Can A Tech Overhaul Boost Building Values — And Attract Young Talent?
Construction isn’t the only part of the commercial real estate industry facing a labor shortage. As their most experienced colleagues retire, property management teams are reportedly having a difficult time refilling their ranks with new employees.
“It’s not like being a fireman — nobody grows up saying I want to be a property manager,” said Perry Levine, who worked in property management for three decades before joining technology firm RealPage as its industry principal for commercial real estate. “We are graying out, and part of the issue is that young people don’t think of us as an innovative industry.”
Levine laid much of the blame for CRE’s recruitment issues on the industry’s outdated technology. Young analysts and brokers who have the chance to work with cutting-edge software at a private equity or tech firm may not be swayed by a higher salary if it means they have to spend their days combing through Excel sheets or working, as some CRE firms still do, on pen and paper.
But investing in new technology isn’t just about nabbing talent, Levine said. A modern property management software suite can catch small human errors that might otherwise cost CRE owners tens of thousands of dollars.
Small changes to a company's operations — like performing expense recoveries at the push of a button or never again forgetting to charge a tenant a rent increase on time — can translate to large swings in a building’s value.
“Assuming a 5% cap rate, taking in an extra $10K per year translates to a $200K boost in building value,” Levine said. “Property managers who are sticking with outdated systems are almost certainly losing out on much more than $10K per year.”
Bisnow sat down with Levine to see why he thinks technology can not only bring buildings more value but also make CRE appealing and a competitive industry for new talent.
Bisnow: What would you say is the status quo when it comes to technology in CRE?
Perry Levine: Real estate is strongly in the ‘If it ain’t broke, don’t fix it’ camp. A lot of people and organizations in our industry are using really old systems that can’t even track many key elements of real estate transactions.
Even if you have a fairly simple lease, you have to ask yourself, ‘Am I capturing all the revenue opportunities that the lease affords me?’ Maybe there is a stipulation in there to cover graffiti removal, or a charge for accounting services. If I’m doing expense recovery by hand or in an Excel sheet, and I miss even one line item, I could be losing out on $10K of net operating income. Maybe I forget it across a portfolio of 10 properties, suddenly I’ve lost $2M of value in my portfolio just because I wasn’t thorough with expense recoveries.
Bisnow: Do you think most CRE firms trust their data?
Levine: Most of the real estate organizations I work with have to constantly monitor their systems to make sure they don’t miss out on important deadlines, like sending tenants rent increases on time. It’s embarrassing to have to return to a tenant and tell them you forgot to charge them more money. So the distrust you have in your own technology actually creates distrust between you and your tenants.
Even if there is a single source of truth, a single Excel sheet, maybe, if that system isn’t capable of handling expense recoveries, rent increases and every aspect of a triple-net lease, you are missing out on huge cash value.
Bisnow: How can technologies save employees time as well as companies money?
Levine: When I was working as a COO of a property management company in 2008, I spent 30 to 34 hours a month just laying out custom financial packages for different owners and investors who wanted to see this or that piece of specific information. If I had had a software like RealPage back then, I could have just set it up to automatically send customized reports to every recipient, however often they wanted it.
We had a focus group a year ago for some of our commercial clients to talk about how they use RealPage’s systems. When we came around to one woman, she explained that the expense recoveries that usually took her three weeks now take her 30 minutes. We all gathered around her laptop to confirm it was true, we could hardly even believe it.
Bisnow: Why do you think those kinds of efficiencies are important for retention?
Levine: The current labor force is interested in working for companies with exciting technology, flexible workspaces, an emphasis on social issues and a focus on the overall well-being of employees. If the commercial real estate sector does not consider those changes, it will continue to lose talent to private equity firms and other forward-thinking companies.
I remember meeting with a property management company in San Francisco. Their offices were downtown on the 32nd floor of a building with an outstanding view of the Bay, and they clearly were offering very competitive salaries, but the senior vice president of asset management said to me, 'We are having the hardest time finding new people.'
The industry needs the latest technology to enable teams to do their jobs effectively, and in many cases to allow employees to keep working the way they are accustomed to.
This feature was produced in collaboration between the Bisnow Branded Content Studio and RealPage. Bisnow news staff was not involved in the production of this content.