A Quick Check Up on the 2016 Property Management Industry
It’s always smart to prepare for changes in the real estate market, but busy property managers may find that keeping up with the demands of their rental units leaves them with little time to follow industry trends. Take a few minutes to check in with regional and national forecasts for 2016 to make the right decisions and keep your property full all year long.
2016 National and Regional Vacancy Rates
2015 was a good year for real estate, and 2016 is poised to be another. Expect to see vacancy rates dip even lower nationwide, with rents remaining strong. This is good news for property managers in much of the U.S. and tough news for renters. Tenants looking for a good deal will have a difficult time. Compared to 2008, when there was a supply of vacant new construction apartments in need of filling, there are far fewer vacancies to drive rent prices down.
While vacancy rates are low nationwide, some cities may have higher vacancy rates at present. New York City, for example, is seeing an increase in new construction that is driving the city’s vacancy rate up. To stay competitive amidst the wider stock of open units, landlords in the five boroughs area will need to put the brakes on rent increases. If this trend spills over into other metro markets, it could cool the rental market nationwide.
Low oil prices can also have a negative effect on some markets, namely Houston. As oil prices remains stagnant and drilling is on hold in oil-rich states, many who worked in the industry face job cuts that threaten their livelihood. Property managers in affected metro markets may need to keep rents stable or be extra attentive to renters to keep units occupied despite the sector slump.
Urban vs. Suburban Rental Stock
Along with Millennials, who are committed to renting either by personal preference or an inability to quality for a mortgage of their own, expect Boomers to sell off the suburban empty nest and seek to move closer to the city for the full live/work/play experience.
While the suburbs do have a higher vacancy rate, reduced rental unit supply in urban areas along with high costs of rent will help drive some renters out to the suburbs. Look for renewed interest in suburban homes among renters who want more value for their dollar. If you manage units in the city as well as in the suburbs just outside, this renewed interest in the suburbs is good news.
Expect these rental patterns to hold through 2016. Savvy property managers can add value to their rental units and incentivize tenants to continue to pay premium rents by creating an attractive and elegant common area that creates community in the apartment complex.
How Property Managers Can Stay Ahead in 2016
Busy property managers who are still doing things by hand should consider 2016 the year to invest in effective property management software. Such software can help property managers save time, stay on top of vacancies, easily advertise units, quickly screen tenants, and handle tenant applications.
Since low vacancies mean that maximum profit is gleaned from every rental unit, 2016 is a good year to invest in infrastructure and maintenance. If property owners have been putting off needed repairs to common areas, or you know that the building’s HVAC systems are old and inefficient, suggest spending money modernizing the apartment. These improvements are easily offset by the income from rental units, and help to make the apartment or condo complex more attractive in down cycles as well.
Owner-managers who seek additional real estate holdings should invest in multifamily units, which offer a greater return on investment than single family homes. In the second half of 2015, demand for multifamily units was strong and Freddie Mac forecasts that this demand will remain strong into the foreseeable future.