At The Epicenter: How Property Managers Are Weathering COVID’s Many Challenges
In the past year, everyone has become fluent in debates around wearing a mask, indoor exposure, ventilation and the infection risks of the coronavirus. But unlike many of their commercial real estate peers, property managers, especially those working residential properties, have found themselves on the front lines of this dangerous pandemic, which has radically changed their workplace, workloads, and health and financial prospects.
“People are working from home, and that means people are noticing more issues, there’s more wear and tear, and you notice the tenant above you making noise,” said Ari Chazanas, CEO of Lotus West Properties, a property management firm that oversees roughly 500 units in west Los Angeles, near Brentwood. His team has been “running nonstop” since March. “There’s tenants who are lonely and want to see people. And there’s tenants who, due to COVID fears, don’t want anybody in the building, but their neighbors are making more service calls. And we’re just caught in the middle.”
It’s been a challenging and disruptive year for everybody and every job. And property managers have definitely seen their roles and responsibilities dramatically shift over the course of 2020. Residential managers have been forced to deal with the ever-present challenge of health and safety around COVID-19 and the shifting and evolving rules and regulations around evictions and tenant rent relief. Chazanas said that overlapping rules on evictions, and requirements to service and file new documentation, have been overwhelming, and there’s increased interaction with tenants despite the risk of infection (last week, half of his 12-member maintenance staff was out with COVID).
Commercial operators have been challenged with keeping buildings ready for workers who still haven’t returned en masse. Neil Pendleton, CBRE’s senior managing director in the Chicago office, oversees a staff of 280 who manage roughly 340 buildings in the city and nearby suburbs. He said that property teams have continued to keep buildings running since March.
“People may loosely use the term front-line workers, but they really are,” he said. “They haven’t had a choice to stay home, they show up and to their credit, continued to keep things running.”
“It’s making everybody pretty crazy,” said Jeff Cronrod, a board member for the American Apartment Owners Association, the nation’s largest landlord trade group. “The biggest thing of course is keeping tenants safe and keeping public areas clean. They’re new burdens — the acute awareness of these issues — managers and property management companies didn’t have to deal with. Then, riding on the coattails, is a significant money issue, of tenants facing debt and evictions.”
Cronrod predicts it will take two years after vaccinations are widely available for the housing market to settle down. Until then, property managers will, as they do now, find themselves at the epicenter. They’re the connection between owners, tenants and vendors, in “the middle of the mess.”
Some of the most stressful positions in the property management sector right now involve working in residential settings. Chazanas said that in addition to increased time spent on maintenance and keeping residents safe, the combination of deferred rent and changing eviction regulations, as well as lost rental income, have hurt his bottom line.
His income, like many in his industry, is based on a percentage of collected rent. When tenants can’t pay, it hits profits. Some buildings he manages have had to drop rent 10% to 20% due to extensive vacancies. And while it’s nothing compared to renters facing eviction due to a loss of work beyond their control, Chazanas said there is so much paperwork and so many regulations to follow around eviction and rent deferral that each case can take an entire day of filling out forms.
Residential property managers also find themselves negotiating the different levels of concern, and caution, the public exercises around preventive measures for COVID. Byron Yamada, who works for Chazanas, said he has some tenants who ask for extra and extensive personal protective equipment when workers enter their unit. One of his tenants, an older woman, won’t leave her apartment, slipping her rent check under the door for him to pick up instead of walking it to the dropbox one floor up. But other tenants on the same floor may walk around the hallway maskless.
“We try to mediate the differences, but also try not to get too involved,” Yamada said. “It’s a divisive issue. We’re just as careful as we can be.”
Cronrod said the financial stresses felt by property managers mirror those felt throughout the building upkeep and maintenance industries. Maintenance workers and gardeners lose work, a domino effect that often gets overlooked, and unlike other front-line workers, such as grocery store clerks or warehouse workers, they’re often not seeing bonuses or hazardous duty pay due to the industry’s financial strains.
Commercial property managers have been spared many of the persistent safety concerns of their residential counterparts since offices have been mostly empty since last spring. But that doesn’t mean they haven’t had significant challenges. Alyssa Faughn, a San Diego property manager now with JLL, worked for Meissner Jacquet when the coronavirus first hit, and said it was challenging from the start, when clients weren’t sure what to do, and some wanted to close their offices.
“Everything was moving fast,” she said. “It was crazy placing orders for thousands of dollars of hand sanitizer to then find out it wasn’t available. For one of my office buildings, we ordered hand sanitizer in March and didn’t start getting orders until June and July, and I don’t think we ever got the full orders in.”
Caroline Gadaleta is the regional managing director for property management for JLL in the New York/Tri-State region, which encompasses roughly 20.5M SF of office space. She started the position in 2020 with lofty ambitions and goals, and after everything came to a halt in March, she and her team had to switch gears and adapt to a totally new normal.
“When people ask me how my team is managing through all of this, I say that we solve problems every day, and COVID is just another problem we’re solving for, albeit on a much, much larger scale,” she said.
Gadaleta said 2020 was full of unexpected challenges; a shuffle to locate safety gear, personal protective equipment, signage and hand sanitizer in the first few months of the pandemic. In June, during the protests and uprisings against the killing of George Floyd, staff had to board up and protect buildings with retail space. The staff has also dealt with losses, including vendors who have passed away due to COVID. But amid all those challenges, staff has kept buildings in good operating order, waiting for a new normal.
“We are ready for tenants to come back, and have been ready for the last seven months,” she said.
Whatever new normal is reached will take plenty of time. Pendleton said that since March, CBRE’s Chicagoland portfolio hasn’t seen occupancy above 14%. Large-scale return to office work is so far away that most large CRE firms don’t yet have plans for dealing with a returning workforce with differing levels of vaccination.
There are also questions within the industry about how building maintenance workers and property managers may fit into the calculus around who gets vaccinated when. Chazanas said that in California, he is confused as to why it appears his staff isn’t listed in the earlier tiers for the state’s vaccination rollout.
“It’s a double hit,” he said. “They’re supposed to be accommodating, show up and do their job, and go in and out of people’s apartments every day, and they’re getting sick. It took my guys a week to get their test results back.”
“I hope we can get to some sort of stability in May, June, July,” he added. “Hope it gets easier for us. We’ve been going nonstop for almost a year.”