Register now for Super's virtual panel featuring experts from Gensler, DL Partners, and The Folson Group. This panel will discuss strategies and insights for HOAs and management teams seeking to get ahead of these trends from 12-1pm on March 7th.
After nearly three years of disruption from the COVID-19 pandemic, the real estate industry would be right in hoping for some respite. Management teams worked through the pandemic to ensure building and resident safety, dealt with mass exoduses followed by subsequent demand, faced supply chain and labor shortages—it’s been a period of extraordinary resilience and change.
Property managers must prepare for more headwinds: staggering inflation leading into a looming recession, increasingly extreme weather and natural disasters, and local and global changes ranging from demographics to regulation.
The landscape is shifting faster than ever imagined. The good news? The adaptability of the property management industry has been thoroughly tested. Each challenge adds new tools to our collective toolkits, and with each storm we weather (literally and figuratively), we gain more resilience to face what comes next.
Managing people’s homes and investments has always been important, and with these trends, quality of management will take on an even more critical role in the years to come. To help management teams get ahead, here’s Super’s outlook on what to prepare for in the coming year—and how to find advantages.
Trend 01: Economic hurdles
Put simply, costs are up (inflation is on track to rise 9% in 2022). To curb demand, interest rate hikes make it more expensive to borrow money. One major side effect of decreased spending is a weakened stock and jobs market, leading to fears of recession.
For management teams and their residents, these economic factors impact areas like the cost of normal operations and financing projects to extreme utility bills and corrections in the housing market. Housing prices will continue to be a moving target. Goldman Sachs and Morgan Stanley both predict a 5-10% decline in U.S. home prices in 2023. As home purchasing slows, rent prices will continue to stay high, with Moody’s Analytics predicting a 5-7% rise in the first half of 2023.
Overall, expect residents to be extremely price sensitive as they feel the differences in everyday purchases and prepare for—or worse, become affected by—layoffs, all while watching the value of their portfolios and real estate investments go down.
“Although the costs for loans are increasing, they are still an important tool for HOAs. It will allow them to hold on to critical cash reserves and still make important, long-term investments such as large repairs and CapEx projects.” - Daniel Trudo, Vice President, Business Banking, Capital One
Near term, set expectations on changes in operating costs and bring owners and boards into the financial planning process. Be extra transparent on the state of HOA finances and help them prepare for known price increases, such as higher heating bills this winter.
Look for efficiencies, such as installing smart thermostats and implementing technology solutions that help with budgeting and fees. If there’s a new sale, move quickly on applications to help deals go smoothly—and strengthen your reputation during sensitive times.
Looking ahead, help HOAs take advantage of rising interest rates on reserve accounts. While the past few years have had negligible interest returns, these can now be a meaningful monthly sum. Forecast beyond the next operating year in financial plans. If an HOA has upcoming projects, or needs to refinance, there will be longer-term implications as loans get less affordable.
Trend 02: Technology adoption
The Real Deal recently wrote that for property managers, “the switch to remote operations during lockdown…proved a challenging adjustment.” There remains ample opportunity for the industry to take advantage of technology to improve operations and customer retention.
Embracing technology has time and time again proved to be a superpower for businesses looking to increase efficiency and productivity (i.e. save time) and reduce churn or rework (i.e. save money). It’s a winning business strategy.
Take the example of Zoom: the software is part of our everyday lives—in 2022, the company reported 350 million meeting participants every day. And this isn’t just for Millennials and Gen Z; 29% of Zoom’s iOS users are aged 50 and above.
Other highly hands-on industries are reaping the benefits of technology: online ordering has quickly risen to account for 1/3 of sales at quick-service restaurants; digital concierges help hotels gain direct bookings (saving 20% margin) and engage with guests at scale. Such technology not only delivers a better customer experience, it paves new paths for businesses to optimize operations.
“The incentives are now in place for organizations to refocus their efforts on automation and productivity-driving technologies.” - Josh Pokrzywinski, Morgan Stanley Research
Think about the opportunities where technology can help you improve productivity. For instance, in a given day: how much time do you spend triaging email requests? Setting up and sending calendar invites? Logging tasks that come directly to your cell phone? Looking up residents? Technology that can help you save minutes on each of these activities, multiplied by each occurrence, can help you take on more customers without making any other operational investments.
Find a technology partner that’s willing to work closely with you—to support the onboarding process and transition, as well as prioritize your feedback and rapidly improve their product.
