The property management landscape is undergoing a profound transformation, driven by the rising economic influence of Generation Z. Recognizing the rapid shift toward technology post-COVID and its effects on the asset and property management industry helps to predict and navigate future changes.
The New Age of Rentership
The property management landscape has undergone a significant transformation as Gen Z takes the reins as the primary demographic of renters in the United States, comprising over one-third of all renters, according to Pew Research Center. Individuals in this age range are accustomed to an on-demand lifestyle and they seek seamless, user-friendly tools that simplify everything from searching for property listings, signing leases, managing rent payments, and requesting maintenance. But, how can you cater to the new tech-savvy generation without alienating renters that remember searching for listings in the newspaper? The pool of renters may share more similarities than you think.
The Industry’s Rapid Shift and the Effects of Overnight Digitization
Despite the seemingly sudden boom of all tech-suffixed sectors within the past decade, proptech has been evolving since the 1980s, per Forbes. Prior to the COVID-19 pandemic, nearly all industries had begun digitizing operations, and the real estate industry, particularly the property management subset, was no different. However, COVID-19 exacerbated the need for streamlined operations as property managers across the nation scrambled to adopt virtual and self-showings to comply with local lockdown regulations.
The first consequence of a rapidly-adopted hands-off approach to property showings was a dramatic spike in rental scams. During the pandemic, these types of housing scams became so prevalent that consumers lost over $350 million in 2021 alone, a 64% increase from the previous year, according to the FBI. With housing insecurity on a steady rise and more people turning to online marketplaces like Facebook and Craigslist to find rental homes, the problem is only getting worse. Moreover, instant payment apps like Venmo and Cash App coupled with increasingly convincing fake property listings (thanks to ChatGPT and other AI writing tools) make it easier for prospective tenants to fall victim to rental scams, and harder to get their money back.
In many cases, renters will pay the scammer, sign a lease, and move in, unaware that they have become unauthorized tenants. Given the variation in squatters’ rights and eviction laws across states, this sudden and dramatic rise in rental scams ushered in costly and time-consuming processes for landlords and property managers everywhere.
However, the effects of this seemingly overnight shift toward digitization within the property management sphere aren’t overwhelmingly negative - in fact, quite the opposite. Many can agree that this industry was previously (and in comparison to other subsets of the real estate industry, may still be) antiquated. Early proptech software proved to be costly and difficult to integrate into existing operations, leaving smaller property management companies unsure of how to progress. Thus, manual processes and leasing inefficiencies remained the standard.
However, as B2B SaaS platforms dominated the technology landscape, they were competing with each other, lowering software prices and becoming more accessible to property management companies of all sizes. The abundance of these platforms has made leasing operations flow smoother for property managers while improving the accessibility of housing for renters. The post-COVID economic turmoil has particularly affected renters, especially those that have just aged into the workforce. Amidst mass layoffs and inflation, many have turned to self-employment, freelance work, or the gig economy. To increase accessibility of housing to these renters, there has been a shift toward open banking, utilizing fintech platforms to provide a more comprehensive view of a prospective tenant’s financial data that traditional screening methods would miss.
Showdigs has found that after-hours and weekends make up over 60% of all in-person tour inquiries. Property managers working a traditional nine-to-five schedule are missing out on valuable leads, and renters unable to tour during the workday have a difficult time finding housing quickly. Many proptech platforms have made an effort to crack down on property security, leveraging AI tools, smart lockboxes, and geolocation technology to make self-showings and virtual tours safer for property owners and managers, while making property showings more accessible to renters.
Following in the Footsteps of Revolutionized Industries: What’s Next?
You can draw countless parallels when considering the factors that contributed to the digital revolution of the property management industry. However, the rise of e-commerce in recent years bears remarkable similarities. Before the age of at-home TV shopping, commerce remained relatively unchanged. Prior to that, the last major shift occurred in the early 1900s when chain department stores and shopping malls began to replace small mom-and-pop shops. It’s not until the launch of Amazon Prime 2-day delivery in 2005 that competition started to heat up, and consumer behavior patterns changed forever.
While Amazon is the catalyst that sparked a change in the way you shop for goods, COVID-19 was the event that sparked a tech-forward mindset in the property management industry. Shifting consumer demands as Gen Z aged into the rental market, alongside a need for automation in the leasing process, ushered in the adoption of leasing software. At the same time, record low interest rates made it easy for buyers to purchase investment properties. According to Redfin, demand for second homes was up 92% in January, 2021 compared to pre-pandemic levels. With property managers seeing a jump in new clients, streamlined leasing operations were a must.
Another parallel lies in consolidation. The property management landscape has seen an uptick in acquisitions, while to less of a degree than e-commerce giants like Amazon. Instead of catering directly to property owners, large institutional property management companies have started to absorb the portfolios of smaller, family-owned businesses. With more capital to spend, these institutional portfolios have spurred a trend of renovating to include smart home devices and other features that tech-savvy young renters seek out.
With renting gaining popularity in recent years, coliving, specifically in the single-family rental market, has seen a modern emergence as more renters are opting to live with roommates. According to Common, a coliving unit costs, on average, 15% to 20% less than renting a studio unit in the same market. Companies like Bungalow have been early adopters of this trend, converting much of their single-family portfolio into shared homes.
The Resilience of the Industry
Compared to the beginning of the last decade, property and asset management operations are unrecognizable. The adoption of new technologies to cater to an ever-changing consumer base has streamlined leasing operations and has led to the consolidation of smaller, family-owned companies, into institutional portfolios. Fundamental changes to the leasing process has made the housing search easier to navigate, while technologies like self-showings and alternative screening options have made housing more accessible. As the industry looks toward the future, proptech is constantly innovating to provide owners, managers, and renters with a seamless leasing and tenancy experience.