Tyler Christiansen, CEO of Funnel, on the rising tide of centralization for third-party managers.
If you invest in multifamily real estate, it’s worth noting that the way apartments are operated is undergoing a significant transformation—one that directly impacts operational efficiency, renter and resident satisfaction and, ultimately, portfolio performance.
From leasing to maintenance, much of what used to be handled exclusively by onsite staff is now increasingly managed by centralized teams or automated through AI tools, whether it’s questions about your pet policy, a link to your application or help with scheduling a tour.
Building on the centralization playbook
This shift isn’t happening in a vacuum. It builds on a broader industry evolution I’ve explored in earlier articles on multifamily operations—debunking outdated assumptions about centralized models, arguing for the need to incorporate AI and tracing how centralized models can unlock scalability.
What’s different now is the focus: This piece explores how these shifts are finally reaching third-party managers—a group once considered incompatible with centralization. We’re no longer just debating if centralization or AI can work; the question now is how leading third-party managers are making them work across increasingly complex, multi-owner portfolios.
Make no mistake: The way rentals are operated is undergoing a massive behind-the-scenes transformation. And as these changes accelerate, they offer ways to improve efficiency and redefine the experience for millions of renters.
Centralization is reshaping how portfolios operate
The first change is in how properties are managed and leased. Increasingly, property owners are hiring third-party managers to handle day-to-day leasing and operations. In fact, based on an article by Dom Beveridge and based on NMHC data, “the average size of the top 50 management groups had increased by 58% in the decade leading up to 2023, while the top 50 ownership portfolios had decreased by 17% on average over the same period.”
The other massive change is centralization, or the movement of tasks traditionally handled by onsite teams to offsite locations or remote teams. Property management companies are building skilled and specialized teams to handle tasks like leasing, renewals, application screening and customer service from a corporate or remote team. This isn’t just a trend for large companies or high-end apartments; it’s a fundamental shift already making waves in how portfolios of apartment communities operate.
For years, many critics thought centralization wouldn’t work for third-party managers because the ownership groups that hired them wouldn’t share resources with competitors across the street, prioritizing exclusivity over collaboration. However, with fixed costs rising, that mindset is shifting, particularly with shared services that don’t directly impact the sales cycle, such as administrative tasks.
Centralization isn’t just good for building owners and management companies—it’s good for renters. It sets the stage for a rental experience that actually feels human. When property staff aren’t drowning in paperwork, they can spend more time focusing on the people who live there. That means friendlier leasing teams, quicker problem-solving and a better overall experience for renters.
The multifamily industry has a history of cyclical change, but one thing is clear: The centralization of tasks (taking traditional onsite jobs offsite) and the growth of third-party managers are here to stay. Centralization’s staying power lies in its ability for property management companies to solve real operational inefficiencies, foster scalability and meet the evolving demands of both renters and owners.
The evolution of centralization in the industry
As ownership structures shifted, third-party managers emerged as a powerful force in the multifamily industry. But this operating model comes with inefficiencies: Onsite teams become burdened with everything from leasing to maintenance to administrative work. However, not every task needs to be handled on-site. I recommend moving your most repetitive, administrative work, like application screening, renewals or prospect communication and follow-up, off-site.
Owner-operators led the first centralization wave with publicly traded REITs sharing results on earnings calls. Their progress shaped the industry’s perception of centralization. While its detractors claim that centralization is only for owner-operators, I believe third-party managers who ignore centralization risk falling behind in a hyper-competitive industry—one in which management contracts have razor-thin margins and only require 30-day notice to move management to a different company.
The next wave of centralization started as many large owners who also managed properties for third parties began centralizing operations for their owned assets. At the same time, they started centralizing administrative tasks across all assets and began renegotiating contracts with owner groups to centralize other components (like leasing and maintenance) for the third-party managed units under their purview.
The final wave of centralization is underway, with third-party-managed-only portfolios now centralizing administrative tasks and aiming to tackle centralized leasing and maintenance next.
Understanding centralization’s drive
Managing everything on-site can be expensive, inconsistent and inefficient. Owners demand smarter, leaner ways of running their properties from third-party managers. In my opinion, it’s because they heard about the results from the REITs and they want those results for their own properties. Centralization can help deliver this by consolidating tasks into specialized teams that can handle them faster, better and more consistently.
Many third-party managers hesitate to adopt centralized models, citing concerns about disruption or owner pushback. But let’s be honest: Much of this resistance is rooted in fear of change. Centralization forces a reevaluation of long-standing workflows—something many find uncomfortable.
Critics argue that owners, focused on individual property performance, won’t accept shared services. However, I find the opposite is often true. Owners are increasingly savvy about distinguishing between controllable and uncontrollable costs. They’re demanding operational efficiency.
Now is the time
In an industry where owners increasingly scrutinize every dollar spent, I believe centralization is no longer a nice-to-have; it’s a necessity. Third-party managers clinging to the status quo risk losing relevance as their peers deliver better results with fewer resources.
The multifamily industry is at a crossroads: Embrace centralization or risk obsolescence. For those willing to adapt, the rewards can be immense. For those who resist? Well, the industry doesn’t wait for stragglers.
