Under One Roof: Should You Centralize Operations?
The pros and cons are complex. Here’s what to consider.
The practice of centralizing multifamily property operations has evolved considerably in recent years. What started as a consolidation of leasing specialists and property managers in the 2010s has morphed into multi-state, portfolio-wide combinations of administrative functions, resident services and data-collection platforms.
Add to these trends innovations in artificial intelligence and CRM software, and centralizing operations is an attractive option for owners and managers.
But taking this step for the sake of doing so, or solely to save costs, could be counterproductive. While the benefits can be immense, undertaking centralization without a clear purpose or considering the nuances of portfolios and employee preferences can result in setbacks.
A manager of newly completed market-rate communities may have entirely different workflows from an operator of scattered-site single-family rental homes spread across several states. For that reason, the ideal approach to centralization is often a hyper-localized one.
One size doesn’t fit all
Historically, the most common centralized role has been the assistant manager. This person handles daily operations such as bookkeeping, maintenance and lease administration. While that’s still the case today, operators have found success in further unifying most other administrative functions, as well as inbound communications with current and prospective renters. These approaches often differ widely in practice.
Some firms have largely phased out the position. “The majority of our properties don’t have assistant managers at all,” said Melody King, COO of property operations at BH Management, which oversees more than 350 properties in 37 states. Since beginning its centralization journey in 2018, the firm has combined all its renter application and contact centers and is currently piloting a centralized maintenance program.
Others have gone a step further. Second Avenue, an investment and management firm which operates scattered-site single-family rental homes, has personnel available locally for home inspections only. All other services originate from offices in Tampa, Fla., Chicago and Jacksonville, Fla., according to the company’s COO, Ray Barrows.
Not only have some firms gone virtual but some others have automated their first points of contact entirely. Asset Living has created virtual leasing concierges, which are assigned to 10 properties each and are like “a fisherman capturing all the initial applications and inquiries that come in through in-person or chat service,” described Pauline Houchins, the firm’s division president. The concierges also set up appointments for leasing agents, expedite the application process and even work on a site-specific basis if needed.
AvalonBay Communities occupies the middle ground between full virtualization and site-specific management. Michael Coyne, the firm’s vice president of operations, refers to his company’s approach as a “neighborhood model,” where associates share managerial duties for three to five communities in the same area.
According to Coyne, the teams benefit from having distinct duties at specific properties along with the resources of regional offices and integrations with AI. “The key insight we’ve learned is that centralization isn’t binary. It’s about finding the optimal blend for your portfolio and customer base,” he said.
Smooth Transition Strategies
Even though many of centralization’s potential drawbacks can happen because of a disorganized or unfocused approach, the transition can be highly successful if stakeholders effectively convey their reasoning to renters and staff. From tech stack changes to career path diversions, constant communication across centralized teams is a must.
Budding centralizers would do well to start small and scale up based on employee and resident feedback. “Start with a pilot program, preferably something less complex like billing, and let user feedback and operational metrics guide your expansion,” advised Michael Coyne, vice president of operations at AvalonBay Communities.
No matter which processes are involved, it’s important to communicate not only how a firm is going about centralizing but why. “The worst thing that can happen for teams is to be worried about their jobs,” noted Kevin Owens, president of RKW Residential. “Make sure that they understand what the goal is and the steps you’re going to take.”
To thread this communications needle, it may be most effective to allow the process to progress naturally by framing it as a business opportunity rather than a goal to aspire to. “I would never want to be put in a position where I would have to eliminate a position (in order to centralize),” shared Tim Kramer, director of operations at Draper and Kramer.
Even when a role does become centralized, Kramer prefers that his team stays aware of the details, such as local market data, accounts receivable and even which residents pay rent late.
“We don’t want to totally remove the folks on-site from these processes; we just want to take away the routine portion of that to leave room for the exceptional to be handled personally,” he said. “As a general rule, one should automate the routine and personalize the exceptional.”
The benefits: Saving time and money
As with many other tech-focused management strategies, the most frequently reported benefit is saving valuable staff time, whether it’s training or the turnaround for assisting residents and prospects. These savings come from streamlining what are often disjointed procedures and software used by different teams at the community level.
