In many respects, we have already focused on Property Management trends in our two early Advisory dispatches when we explored Commercial Real Estate Owners/Developers and Corporate Real Estate Departments. Each of these sectors also deals with Property and Facility Management issues, however, their issues differ a bit from that of the third party Property Management company. This Advisory will focus on the latter.

Over the past five years, the third party Property Management company has been dealing with a number of major issues that have impacted their ability to grow and improve their operations. Decreasing profit margins, the need to support numerous and different Property Management systems and the growing need to decrease operating expenses for owners, continues to put pressure on their firms. With the advent of more sophisticated ownership models, such as Pension Funds and REITs with their increased expectations, the pressure on third party firms only intensifies.

The following represent the trends we saw continuing to evolve this year for third party Property Management firms as a result of technology and automation:

• Low profit margins restrict firms’ ability to invest in new technology
• Owners are investing more in technology, therefore creating better systems
• Because owners have the most at stake, they are the most aggressive when it comes to investing in technology
• There is some innovation taking place in the industry but mostly by a few large Property Management firms
• Because PM is often a loss leader for other business opportunities, the desire to invest in tech is low
• Third party firms will continue to get competition from both private, public and corporate owners who do it themselves
• Management firms need to deal with multiple systems for multiple owners, therefore restricting effectiveness
• Because of multiple owners, the management firm’s ability to embrace enterprise systems is inhibited
• The integration of multiple systems across large portfolios for multiple owners is very difficult
• Property Management software companies are moving quickly to the concept of the integrated Enterprise solutions
• Disparate islands of information are being recognized as detrimental to effective and efficient Property Management
• Technology is causing the functions of Property and Facility Management to blend and this is disruptive for both
• New technologies will obsolete some traditional Property Management functions
• Building automation will continue to impact the way facilities are managed
• There are two distinct groups developing, the traditional PM firms and those interested in rethinking the entire process

This year’s conference saw a good amount of energy focused on the operational side of Commercial Real Estate. We heard many case studies about aggressive automation strategies that ultimately improve the financial performance of traditional real estate. As tenants get better service and cash flows improves, the net result could be higher valuation. We see this trend of applying aggressive automation solutions to every aspect of Property and Facility Management continuing for at least the next five years.