“After years of struggling with management, our condo board was seeking visibility into the holistic needs of the building, transparency into our finances, and accountability around tasks and basic maintenance. That's when we found Super. Super has been unbelievably easy for everyone to use and has diminished a lot of the headaches." - Tatiana Peck, Board Member
Trend 03: Rising resident expectations
The pandemic also shifted the demographics of communities and HOAs. Unrestricted by office commutes and driven by low interest rates, the last two years have seen more first-time homebuyers than ever before. In 2021, Freddie Mac financed over half a million loans to first-time homebuyers—the highest level since tracking began in 1994, and a 22% increase from 2020.
These residents have very different expectations. Whereas “there’s an app for that” was the motto in 2009, today people are reluctant to download yet another app—and even if you get the download, unless it’s one of their mainstays (a social media or messaging app)—it’s unlikely to get opened. While the average smartphone user has 80 apps downloaded, they only use 9 on a daily basis.
On top of that, people have been trained to expect instant gratification—on-demand, tech-enabled services like Uber, Taskrabbit, and Instacart mean residents get status updates in minutes, not hours or days. This is now tablestakes.
The next generation of HOA member is already here: meet them where they are. Management companies can differentiate by presenting modern solutions that align with expectations.
Look for solutions that keep residents in the loop—automating status updates and notifications—so they have the same level of transparency and instant feedback they expect from other services in their lives. Be wary of solutions that offer an “app for app’s sake,” and instead look for solutions that provide instant feedback, are easy to use, and offer a modern look-and-feel.
Trend 04: Climate change consequences
In 2022, the world faced unprecedented heatwaves, power grid outages, hurricanes, wildfires, drought, and flooding. According to Reuters, this shouldn’t come as a surprise: “Much of this, scientists say, is what's expected from climate change.” But for property managers, the intensity of these events raises new questions about the industry’s role as the emergency response team.
Take New York City’s sewage infrastructure for example. With the increase in heavy rains, the city simply can’t keep up—leading to flooding and deaths. In other parts of the US, wildfire season keeps expanding—as of this October, over 7 million acres have burned from 59,221 wildfires so far in 2022. Both acres burned and wildfire volume are “well above” the 10-year average.
These events are the new normal. Not only do property managers need to contend with responses to weather-related emergencies, natural disasters, and increasingly extreme climates, they’ll need to help HOAs navigate new regulation intended to slow climate change.
“New York’s century-and-a-half-old sewer system was designed to handle no more than 1.75 inches of rain in a 1-hour rainstorm. When rain exceeds that amount, or storms last longer, you get flooding.” - The Atlantic
In the short-term, get buttoned up on emergency response protocols, and ensure you have a good way to contact all residents—both owners who reside in the HOA and any renters. You’ll want to have peace of mind that in the case of an emergency, you can contact every current resident with instructions.
Longer-term, properties will need a solid roster of partners to address the specific needs their geography will contend with—and updated insurance policies and coverage. Expect more maintenance and check-up work to avoid things like flooding or debris build-up, as well as bigger, costly projects to weatherproof or get properties up to new standards.
Trend 05: Expanding compliance
Cities and municipalities around the US are updating regulation and policy around tenant protections, resident safety, and building emissions. It’s been called “regulation hell”—and one of the bigger pain points for property managers that have to navigate an increasing roster of regulation and compliance activities.
With climate change top of mind, reducing emissions from buildings is one area with major legislation. In California, residential real estate takes up 18% of statewide energy consumption, and the state has plans to cut that 40% by 2030. Keep in mind that 1/4 of the state’s residential buildings are multifamily—and more than half of them were built before any energy efficiency standards were in place.
In New York, many buildings are gearing up for massive investments to meet limits on greenhouse gas emissions starting in 2024 (just one more year) as part of Local Law 97 and the Climate Mobilization Act.
Expect continued regulation with a focus on residential buildings. Build a team of partners and experts to help navigate compliance updates and help execute the work.
Keeping on top of compliance is often still a manual task requiring strong record keeping. Create more time for teams to meet the growing number of deadlines by implementing technology that can eliminate repetitive administrative work and prevent violations. Technology that automates compliance schedules will reducing the room for error while saving time.
“Safety and energy-efficiency are top of mind. What’s exciting in this space is how wide the impact will be: from buyers requesting energy efficiency upgrades and property managers managing larger-scale projects, to implementing software to get more operationally efficient.” - Angela Lau, Founder, PMI Manhattan Group
In an industry that’s always-on and responsive to the needs of buildings and its residents, property management companies who embrace these trends will shift from a reactive stance to a proactive approach.
New opportunities will arise to support residents and their properties as subject matter experts and strategic, trusted partners. Picking up more “tools” will be increasingly necessary.
Super’s two co-founders were featured by Her Forward about their entrepreneurial successes and the strategies that got them there.
A step-by-step guide for building owners in New York City on how to navigate new energy efficiency laws Local Law 97 and beyond.