New Economy's Demographics Expand Property Management Roll

Having paid record prices, new economy owners are taking an active role in the way their building is run, raising the bar of service standards and creating ground for confilct with longer-term owners and boards.

BY ANTHONY COLELLA
Principal
Tudor Realty Services Corp.

New York City's prosperous "new economy" has transformed the way real estate professionals do business. In the commercial realm, the proliferance of dot-com and telecom companies seeking office space has required brokers to fast-track the real estate process and building owners to modify and add technical, mechanical and convenience services. In the residential market, property managers, already masters of many disciplines, have expanded their service provider skills based on the changing demographics and demands of building residents; and the growing use of technology-based communications.

There was a time - not that long ago - when the characteristics of building residents could be articulated based on their neighborhoods. On the Upper West Side, residents' personalities often mirrored the casual, colorful, youthful and varied streetscape, while Upper East Side residents, notably from Fifth to Park Avenues, tended towards the formal and traditional with an upscale sense of privilege that goes with white glove service.

Beginning about two years ago, in conjunction with the new economy and compounded by a lack of new construction during the early 1990's, demand for "quality" housing rose as supply diminished. New buyers, @g to pay substantial money for housing, went looking for a $400,000 two-bedroom on the Upper East Side, only to discover that, if one was available, its asking price was probably $800,000. They went elsewhere - to other established neighborhoods and evolving gentrified ones such as Midtown West and NoHo - but took their heightened expectations for building services, staff and decor to lower cost per-square-foot buildings.

Property management has, of course, always been a people business - but now the people were changing. The pace of shifting demographics and psychographics continues to accelerate. According to statistics compiled by Tudor Realty Services Corp. (TRS), in the past few years, within buildings the company manages, approximately 25% of residents are recent purchasers. Having paid record prices, these new economy owners are taking an active role in the way their building is run, raising the bar of building service standards and creating fertile ground for conflict with longer-term unit owners and boards.

A case in point: in a building TRS manages, a new owner paid in the neighborhood of $I million for an eight-room apartment in a non-doorman., six-story, Upper West Side building. The owner expected to have staff available to accept packages, announce guests and immediately service their apartment - not unreasonable when one has purchased in the $1 million price range, but completely out of synch with the budget of a limited service building. Though they were willing to pay an increase in maintenance fees for increased services, other residents were not.

As scenarios such as these become more prevalent, the managing agent's role has, by necessity, become more proactive and intense. Today's manager must not only be an educator with regard to the building's current position, but also an impartial negotiator, discussing what changes may be productive and economically feasible, and an excellent communicator of the concerns of longer-term residents, new economy purchasers and the board.

Lastly, the managing agent must be a facilitator of solutions to meet new economy expectations for additional staffing (it may be practical to have someone available to accept Federal Express packages in the morning); increased services (the common areas will benefit by being cleaned three times, rather than once, a week); cosmetic upgrades (the staff could use new uniforms and the lobby will be more appealing with fresh flowers); and capital improvements (lobby redesign, elevator upgrades or facade restoration will build property value for all unit owners).

Technology-based communications have also impacted residential property management on two fronts. For one, in this new economy, more people are working from home. In turn, this trend has escalated the need, and heightened response times, for on-site services.

Secondly, internet technology has served to greatly enhance communication among managing agents, tenants and boards. What used to take fifteen phone calls can now be achieved with one e-mail. The property management firm's willingness and ability to embrace current technology assures not only prompt, responsive feedback on tenant problems and building issues but also hones the company's competitive edge with regard to operating efficiency and productivity.

This unprecedented market has produced interesting new challenges for residential property management firms. In addition to providing responsive, efficient, cost-effective management, maintaining properly functioning building systems and delivering quality, timely services, today's building managers must also demonstrate their ability to foresee and facilitate creative solutions in a rapidly changing age of great expectations.

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