions to capture the evolution of the industry. Not surprisingly, conducting business in a more digitally savvy way has pushed the management business from paper to the cloud. And for those in the business who were loath to embrace technology, the coronavirus pandemic has sealed the deal.
For those looking for the charts which detail how each of the 44 management company respondents operate, you’ll find them in a convenient PDF on the homepage of habitatmag.com. Here are some of today’s major trends:
By far the most significant trend is the industry’s shift from a paper-driven business to a digital one as more property-management platforms become available. Among the companies surveyed, 93% said they now have document management systems to help them work more efficiently and provide better service to clients. Argo Real Estate, for example, uses both a turnkey project management software as well as MDS (Multidata Services) accounting software, which is specifically built for the New York real estate market. The company integrated the two into what it calls the Argo Hub. “Anything that we’re working on with boards is in there,” says Julie Zuraw, the chief operating officer. “For example, if it’s a Local Law 11 project, the proposals, the history of bidding and all the associated documents and emails are archived in the system. We give boards read-only access, and we push out a report every week so they stay updated.”
A relative veteran when it comes to property management software, the Ferrara Management Group has used Yardi Systems since 2013, which it has fine-tuned over the years. “There’s a portal where our vendors upload invoices, and we’ve set up a workflow where board members can approve payments,” says Robert Ferrara, the company’s president. “At the same time, we also use Dropbox for everyday documents like meeting minutes, agendas and financial statements. We keep enhancing the process along the way, and the feedback from our clients has been very, very positive.”
As for admissions packages, roughly two-thirds of survey respondents say they’ve made the switch to a cloud-based platform, such as AppFolio, eApply or Yardi. Half of them, including Century Management Services, use BoardPackager, which connects buyers, boards, brokers and property managers, offers instant access to everything from building information to due-diligence documents, and allows users to pay fees electronically. “It definitely speeds the process along, and because everything is visible to all parties, it’s much more transparent,” says A.J. Rexhepi, Century’s vice president. “And while no one could have anticipated it, going digital has meant we can still get to the closing stage efficiently, even with COVID-19.”
While the companies surveyed have on average digitized 84% of their business – up from 78% in our 2020 survey – they still have a ways to go. “Over the past several years, we’ve digitized every new property as they came in, but we’re still working on older buildings that we’ve managed for a long time,” says David Amster, the president of Prime Locations. “In addition to our annual file purges, we’ve been tackling it pretty aggressively, with the goal date of getting everything done by the end of 2021. But there’s a tremendous amount of paper, and it’s a lot of work.”
For all of its advantages, going digital also comes with a downside – the risk of cybertheft. That explains why 93% of survey respondents (up from 88% in 2020) now carry cyber insurance to cover legal fees, court costs and settlements in the event sensitive electronic data is stolen or compromised and a board or individual decides to sue. As Dawn Dickstein, the president of MD Squared Property Group discovered, cyber liability insurance is worth the investment. “We recently had an issue where a resident received a spam email saying he could pay through PayPal,” she says. “While we do have online payments, this person was astute enough to know the email didn’t sound right and brought it to our attention. Our insurance company took care of everything in terms of providing advice and giving us examples of communications to send our residents to notify them and remind them about the means we do use for payment.”
In addition to cyber insurance, management companies are taking other steps to store and protect personal data. “For buildings that still want paper application packages, we actually redact Social Security and bank account numbers,” says Steve Birbach, the president of Vanderbilt Property Management. “Boards don’t need to see them, and we want to limit our exposure in terms of what we’re putting out there.” At Ferrara, all paper applications are automatically uploaded into Yardi, which has a secure website, and then everything is shredded, says Paul Boogaard, the company’s account executive, adding, “We haven’t seen any breaches, but you can’t be too careful.”
From mandated facade repairs to elevator inspections to energy benchmarking, New York City regulations have increased sharply in recent years, as have the fines for failing to meet them, with the Department of Buildings issuing thousands of violations a day to building owners. So it’s no wonder that more companies than ever (77% compared with 68% in our 2020 survey) now have formal, staffed departments to monitor compliance issues. What’s more, all of the survey respondents said they were using automation software to track violations and keep boards up to date on the confusing collection of deadlines; about 80% use Site-Compli or Jack Jaffa (up from 73% in 2020), while roughly 20% rely on proprietary software, including databases and spreadsheets.
For her part, Argo’s Zuraw doesn’t see the need for a custom-designed system. “There’s no reason to build your own when you have two companies out there competing against each other to offer the best possible service,” she says. But compliance software – Argo uses Jack Jaffa – isn’t enough. “We have a two-person in-house team that schedules inspections for all our buildings,” Zuraw says. “There’s so much to wrap your head around, you need somebody who’s got the big picture in mind.”
Century Management takes things a step further. “We use Site-Compli and have our own internal team, but we also hired a third-party compliance vendor, who puts together monthly reports,” Rexhepi explains. “The way the city is implementing new laws on an almost daily basis, it helps to have a professional on board to organize everything for you.”
While some boards still look for all property management functions to be handled with one monthly fee, the reality is that the task of operating buildings has become so complex that specialists are required to manage numerous functions. And that frequently means added fees.
Capital projects are one area where management companies have added personnel to oversee the work. “We’ve definitely seen an increase in boards wanting our help,” Ferrara says. Back in our 2008 survey, slightly more than half of survey respondents said they charged extra to manage capital projects. Now, with the proliferation of rules and regulations that buildings have to comply with, 82% report that additional fees are being charged to manage client projects. While some companies charge a percentage of the total cost of the project, others calculate their fees by the hour. “We prefer the latter, because we believe that makes us a better advocate for a property than if we’re getting paid a percentage,” Ferrara adds. “In some cases, we give boards both an hourly rate and a percentage fee and let them decide which they think is more cost effective.”
The cost of energy is another critical concern for most co-ops and condos, and management companies have stepped into the procurement arena to source cheaper rates. According to our 2018 survey only 33% of the responding companies reported having dedicated staff for this, while today 50% say they do. “We work with different suppliers and approach them directly to find the best locked-in rates,” Ferrara says.
Prime Locations, meanwhile, has partnered with the New York City-based company M3 Energy, which evaluates a building’s electrical, natural gas and oil usage, finds an energy service company with the lowest unit cost and continuously tracks prices in search of additional savings. “Doing the analytics and bidding it out is complicated and time-consuming,” Amster says. “You really need to outsource it to a third party who’s experienced in the field.”
The one trend that no one disputes is that technology has become the property management industry’s best friend. “The work just keeps increasing, both on the management side and for boards,” Vanderbilt’s Birbach says. “Thank goodness for digitization. It’s a beautiful thing.”