Labour Shortages & Strata Management
Recently, a number of stories made the rounds regarding an open secret in the Strata Property Management world: that good labour is getting increasingly hard to find. Business in Vancouver (BIV) published the following article https://biv.com/article/2018/02/shortage-metro-vancouver-strata-agents-worsening this month and the CBC’s take be found here.
While there are some factors that are hitting every industry in BC and small business in particular (for example, the new payroll tax will be a very significant new $45k+ hit to our 30 person company in 2019), there are several that impact Strata Property Management more acutely than other businesses. It’s no secret that minimum wage increases, the sky-rocketing cost of living in the greater Vancouver region and the demographic shift of baby-boomers retiring is exerting an overall upward pressure on wage costs. While these problems are not unique to our industry, the resulting critical lack of capable strata licensees should be a grave concern to those living in or investing in strata corporations in BC.
Along with those common problems felt throughout the Lower Mainland labour market there are many pressures in our industry that are indeed unique or at least by-products of the particulars of Strata Property Management. We’ll discuss some of them below. Unfortunately, the list isn’t exhaustive:
- Housing Starts and Lack of Labour: Between 2009 and 2016, the value of new construction permits in the City of Vancouver alone rose from $1.58 billion to $2.72 billion (with a brief pit-stop at $3.24 billion in 2015) according to the City’s statistics. There are approximately 500,000 strata lots in BC, and strata corporations account for 80% of the increase in the number of all properties in BC since 2007 and 90% in the Lower Mainland. Conversely, there are approximately 1,300 licensed Strata Managers; however, most of those licensees don’t actively practice strata management (i.e. they work in rental, or trading services and simply maintain their license for flexibility). Industry organizations estimate that there are approximately a shocking 300 to 500 active Strata Managers in the PROVINCE. Amazingly, the number of Strata Managers has not increased in at least 10 years- in other words, the same number of Property Managers are handling tens of thousands (conservatively) more units as a decade ago.
- Difficulty/Complexity of the Job: If you ask any Strata Property Manager who has been doing this for 10+ years, they will all tell you the same thing: The job is much, much more difficult than it used to be. As evidenced by the huge stock-piles of cash in Operating and Contingency Reserve Fund accounts that have skyrocketed over the past 20 years, there are many more large projects (envelope, roofs, windows, etc.) at Strata Corporations than there used to be. This is a function of new and onerous regulation and the increasing complexity of building systems, coupled with the aging of Strata Corporations- many of which are 20-30 plus years old and hitting the biggest phase of their renewal cycle. Needless to say, the hundreds of emails a Property Manager receives each day make it difficult for them to keep up with all of the other things that they are required or assumed to do for their clients. To sum up, the job is far different than it was a decade ago and Property Managers have to be better and more qualified than they used to be. Significant steps need to be taken to reduce the workload (number of Strata Corporations/units being managed) while not reducing salaries otherwise those living in strata corporations will ultimately suffer from poor or effectively no management.
- Amalgamation and the Entry of Large US based Companies: This is certainly not unique to our world, but while we’re proud to be locally owned and operated we do face real pressures from competitors who are able to undercut the industry by offering reduced rates on management fees in order to “win business”. Those competitors often offer what they refer to as “ancillary services” such as concierges, general maintenance, painting, etc. which allow them to boost their bottom line along with other revenue streams which may or may not be properly disclosed to the client. This leads to all sorts of questions as to what the priority of the management firm is: is it to provide good management, or is it to open the door to other services that their parent company provides? Not only are we not interested in that sort of business, we simply don’t agree that it provides good value to clients in the big picture. We focus on attracting and retaining the very best, most capable people and that continuity has proven to our differentiator, but it comes at a cost- one that informed clients are quite willing to pay. When we are visiting with potential clients, they are keenly aware of price differences between our firm and our competitors, and of course they are looking for good value for their dollar. While we’ve been successful over the years in demonstrating that you do indeed ‘get what you pay for’, it cannot be denied that ultimately price is a significant factor when selecting new management. Stratawest and firms like ours (medium-sized, paying top dollar to our staff, providing excellent benefits, boasting industry leading recruitment and retention, etc.) simply can’t compare on price while quoting apples to oranges with those firms on such an uneven playing field and this can’t be ignored. You get what you pay for every time.
