Has your multifamily property management business started to see a positive variance in your operating budgets? Are you spending less on maintenance and turns? While it is likely that you are saving money on these expenses, you would be wise to move the dollars forward in your forecasts, as a catch-up is sure to come.
In a recent webinar, we sat down with a few of our key partners in the industry to discuss current trends and how their clients’ use of technology has evolved to support new challenges. Below is some of the data our partners shared with us regarding maintenance and make-ready savings in the conventional multifamily and affordable housing markets.
Wonder what happened to all of the service requests and work orders?
In our webinar, we highlighted the continued trend relating to work order/service request volume in conventional, affordable and public housing.
Since the onset of the pandemic in mid-March, we have seen a substantial drop in volumes across all three housing sectors. Even as MRI’s own Multifamily Market Insights Report indicates that May brought a slight recovery, volumes are still more than 40% off from the prior year.
We also triangulated this trend with ServusConnect, a partner that focuses on the unique operational maintenance needs of multifamily, and noted a similar drop in volume.
We believe this reduction in volume is attributable to two main factors:
- Properties focusing on emergency requests only
- Properties providing residents videos and other forms of technician assisted DIY capabilities
While we might be able to explain the current trend, it should bring some worry for operators because repairs are likely being deferred but will eventually need to be addressed. Further, with more people being at home due to lockdowns and closures, it is expected that wear-and-tear items will need attention more frequently than under normal circumstances.
As budgets are reforecasted for the second half of 2020, unspent dollars should be reallocated into future periods and adjustments should be made for more frequent replacement of wear-and-tear items.
Similar to maintenance volumes, we have also documented a sustained drop in move outs across the three sectors which we believe is driven by residents choosing to eliminate uncertainty and stay put.
Fewer move outs directly drive a reduction in turn-related spending. For additional insight, we triangulated this data point with our partner Nexus Systems, a leading supplier of AP automation systems, to see how make-ready spending has been impacted since the onset of the pandemic.
It is clear that make-ready spending dropped precipitously to nearly zero for eight weeks, and while there has been some recovery, it is more than 75% off the prior year’s pace.
With ongoing uncertainty, we expect to see residents remain in place until they have clarity on their individual situation. Further, with eviction moratoriums in place through July 2020 for many, there is an artificial damper on move-out volumes. Unless carefully considered, a wave of pent-up evictions could overwhelm staff trying to make units ready for new residents and suddenly ramp up spending in this currently dormant category.
Landlords should carefully examine their rent rolls to understand the full complement of activities that will drive turn volumes, such as existing notices to vacate, lockdown-paused evictions, month-to-month leases, and residents who are currently under duress from COVID-19 impacts. With a clear view of these volumes, a realistic plan can be created for the remainder of 2020 and it should be reflected in your multifamily property management company’s budget reforecasts. See our full discussion with MRI’s partners in this webinar to learn more.