An interesting thread caught my eye last week on the always-engaging Multifamily Insiders website. The chat, entitled: "Am I alone in thinking that the 1 per 100 rule in onsite staffing needs to change and change quickly?" stopped me in my tracks as it represented the exact opposite view that the title first suggested to me.

Let me explain. It has always been the case that an average, 300ish unit community would have an onsite management team of three full-time equivalents (FTEs), usually a community manager, an assistant manager and a leasing agent. Add or subtract an FTE for each 100 more or fewer units, and you have an assumption about staffing that has been a consistent feature of multifamily operations since time immemorial.

Technology and the 1:100 Ratio

A conversation has been afoot in our industry for some time about how technology can break the 1:100 staffing ratio. But it's a different conversation from the one that took place last week on MFI. The participants in that thread spoke of the need to increase staffing levels to avoid burnout of onsite teams. It represented a counterpoint to the current conversation about operations and technology.

For the last few years in our annual 20 for '20 white paper (where we interview 20 senior leaders in operations and technology), we have talked about a group of technologies that are radically changing multifamily operations. Smart building technology, and in particular, access control - makes operations more efficient and is an important enabler for self-guided tours.  

AI leasing agents provide 24/7 on-demand handling of inbound contact through to booking a tour. The combination of these technologies presents a potentially high-quality self-serve leasing experience. A brief look at other consumer industries tells us how strong the consumer preference is for self-serve experiences (think Uber, SweetGreen, hotel/airline apps, and so on). It is a safe bet that multifamily buildings will at some point require fewer onsite staff. But, as the MFI thread suggests, that point may be some distance away.

But it's not all about technology...

To reap the undoubted rewards of these exciting technologies, multifamily operating models must change. But there are obstacles in the way, some cultural and some more structural.  

First, as we recently wrote in these pages, COVID changed the way some operators think about this kind of automation, at least temporarily. As cities relaxed lockdown restrictions, it seemed that prospects had a renewed appetite for in-person experiences, often opting for guided rather than self-guided tours. Operators who implemented or were considering implementing AI leasing agents told us that they intended to remove busy work and put hours back in the day rather than automate roles out of their organizations.  

We saw this as a subtle but interesting shift in attitudes relative to 12 months earlier (when we researched the previous edition of 20 for '20 and speculated that "people had made a comeback in 2020." But there may be deeper reasons why companies' views on leasing automation have changed.

Old Habits Die Hard

Of all companies pushing automation in multifamily, the public REITs are at the forefront of redefining property operations. AvalonBay was the first to declare that it had broken the 1:100 ratio by using technology to redeploy staff between properties. UDR and Equity have reported impressive progress in property automation, and others will follow suit.

What normally happens next is that other companies learn what the REITs have done, figure out how to do it themselves and reap the benefits. But in this case, it isn't that simple: REITs are different from most companies because:

• They are big enough to fund investment in enterprise technology
• They tend to have many communities in the same local submarkets (a prerequisite for sharing FTEs between properties)
• They have complete control over their operations and technology environment

There are relatively few non-REIT companies that meet all three of these conditions. Most owner-operators are of a size that limits their technological ambitions to what they can purchase off the shelf. Fee managers may have the requisite scale but also have partners who get a vote on operational and technology decisions. Where they have a high density of properties in a given market, there are usually multiple owners involved, limiting the ability to pool resources between properties.  

The nature of multifamily deals and operating agreements makes it convenient for staff to "belong" to communities. Deals are mostly discrete, with different partners, financing and financial objectives from other properties in the same portfolio. The least complicated approach to staffing is the one that assigns individual FTEs to individual properties. It is a paradigm with which most actors in the industry are comfortable, even if it looks increasingly inefficient.

The REITs are demonstrating how technology can make operations significantly more efficient. To be competitive, other companies will have to find ways to access the same efficiencies. They will need to think differently about the models for delivering services at their properties and ultimately consider the future operating model in assessing investment decisions.

Those are bigger and more structural changes than technology alone can address, which is why the 1:100 ratio will be hard for most of the industry to escape in the near term. In the meantime, let's spare a thought for property teams whose work volume has not gone down, irrespective of what the rest of the industry is saying about technology!