CEOs Tackle the Labor Crisis
By Les Shaver
This is the fourth article in Chief Executive Outlook, our series predicting industry trends in 2018.
Talent and training top the list of industry leaders’ concerns heading into 2018.
With 99,393 apartments, MAA CEO Eric Bolton, began 2017 as the largest apartment owner in the country. Even as the head of a large public company, he knows success is not ultimately determined by how well a deal is financed or built.
“The most important variable driving success onsite is the quality of the people who are working on the frontlines, providing service to our residents,” Bolton says. “If you do not get the onsite staff right, good performance will be challenged.”
Entering 2018, with the unemployment rate at 4 percent and expected to drop further, finding and keeping associates who can take MAA’s systems, processes and tools and drive value for investors at the site level is a big challenge for Bolton.
“In this environment, where unemployment rates have continued to come down and new apartment construction has picked up, and you have a lot of developers reaching out trying to staff these properties, they are naturally going to go to some of the bigger companies that have more robust training programs and try to poach their employees,” Bolton says.
“One of my areas of significant focus going into next year is to continue to think about the things that we are doing to motivate and reward our onsite associates for doing a great job.”
Bolton is not alone.
Jay Hiemenz, President and COO of Alliance Residential Company, says “talent and training” are his biggest onsite concerns in 2018. The issue is more acute in high-delivery markets.
“There have been 90,000 units built since 2012 in Houston,” Ken Valach, CEO of Trammell Crow Residential (TCR), says. “That is approximately 300 new apartment communities with 300 new staffs and property managers. Finding the people, training them, and getting them up to speed is a real challenge.”
In this real estate cycle, superstar managers who specialize in lease-ups are so much sought that they can practically name their own salaries.
“The bench is not 10-deep for high-quality community managers,” says Greg Mutz, CEO and Founder of AMLI Residential. “Companies are bidding up the salaries and comps for really good community managers and the top maintenance guys. In addition, most service technicians can leave for a job in the construction industry, which usually pays more, even though more of a boom and bust sort of position.”
Gables CEO Sue Ansel says the search for top-notch onsite staffers is uniquely difficult.
Adds Camden CEO Ric Campo, “Wage pressure in maintenance positions and shortage of construction workers is the biggest onsite challenge.”
Ultimately, a tighter market for labor in any property management position adds expenses.
“Out of controllable operating expenses, payroll comprise about 50 percent,” says Valach, who relies on third-party managers to run TCR’s communities. “No matter what you put in the pro forma, you have to pay up to get the best people.”