The 3 External Pressures
To begin with, we touch on the 3 main external pressures facing your business today.
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Brad: Welcome to another edition of Rent Roll Insights I’m Brad Miller from Real Estate Dynamics where we help Property Management businesses build, buy and sell through our Rent Roll coaching, Property Management training and Business Brokerage right across Australia. Today I’m joined with Nathan Brett from the Real Estate Dynamics leadership team and in this 8-part series we’re going to be discussing what you can do to protect the value of your Rent Roll and to get your business ready for the new AI introductions. Nathan welcome along.
Nathan: Thanks Brad.
Brad: Nathan, for the past five years we’ve been working with Real Estate businesses in a coaching capacity around the country for thousands and thousands of hours and clearly there’s pressure on the Australian Real Estate market and in particular our Rent Rolls in the businesses we have. What do you see are the potential dangers for Real Estate agencies and their Rent Rolls today?
Nathan: Well it’s an interesting time in Property Management what we’ve got is three major external pressures we’ve got economic pressures so we’re certainly looking at a flattening market over the next five years. We’ve got technology pressures with the introduction and continual introduction of more Apps and of course robots are being built now as we speak. And what we’ve got as well is we’ve got our consumer pressures where Landlords want things better, easier and faster.
Brad: Yes that’s actually right. Well let’s have a look at those economic pressures first can you tell us a little bit about how that’s going to affect the values of Rent Rolls?
Nathan: Yes absolutely. So, everything that we’ve read and a lot of industry articles are suggesting that over the next five years there’s going to be downward pressure on capital gains so there’ll be a flattening of values of properties, there will be a deceleration in rental yield so there will be a flattening of rents and subsequently what Landlords are going to do is look at ways that they can increase their yield, that will in turn put downward pressure on Property Management fees.
Brad: Well that’s right so they’re not only going to want it quicker and a faster level of service, but they’re also going to look like wanting it cheaper as well, so they can make their margin. Is that right?
Nathan: Most definitely.
Brad: What about the next external pressure that we’re talking about there in relation to technology which is sort of the basis of what we’re going to do in this eight part series? What do you see as some of the things that Real Estate Principals need to be aware of with technology?
Nathan: Well Real Estate has been a fascinating industry so far as agencies are quick to buy technology, but slow to implement so we call it a ‘mile wide and an inch deep’. So, in Property Management there’s a mile wide of apps, at the moment most of them don’t talk to each other and most offices use them an inch deep. So that’s how it exists at the moment. Obviously with the introduction of AI that’s going to replace some of these apps, it’s going to make it certainly a lot more integrated and so it’s really going to change the way that workflows occur in Property Management big time.
Brad: Yes so you can’t just put a software product into the business anymore you know it’s not as easy as just filling this spot there. Why is it so important that Principals understand technology with this changing market?
Nathan: Well technology used well will give you leverage and increase your efficiency; therefore it increases the bottom line which is profit, but poorly used technology will actually over complicate processes and slow things down.
Brad: Yes. So how does this look for the future as far as Property Management goes?
Nathan: Well in a nutshell, with the introduction of robots being built it’s really going to replace a lot of the jobs that Property Managers currently do and therefore the role of the future Property Manager will be a master communicator, relationship builder, salesperson & negotiator.
Brad: Okay so that’s really important point for our leaders. What should they be focusing on as far as the skill sets of their people moving forward into this changing market?
Nathan: Yes look it’s a great question to ask Brad and again research highly indicates there’s a shortage in Australia of what we call ‘soft skills’. So, some of those might include lack of empathy, effective problem solving, high level problem solving, emotional intelligence and high levels of critical thinking. Therefore, big rocks that really need to be worked on to shift our Property Management people from doing “stuff” to master communicators.
Brad: So how will that look as far as the Rent Roll of tomorrow? What might that look like?
Nathan: Well really when you think about all the jobs, and there’s a plethora of micro jobs in Property Management, you know it’s not so much a question of what robots will be able to do it’s what robots won’t be able to do. So, they’ll be able to do everything, all the stuff that happens like maintenance, rent collection, tenancy renewals all that sort of stuff will be automated which leaves the Property Manager of the future to be the true relationship driver.
Brad: Yes I think it’s going to have a big impact. Can we move on though now to the consumer pressures and what they consist of for Rent Rolls?
Nathan: Absolutely. Well it’s no secret that that there’s downward pressure on fees out in the industry and as he said before Landlords want things better, faster and in most cases cheaper. When you look at other industries that’s really no different. I mean, most things that we can buy today are far cheaper than they were five and ten years ago. So therefore, what we’re looking at is the introduction of AI technology and the ability for larger organizations to offer Property Management at a far less fee base than what’s currently happening.
Brad: Yes. So that’s an interesting direction to take and what sort of opportunities are there for our industry to be consumed by I’d say a larger industry?
Nathan: Well you think about some of the big players in Real Estate; we’ve got insurance, we’ve got finance, they’re probably two of the largest. What would it look like if banks and financial institutions or insurers had their main product offering as the mortgages or the insurance packages and they started to offer Property Management at a very high level that’s largely robot driven in the background at one or two percent?
Brad: Yes well that could really shake things up for everyone I’m sure. So, basically what you’re saying is Property Management won’t go away but there is a possibility that it could be consumed by another industry?
Brad: So, in a nutshell we’ve covered up on the three pressures that we need to consider as you move forward with your Rent Roll being those that around the economic pressures, we have those technology pressures and of course the ever-existing consumer pressures. Is that about right Nathan?
Nathan: Absolutely that sums it up and you know we have had the good fortune at RED of working with thousands of agencies around Australia getting them robot ready.
Brad: Yes and that’s definitely our belief as we look forward to the future. So, in the next episode we’re going to take a look at the warning signs that can act as early warning detectors that something could be amiss in your Rent Roll. Thanks for joining us for Rent Roll Insights, I’m Brad Miller from Real Estate Dynamics.