In my last blog, No Longer Conjecture – Actual Results of Centralization, I covered the current trends in centralization, as seen at NMHC’s OPTECH Conference.  Today, I’d like to play prognosticator and peer into the future of what centralization could look like.  Of course, these are wild speculations, but I’d love to hear what you think, and for you all to share your own wild speculations in the comments! 

1. The Divergence of Multifamily’s On-Site Operations

   Historically, the multifamily industry has been fairly homogeneous, with a standard structure of leasing consultants, assistant property manager, and property manager.  Of course, this recipe varies for smaller communities, but this model still holds true for most of the industry.  With centralization, we have heard from many companies who plan on refocusing some of their on-site team’s efforts to an expanded resident experience, offering a more “white glove” service at their communities. 

   Others, as we have started to see, are using the opportunity to rethink what an on-site office team should really look like.  With AI solutions and more sophisticated centralized communication strategies, some companies may find that they prefer to not have an on-site office team present at all, or at least operate as a skeleton crew. 

   So not only would companies be able to redefine what the operational experience looks like at their communities, but it means that there could be a massive disparity in the on-site experience for residents.  In other words, prospects will be visiting communities that structurally look similar, but operate in dramatically different ways.  Communicating these differences could prove to be a challenge, as well as the ability to sell the advantages of different services and resident benefits provided by some communities but not others.

2. The Death of Office-Team Service

   For the moment, let’s assume that this divergence holds true, and let’s take two communities that formerly were aligned in operations, but now have taken different paths.  Community A took the high-touch, greater resident experience approach, which Community B took the more streamlined approach with minimal office team presence.  This allows communities to evaluate the ROI of having a more robust resident experience, and whether Community A can “sell” this service to residents.

   As I think about multifamily’s ability to communicate value, and ultimately relying on words like “luxury” and “state of the art”, something tells me that this sale might be difficult.  Even if some residents enjoy resident appreciation types of events, it wouldn’t surprise me if they simply do not want to pay for that. If we think about Walmart, as an example, there are plenty of people who are willing to suffer through the Walmart experience in order to save money. 

   At this point, I think it would put a lot of pressure on companies that initially took the resident experience path to start rethinking their strategy.  This is especially true as they see first-hand the results of those who took the bare-bones approach.  In this way, we could easily see a mass shift towards low-touch, bare bones on-site experience when it comes to the office team.

3. The Rebirth of Office-Team Service

    If we do see a flight towards minimal service, and we use Walmart as a guide, then we might eventually see a bounce-back, as consumers who initially placed little value on service begin to come back into the fold.  Demographics will play a huge role in this transition, and multifamily demographics may be more heavily weighted on staying with the minimal service approach; however, some consumers may look for a “similar but better” approach like Target, while others come back for a more high-end boutique experience.

   In other words, I could easily see a bounce-back away from minimal service to some middle ground down the road.

4. Maintenance as the Face of On-Site Operations

   Some residents need to vent, and even if we provide remote solutions for people to share their concerns, they will almost certainly prefer to discuss the situation directly with someone.  As maintenance is the hardest function to centralize, we will likely see maintenance personnel on-site in greater numbers and for longer than their office counterparts.  And now these residents will be setting their sights on this team more than ever to air their grievances.

   This reality will likely mean one of two things:  1) Companies will have to place even more emphasis on customer service skills with their maintenance teams, as well as anticipate the fall-out of maintenance teams having to take that burden, or 2) This will be another reason why some companies maintain a physical presence in the community office. 

5. Consolidation Escalates in Multifamily

   Some aspects of centralization can be moved to any location, but others, such as floating leasing consultants or maintenance crews are only possible with geographically dense portfolios.  This means that companies with only a few properties in a given market may fail to gain all the efficiencies of centralization, and therefore, struggle competitively with larger portfolios who can leverage these strategies.  So the question is, will centralization lead to industry consolidation?

6. Saying Farewell to Guided Tours

   Some elements of centralization are a function of moving tasks to a central location, while other aspects are a function of removing tasks altogether, and in that frame of mind, we have to consider the role of guided tours.  Going to tour an apartment with a leasing consultant seems completely normal because it’s standard practice. But once you change that standard practice and self guided tours become a larger option, we may very well get to a situation where the idea of having to walk with somebody to go look at that apartment is very awkward. For example, imagine someone walking with you through the grocery isles to help you buy fruit. What an uncomfortable situation that would be. 

   I truly think that an exceptional salesperson can sell just about anything to anyone, and add value in the process.  The ability to translate aspects of a community experience to how it might impact a prospect’s life is valuable.  However, truly exceptional salespeople can sometimes be a rare find, and a lot of times the guided tour ends up describing things that prospects can see with their own eyes.  At the end of the day, this may be the death knell of guided tours except in isolated scenarios.

7. Local Supplier Interactions with the On-Site Team

   A coffee here, a donut there, supplier pop-ins to on-site offices are a standard practice in our industry.  But what happens if those offices are radically different?  Does this mean less on-site visits and more regional office visits?  Or maybe no visits at all?  Do you think this impacts the sales structure for local suppliers in this space?  Lots of interesting ramifications on this front!

8. What do You Think the Future Holds for Centralization?

   Obviously, there is still plenty to shake out in this space, so all of these guesses are just that – guesses!  So what do you think?  Do you see a different path for the industry?  Do you see different ramifications for greater centralization?

Again, special thanks to NMHC for building such a phenomenal event for multifamily professionals to discuss the future of our industry!