Construction starts for multifamily housing projects with five units or more fell 5.4% to a rate of 457,000 units in January, according to the latest statistics from the U.S. Department of Commerce.
The drop is not representative of demand as much as it reflects disappearing financing. As much as new construction of multifamily rentals has become necessary in a national housing shortage, property management opportunities have grown exponentially, with the inventory now available.
Whether it was the fatigue caused by rent moratoriums during COVID or the fact that small multifamily owners have grown tired of handling the management of their own properties, a sudden boon of property management companies and entities is dotting the landscape. In turn, the market has seen increased competition from many different entities, both regional and national. According to Plentific Executive Vice President of North America Sal Patalano, the property management space's growth is driven by demand.
“I’m not saying people are beating a path to our door, but people are beating a path to our door,” he laughed. “Candidly, I see nothing but greenfield ahead. Our pipeline is bourgeoning and so are the pipelines of our competitors. I think companies like us to be in this space because there’s more work than can be touched right now.”
Plentific, based in the U.K., services over 700 real estate owners and operators and 1 million properties globally.
Despite the dip in January, the U.S. Census Bureau reported that construction starts of multifamily projects, including condos and apartment complexes offering five or more units, increased by 14.5% in 2022 to 529,000 units.
That jump even inspired communications companies to slide into the property management act, beginning with offering tenants new but limited technology options. Charter Communications Inc. announced it launched a new strategic teaming arrangement with technology company Quext to build intelligent home offerings for new and existing customers served by Spectrum Community Solutions. Charter’s brand has been focused on multifamily properties and hopes through technology to give building residents the ability to remotely manage smart-home devices such as apartment door locks and thermostats.
In Texas, San Antonio-based Stream, a national commercial real estate firm, has also expanded its offerings and entered the property management competition with an integrated platform of services. San Jose, California-based Home365 manages 7,000 properties across the U.S. and provides investment opportunities based on net operating income.
“It’s a big shift with 20,000 management companies out there, managing an average of 200 units,” Home365 Co-Founder Chad Gallagher said. “It (property management) was a mom-and-pop based business for years, and now what we’re bringing to the table is scalable tech and infrastructure allowing us to manage in different markets across the country.”
Plentific’s Patalano agrees that the growth in the property management sector is being spurred by advanced technology.
“If a SAS application can be employed to streamline things and plug the holes the big ERPs (Enterprise Resource Planning) don't have, it’s beneficial for everyone,” he said.
He added that the need for technology coincides with greater tenant demands aligned with rent hikes. “They want more property maintenance, a clean dog park, a working pool and landscaping done.”
Patalano also told Benzinga he sees the construction slowdown as a needed adjustment. “The slowdown in building starts was not only imminent but needed. It’s added stress on traffic, schools and infrastructure.”
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