Most new ideas or ways of working don't spread quickly, until they do. It's a bit like Hemingway's description of bankruptcy happening in two ways, "gradually, then suddenly." Something similar might be happening at the moment with multifamily's tech-enabled reinvention of its long-standing operating model.
For the last few years, I've been following and reporting on the trend that we have come to know as "centralization." During the early years of the trend, all of the talk was of centralizing leasing. Conference stages were full of ideas about how a combination of AI, access control and self-guided tours would make property-based leasing agents a thing of the past. But even after deploying the new tech, relatively few operators made any substantial changes to the way they organized leasing.
The clear trend for the last few editions of the 20for20 annual survey has been the reorganization of property admin functions. Accounting, collections, renewals and so on are being taken off-site and into shared services at an accelerating pace. The change that I am increasingly noticing is that it is efficiency, rather than centralization, that seems to be motivating those achieving the most tangible progress.
An Over-Stated Sense of Place
In this year's 20for20 annual survey, RealFoundations presented a compelling viewpoint cautioning that the industry's focus on centralization is too bound up in geography. It is not surprising, given the structure of real estate portfolios and management, but the dynamic is worth understanding.
Their article makes the case that real estate has long prized local decision-making for its customer responsiveness and positive impact on team morale. But the author describes a "boomerang effect," where factors, such as key-person risk, fragmented systems, and uneven customer experience, result in tasks "thrown" to properties coming right back to corporate management.
The more useful lens is de-localization—placing each task where it can be done most effectively, whether at the property, in shared services, or through a specialized function. What matters is not the location or the title of the person doing the work, but whether the process delivers efficiency, consistency, and scale.
At the time the article was published, I thought it was an interesting idea. I now see it infusing the way that the more effective companies are reaping the benefits of a new operating model. "Centralization" suggests an approach that puts property-based people somewhere else. But in reality, operators are deconstructing some roles into their component activities and reconstituting them in whatever way maximizes efficiency.
How it Started. How it's Going
It feels addictive. The contagion may start with moving an activity like delinquency management to a shared service environment. It's work that nobody particularly likes and that has so far proved to be a great fit for AI-enabled automation. The work is taken over by a specialist team that oversees a largely AI-driven process.
Results are usually good, as payments speed up and more money is collected, and nobody at the site-level misses having to nag residents to pay their rent. The old way of doing things starts to look inefficient in retrospect, so the natural motivation is to find other activities to industrialize. Operators develop a suspicion for any activities that take a substantial amount of time amid the constant interruptions of the leasing office.
And before we know it, efficiency is in fashion in property management as never before.
What started as a trend focused on breaking the 1-to-100 ratio is now far less about staffing ratios and far more about how to make the work better. When operators figure that part out, the cost efficiencies follow.
As the RealFoundations article argued, this trend is far more about the "what" and the "how," rather than the "where." Both site teams and leadership seem increasingly open to being on a treadmill of moving work to where it needs to be done—and ultimately redefining what we want our people to do at the property.
This current focus on efficiency feels like a very strong and positive trend in the industry, and it's something I'm going to be talking about a lot this fall. I will be publishing a new paper in the next few weeks (with my friends at EliseAI) on the subject of automation—something I see as very different from centralization. I will also be giving a keynote about it at this year's MX Summit in South Dakota on the same topic. I very much look forward to the conversations that this will inspire.
Photo by Pixabay: https://www.pexels.com/photo/close-up-of-row-325876/