“The program itself (was) always used to solve some consistency and labor challenges that we were seeing,” noted King. “In managed multifamily, you expect that all of your teams are doing things the way that you have outlined, and (when you) centralize, you realize that’s not the case.” King’s company has gone from training 350 separate teams to onboarding a smaller number of specialists armed with portfolio-wide knowledge.
But the time saved by centralizing doesn’t apply only to training. Draper and Kramer has found that its firm’s asset managers are far more responsive to individual resident queries and requests, which is an advantage of consolidating data and document processing platforms, according to Tim Kramer, the firm’s director of operations. “They’re more available, they can meet with teams more often and they don’t have to close their door to muddle through a series of reports,” he added.
But those looking for on-the-ground cost savings will find results, as well. “Centralization has helped drive payroll efficiency, with same-store payroll falling by 4 percent in 2023 and holding flat in 2024, despite inflationary pressures,” Coyne reported. “The real competitive advantage is our ability to deliver premium experiences without premium costs.”
The key insight we’ve learned is that centralization isn’t binary. It’s about finding the optimal blend for your portfolio and customer base.
—Michael Coyne, Vice President of Operations, AvalonBay Communities
Potential perception problems
Most of the negatives associated with centralization tend to come from a disorganized rollout or residents who are dissatisfied with the new approach. When BH Management first centralized its renewal specialist program, it used a platform separate from its existing CRM. “It just wasn’t working,” King recounted. “We weren’t getting the traction we expected, the residents weren’t buying into communicating with someone who wasn’t on-site and we had to scrap the program.”
The transition to centralization can also pose significant challenges in-house. Moving a community-specific leasing office across the country may not sit well with team veterans accustomed to familiar protocols and processes. The biggest hurdle is the adjustment period, according to Kramer. “You have a lot of site managers who have done what they do for a really long time, and this is very different,” he said. “Not having to do a series of reports or not seeing them right away took some adjusting.”
Communication is key to avoiding these pitfalls. As Kramer put it, “I wanted to make sure (they) didn’t feel like someone from corporate was swooping in and taking control away from them.”
Centralization can also lead to a sense of lost control by inadvertently muddling conventional career paths. “Traditionally, you start as a leasing agent, you become a leasing director, an assistant manager, then a property manager,” Kramer noted. “If you pluck one of those functions from the site, that’s a different career transition and path.”
Relying on technology alone may also be a recipe for trouble if there’s nothing resembling an on-site manager to assist residents. Centralization can get a bad rap from residents and prospects who perceive it as a corporate consolidation and cost-saving measure, rather than a means to help them be more efficient. And many either love the technology or hate it.
“There are residents who will select the option of doing everything themselves alone without any interaction,” shared Kevin Owens, president at RKW Residential. (Alfred, the firm’s parent company, recently announced plans to merge RKW with Quarterra, which will both expand the portfolio and streamline operations and performance practices).
Opting out of centralized operations, Owens believes that some form of on-site presence is necessary. “In those cases, if there is a glitch in the technology, they want to talk to someone,” he said. “It’s important to have people available to residents and prospects so that they can quickly address anything that comes up.”
Ironically, avoiding these pitfalls often involves as local an approach to centralization as possible, as well as viewing it as an assistant for the staff, rather than a replacement.
Asset Living’s Houchins advises operators to keep the community director position localized whenever possible. “We’ve tried to have managers split among several properties, and we’ve found that that’s very stressful for that team member because there are a lot of expectations on the customer service front, and residents don’t like not having someone present,” she said.
Additionally, amenities and programming, particularly for affordable and senior communities, call for a significant on-site presence. “Resident expectations in these environments are higher, and real-time engagement is essential for delivering a superior experience,” noted Wendy Deetjen, vice president of The Habitat Co.’s market-rate portfolio.
And if a team member has detailed knowledge of local market dynamics, it makes little sense to take them out of familiar territory, according to Coyne. “We haven’t removed our on-site associates from any part of the process but instead have enhanced their capabilities,” he noted. “We keep an on-site presence wherever human judgment, local market knowledge, or personal connection creates value for residents.”
