While AI was the hot topic at this year's OPTECH Conference, produced by NMHC, Centralization shifted into a new phase of maturation. More and more operators were able to share how their centralization roll-outs had progressed, and with it, the vision of what centralization is, and just as importantly, is not, came into clear view. 

What does Centralization Look Like?

While "centralization" became a buzzword a few years ago, Amy Chien noted that we have been doing elements of centralized operations for years.  For example, having maintenance techs float from one community to another during staffing challenges can be very similar to current centralization trends.  That said, each company is defining its own "recipe" for what centralization can and should look like, with some companies maintaining key touchpoints with residents, while others work to create a self-serve environment that reduces delays and friction points for the customer.

Standardization versus Centralization

The first step for many companies in the centralization journey began with a process of standardization.  Stephanie Versin noted that they had to deconstruct the leasing consultant job, dissecting it into very specific, specialized roles.

Compared to years past, where on-site team roles were often seen as a "jack of all trades" situation, those roles are now being specialized, where they focus on becoming an expert on one task versus ten, with the most successful rollout involving team members self-selecting their role based upon their interest.  For example, if someone is passionate about resident retention, they can now hyper focus on that process by being a renewal specialist.  In this way, each role is becoming specialized surrounding a given task versus umbrella positions as the industry relied upon previously.

Centralization's Impact on Staffing

As centralization is becoming more prominent as an industry trend, one of the biggest questions related to employee staffing levels and the looming potential of downsizing.  A few short years ago, when the industry was still solidly in the planning phases of this transition, most operators' common refrain was that they would not see a reduction in staffing, but rather excess labor capacity would be shifted towards the resident experience.  The reality has been both different, and yet not entirely unpleasant for team morale.

It could have been an optimistic approach to think that operators could retain previous on-site staffing levels, even while those functions were centralized, or maybe no operators wanted to publicly state that they expected reductions as that would undoubtedly hurt morale.  However, the true story has seemed to come from one surprising helper: Employee Turnover.

Multifamily has historically suffered excruciatingly high employee turnover, which under normal circumstances has created vast struggles for on-site teams and operations as a whole.  But in this one instance, turnover created an opportunity, as operators simply didn't rehire the old roles.  In this way, operators leveraged natural attrition to attain the staffing levels that were probably inevitable through the process of centralizing their operations.  Therefore, they were able to achieve reductions in staff without any actual downsizing.

Centralization Impact on Employee Satisfaction

Now with smaller teams in roles that vary quite a bit from the traditional jack of all trades from years past, what has been the reaction from team members?  Many operators are reporting that employee satisfaction has actually gone up.  They report that the jobs are actually considered "better", with less distraction and as Stephanie Versin noted, they didn't cut people, but rather leveraged centralization to make the existing team work smarter and increase productivity.  This actually reduced turnover as they were able to connect people with the jobs that had the one specific task that they liked.  Similarly, Josh Gampp noted that they simply didn't fill the jobs that people didn't want anyway, so remaining team members were now in roles that better fit their interests.

We have all heard how on-site team members are completely overloaded with different systems and tasks, that this process of making the roles more individual task based has the potential to remove that stress point for team members.

Stories in Centralization

It is not possible to give a full view of what a company is doing in terms of centralization during a single panel session; however, some pieces of the centralization strategy include:

UDR

Few companies, if any, are on the forefront of centralized operations beyond UDR, which has transitioned to having no on-site leasing teams, with properties either having zero or just one person working in the office.  With 100% self-guided tours, the entire leasing process is centralized, with centralized leasing sub-teams by market.  Each centralized team member works with on-site team members in their market to fully understand the inventory available so they can help prospects remotely, along with leveraging Matterport tours to digitally walk prospects through units when needed.  While they also centralize renewals, the remaining on-site office team member often assists in that process due to the relationship with existing residents.

Newcastle Limited (through its Reside Living brand)

Reside Living's centralization team does not replace on-site teams, but rather handle leads that have fallen through the cracks, as well as other functions.  Plus, due to seasonality, Reside's centralized team members tend to be more flexible in their roles relative to other centralization programs.  For example, they have a very defined "leasing/renewal season", which means that they may receive 20 applications per week during the fall season, but receive 10X that amount during the busy season.  Therefore, tasks tend to get shifted depending on the time of the year.

Veritas Investments

As Veritas Investments focuses on smaller properties who often wouldn't have on-site staff, their centralization plans were wide sweeping, including:

• Leasing
• Collections
• Accounting
• Resident Services
• Resident Engagement
• Online Reputation
• Marketing automation, such as automated follow-up after tour
• Maintenance

Just as interesting as what IS being centralized is hearing what companies do not plan on centralizing. For move-ins, Veritas Investments specifically does not automate or centralize that piece of the resident experience because they want to provide a personalized, concierge-level approach. Conversely, while UDR currently has someone to meet new residents, they're planning to automate that process completely to provide a frictionless move-in experience.

Additional Benefits Being Felt with Centralization

According to Stephanie Versin, one great benefit of centralization is consistency.  Rather than having multiple properties with multiple ways of doing things, they now can operate in a "one team, one dream" perspective.

Josh Gampp mentioned that centralization didn't always indicate centralizing with their own team members.  For example, this process has enabled them to vend out things that tend to be more seasonal, such as unit turns.  That way, they do not have to be fully staffed year-round for seasonal items.

Challenges of Centralization

Centralization didn't come without its own set of challenges, however.  One of the big issues noted by both Brad Kirshenbaum and Alaine Walsh were the communication hand-offs between centralized and remaining on-site team members.  For example, an on-site team member may know information about a renewal and if it isn't properly communicated to the renewal team, they risk annoying the resident.

Additionally, as centralization took over more resident functions, the overall company brand became more important, which also meant that reviews are now prevalent at both the property AND company level.  Therefore, operations at one property now impact the company as a whole in a much broader way.

Outlook for Centralization

Although it is impossible to completely predict the path of progress in multifamily, it certainly appears that centralization is an inevitability, especially for portfolios that are more densely positioned, as well as portfolios with smaller unit properties.  The main questions are how long centralization will take to achieve in a broader context, as well as what ramifications it will have for portfolio structure both from a ownership perspective and also 3^rd party management.  Will ownership groups become larger to take advantage of efficiencies?  Will power shift more to 3^rd party managers because of the standardization of operations and technology across their managed portfolio?  Lots of interesting questions to ponder!

Share your bold takes of how centralization will progress in multifamily, and what impacts it will ultimately have below in the comments.  Also, if you enjoy these types of conversations, you can subscribe below in the author area.

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