Impending Reality: Why Property Management Firms Must Modernize

Commercial real estate management software – a brief history

Technology solutions for the commercial real estate industry have been around for decades. 

The first wave of PropTech (property technology) appeared in the mid-1980s, offering property management companies basic general ledger accounting programs to post rent receipts and pay bills.

Then came the information age of the early 2000s, bringing with it the cloud computing revolution, faster broadband transmission and increases in storage capacity. This spurred innovation in back-end accounting systems evolving them into enterprise solutions with added functionality merging: accounting, leasing and maintenance departments onto the same platform.

Roughly 10 years later, the PropTech ecosystem further evolved with software solutions that were mobile and social media-friendly. New technologies emerged on the market that made it easier for external users (prospects, tenants and vendors) to communicate and transact with property management offices using different devices.

PropTech innovation is accelerating faster than ever

Today, we are entering one of the most exciting phases in the history of PropTech. Billions of dollars are being invested into startups, which are designing new functionality leveraging IoT, AI, VR, and other emerging technologies to solve common problems property managers experience. In 2017, venture capital firms invested $12.6 billion in PropTech…almost 10x times the amount invested in 2015[i].

This warp-speed transformation is only going to get faster, the landscape will continue to change and as it does – property management companies risk falling behind. An estimated 40% of property management firms are still using Excel for Common Area Maintenance (CAM) reconciliations, budgets, tracking lease expirations and more. The age-old Proverb: “If ain’t broke, don’t fix it” has allowed many firms to stay afloat for the past 10 years while using only QuickBooks and a spreadsheet. However, a dramatic shift is about to occur that will ramp up the pressure on property management companies to modernize their software or become obsolete.

It’s not just about maintaining a competitive edge by giving tenants the option to pay rent online, or increasing productivity by going paperless with mobile work orders. Nor is it just about attracting a resident by offering smart home automation as an amenity. The shift is in an area that has been overlooked by many firms: the demographic change in the workforce, and the ability to recruit top talent.

Property management firms are facing a talent shortage

The average age of a property manager is 52 years old, according to the Institute of Real Estate Management[ii]. Taking this a step further, Transwestern's national director of property management, Rob Bridges, says over half of the commercial real estate services workforce will reach the age of retirement in just five years[iii]. There will soon be a talent shortage, and property management firms will have to evolve by implementing updated software to help attract millennials. 

Tech-savvy millennials entering the workforce are in demand. And they want to work for firms that make smart use of the technology they are accustomed to using in their everyday lives, particularly mobile devices, cloud-based applications and paperless document processing. Firms competing for this talent pool need to be thinking about transforming their operations through automation, mobility and cloud-based technologies in order to attract and retain Gen Y. Or else they will be inadequately staffed when the baby boomers retire.