Five Multifamily Centralization Myths Debunked
Funnel Leasing CEO, on common centralization myths, and how to avoid centralization pitfalls.
If the multifamily industry shared a list of trending topics, I think centralization would top it. Like with any buzzword or trend, there is a lot of confusion about what centralization is, its potential benefits and what parts of a business can actually be centralized.
“This misunderstanding of centralization basics is causing a rush of “solutioning” by vendors hustling to prescribe answers to centralization without diagnosing operators’ underlying objectives of centralization.”
This misunderstanding of centralization basics is causing a rush of “solutioning” by vendors hustling to prescribe answers to centralization without diagnosing operators’ underlying objectives of centralization.
To be clear, centralization is a complete business transformation that includes three key elements: organizational change (how teams are structured), operational change (who does what) and technological change (tech solutions needed to make these changes). Think of centralization as a three-legged stool; without a full commitment to all three components, it fails.
Let’s bust five frequent centralization myths to set you on a smooth centralization journey.
1. Centralization is only for big operators.
This is a pervasive myth in multifamily and a close cousin of the “grass is always greener” idea. For every multifamily property management company, no matter the size, centralization requires operators to transform how teams are structured, which teams do what and the technology solutions needed to make the changes.
In other words, centralization isn’t a quick fix, and it’s a business transformation regardless of company size. In some ways, centralization is even more relevant for smaller and mid-sized companies because it levels the playing field for those operating with fewer resources and back-of-house capabilities. A centralized model—powered by the right technology—leverages resources and maximizes marketing budgets, resulting in cost savings for the owner, less work for the team and a modern apartment shopping experience for the customer.
“Centralization is even more relevant for smaller and mid-sized companies because it levels the playing field for those operating with fewer resources and back-of-house capabilities.”
By centralizing, operators are often able to weather tumultuous external forces with greater ease and punch above their weight.
2. Centralization isn’t for third-party operators.
Third-party managers are responsible for properties from different owner groups. Lead sharing is where many of our minds go when we think of centralization, and this association has caused many third-party managers to believe centralization wouldn’t work for them.
Again, centralization is full business restructuring and transformation. Centralized teams can work across the portfolio and ownership groups to take care of back-of-house administrative tasks like leasing, renewals and follow-up. Centralized multi-property sales teams can work across ownership groups to give tours and provide excellent customer service to prospective renters. You can use centralization to create a better experience for the renter by helping them find their next home with ease, which in turn increases their propensity for loyalty.
I also would push for operators to think bigger. Within the hospitality industry, lead sharing across owner groups is a common practice within loyalty programs. Like the Marriott Bonvoy loyalty program, with inter-ownership group lead sharing agreements, renter loyalty programs are waiting for third-party managers to lead the charge.
3. Centralization equals automation.
Centralization and automation create different efficiencies. AI shortens lead follow-up time because it is built for speed. But leveraging AI isn’t the same as fundamentally restructuring the intersection of people, processes and tech to create efficiencies. Properties will still be staffed in the same manner with the same ratios, and your teams won’t necessarily always be playing to their strengths. AI is an essential component of any tech stack, but equating it to centralization is a mistake.
“Leveraging AI isn’t the same as fundamentally restructuring the intersection of people, processes and tech to create efficiencies.”
4. Centralization isn’t good for leasing teams.
Everyone is competing for the best and the brightest in the labor pool. I believe that companies that centralize are often better positioned to attract top talent. With the Great Resignation in full effect, talent retention and hiring are a top pain point for many property management companies.
Let’s rewind a bit to understand the context. The staffing model for property management companies hasn’t changed much for decades. The status quo ratio is one leasing professional per every 100 units in an apartment community. However, technology has changed dramatically since this staffing ratio was introduced.
Many tasks can now be optimized via AI and automation or managed remotely by centralized teams. Administrative functions such as processing lease paperwork and applications can be more efficiently handled by teams dedicated to those unique functions, allowing the sales team to focus on leasing and customer service. This creates a staffing model that aligns roles with strengths instead of roles with unit count. This can help create a career path that rewards team members for what they do best.
5. All centralization is the same.
When business intelligence (BI) was new to multifamily (around 2012 to 2015), it seemed that every existing vendor was making claims that they could offer their clients business intelligence tools, from true solutions to simple spreadsheets. It became clear that reports are not BI. I share this story as a “buyers beware” warning.
History repeats itself. As multifamily embraces centralization, there is a rush of tech that claims that they can do that too. Many of the centralization solutions are workarounds—linking guest cards or moving guest cards from community to community—that can’t create the streamlined centralization that operators demand.
“Many of the centralization solutions are workarounds—linking guest cards or moving guest cards from community to community—that can’t create the streamlined centralization that operators demand.”
Most multifamily tech solutions are architected around the property, creating duplicate records for renters at multiple properties in the same owner’s portfolio and limiting operators’ ability to centralize administrative tasks to a central team. Centralization is still out of reach because the tech is architected in a way that would require teams to either open 17 tabs in an incognito browser or log in and out of systems at the property level across the portfolio in order to understand what is going on.
Centralization is a future operating model.
This one is not a myth. Operators are driving the centralization charge. They are restructuring every facet of their business from how they staff properties, to which team members do what, reducing costs, boosting productivity, all while onboarding tech solutions that empower them to operate in this new model.
I believe centralization is the future standard multifamily operating model. Set your company up for success on your centralization journey by avoiding the common centralization misconceptions I covered.