It’s that time of year…when we break out the biggest hits and misses of the last 365 days and predict what’s on the horizon for the new year. As far as the property management industry is concerned, 2022 was a rocky year, with Covid regulations continuing to prevent landlords from collecting rents to water restrictions pressing property owners to rethink how to design and upgrade their properties. Can property managers expect better experiences in 2023? We asked Rick Hoegler, CEO of Pan American Properties, for his predictions.
Rental Trends: “No One Really Knows”
“We have seen rents softening in the market across all sectors, not just in the high and low ends,” Rick says. He attributes it to seasonality, the time of year when most people aren’t moving around as much. “Who wants to move when you’re putting up a Christmas tree?”
But he admits seasonality can’t completely account for the slump in rental sales. “How much of an effect does this softening and slowdown have on the economy? I’ve listened and spoken to multiple forecasters – economists, bankers – who usually have a good pulse on what’s going to be happening. And nobody really knows. That’s what creates the uncertainty and the pause.”
While the technology industry in the northern part of California has suffered massive layoffs, service-based property management has so far remained intact. “Apartments still need to be managed, and construction is still happening,” he says.
Still, Rick remains positive about the future forecast. “We budgeted for a 3 to 5% increase over the next year. But the market is going to dictate. So if people aren’t moving, if we’re not seeing a surge in demand, that will be a problem. But as of right now we’re not seeing a need for concern.” Besides, with rising interest rates, “no one’s buying houses right now,” he says.
Legal Considerations: Wage Transparency and the “Covid Hangover”
According to Rick, legal constraints continue to be an issue. While nothing is changing much in the multi-family space this next year, the new Pay Transparency Act signed into law by Governor Gavin Newsom, effective January 1, will require employers with at least 15 workers to provide pay ranges when posting jobs. Employees will then be able to ask potential employers for the pay ranges for their position. Changes in how employers report this pay data to the state will also be effective on the first of the year. “So that will be a challenge,” he says.
And “the Covid hangover” continues, Rick explained. Covid evictions are still in process, and while the courts have embraced technology and managed to cut through the cases clogging the system by holding hearings on Zoom, now those who enforce the laws such as cops and sheriffs are deluged with cases. Many delinquent tenants tend to stay in their homes for as long as they can, requiring forceful removal.
“Our clients are frustrated, and we are frustrated. They are not collecting rent, and we are not collecting our management fee,” Rick says. “L.A. City’s eviction moratorium continues through the end of the year, and its rent freeze could continue throughout 2023. But there is a light at the end of the Covid tunnel. Things should return to normal by the end of the second quarter of 2023,” he says.
Compliance Issues: The Balcony Inspection Law
“Compliance with California’s Balcony Inspection Law (SB 721) is something property owners need to be aware of now,” Rick says. “It requires property owners with three or more units and two or more floors with elevated structures, such as balconies or decks, to have completed their initial inspections by January 1, 2025. Compliance will most likely require labor, and this is where a softening economy can be of benefit, it may be a good time to get better deals on labor and materials.”
“Balconies aren’t the only area property managers should be focusing on. The supply chain crisis, while improving, can also be used to property managers’ benefit,” he says. “Warehouses are full, and significant deals are there to be had. If you are looking to renovate or upgrade, now is a good time to do it. You will get prompt service, better materials, and cost pricing.”
Why You Should Hire Pan American Properties
“We’ve experienced no slowdown at all. We will be expanding our maintenance and construction areas and looking to add new services and continue to build a good, quality team,” Rick says. “And instead of being subject to vendors and the economic climate, Pan American Properties is taking advantage of the market – any softness and fluctuations – to better our team. And provide more services to our client.”Are you looking to have an impactful 2023? Take advantage of Pan American’s expertise and qualified professionals and call them today at (888) 754-9700 or email [email protected].