- Dissatisfaction of Employees/Potential Candidates/Millennials: Much of this data is anecdotal, but the new licensing stats prove the point- we are not seeing the necessary flood of new entrants into the industry to replace the baby boomers who are retiring. This is evidenced by the fact that the number of Strata Property Managers hasn’t increased in decades. Although this is an excellent second or third career for those with some work experience and skills, the industry itself does not have an accurate identity and simply does not fit into what the typical millennial is looking for- a meaningfully positive work environment (we get yelled at a lot!), no evening meetings, a particularly team-oriented environment and the ability to come and go as they please. It is going to become increasingly difficult to attract new candidates into our industry without some very real changes to how business gets done and how those efforts are compensated. Top of the list aside from fees may well be evening meetings- probably the number one source of complaints of those currently in the industry. The days of 7pm-9pm (or 11pm!) meetings could be numbered, as new entrants into the industry simply won’t put up with the resultant 12 (or longer) hour days on top of an already hectic day of emails and phone calls.
- Increased Regulation/Licensing: Licensing for Strata Property Managers came into effect in 2005, and provides an excellent tool for ensuring that new entrants into the industry have a base level of qualification; however, there is a real cost (more than $1,000 in cash, and many hours in time) in pursuing a license with the end goal often being awarded a job in the industry where you will have an entry portfolio of 15+ buildings (not how we do things, but certainly the norm). The ongoing education requirements in our industry have also increased while legislation changes/regulatory oversight have all made it much more difficult for new licensees to enter into the industry with no experience and be able to do what is required of them. For example, 5 years ago there was no Civil Resolution Tribunal (CRT), no mandatory Depreciation Reports, no oversight from the Real Estate Council on the operation of Section Strata Corporations and more. Frankly, it used to be that a Property Manager would show up with zero relative education or experience, be handed a portfolio of business and be on their way. The job is far too challenging and regulated now for that to end anything but poorly, and training takes months (years, if we’re to be honest). In short, regulation and legislative changes provide a significant barrier to recruiting qualified people to become Property Managers.
So why are we telling you all of this?
The answer is simple: along with all other reputable management companies, we are going to have to raise our management fees while taking a very hard look at potentially reducing the number of clients in our overall portfolio. For many of our clients, we have no choice or flexibility about an increase in fees. We have tried to keep up with at least inflationary pressures alone for the better part of a decade (i.e. minimal 2-3% increases in management dues, some of which are refused) while having to ignore that the costs of doing business in our industry have far out-paced general inflation. Add in the major increases in the cost of running a business and something has to give, and soon.
It should be noted that we regularly (and proudly, in an odd way) turn down calls for new business as we watch our capacity levels first and foremost to ensure we do not effect the level of service we provide to existing and incoming strata corporations. It is one of the key reasons we are a company with almost 100% retention both in clients and staff- we maintain our reputation by not biting off more than we can collectively chew. However, more and more, that new business is offering to pay a premium over existing clientele because they have experienced an existence with less-qualified competitors of ours. While we love the relationships we have with our clients, we also can’t ignore that many are paying fees that are not much more than they did 10-20 years ago when adjusted for inflation, and more still are under the minimum we would take a client of their size and needs on for today.
We know that we are not perfect- some clients will review this memo and have complaints about an issue that hasn’t gone well at their building (which we’re certainly open to hearing about and want to help with), but we do believe that our firm is an industry leader in many ways. We are accountable, our staff are better qualified than most, our retention of both staff and clients is unparalleled, and most of all we truly do care about our clients. This has to come at a cost. We know that there are other upward pressures on costs for your Strata Corporation, and are sensitive to that, but if anything that is all the more evidence that we need to be better compensating our Property Managers and support staff so that they can help you navigate those challenges. We truly believe that by rewarding our staff for the excellent work that they do, they will be better able to assist you with the upkeep and maintenance of your property and that you will find it to be a good investment.