Are Bigger Property Management Companies Necessarily Better?
Jan. 21, 2015 — We've looked at the evolution of property management companies. As times change and needs grow, so do companies — by merging and pooling their resources together. For smaller companies, such as Gerard J. Picaso Inc., joining forces with a larger one makes good sense.
But is bigger necessarily better?
No, says Peter von Simson, CEO of midsize New Bedford Management.
With midsize firms — generally running 40 or 50 buildings — "a client can always speak to the chief executive of the company," Von Simson says. "I think with these larger firms that would be difficult. With these companies that manage a thousand buildings nationwide, it's impossible." Managers in midsize firms "know who you are, top to bottom, and not as a building in a general category."
Steve Greenbaum, director of management at Mark Greenberg Real Estate (MGRE), agrees that larger companies can lose touch not only with their clients — but with their employees as well. "They're huge, and they don't have the hands-on or the interrelationship of midsize companies."
Von Simson adds that one key "difference between us and a lot of the larger firms is that they're in it to provide ancillary services — things like insurance and energy — not just managing the building. With midsize companies like us, the core business is management. With these massive companies, there's more of a chance that something will be missed."
The widely touted advantages of buying in bulk are not as impressive as they seem, argues Von Simson. "By paying attention to the bills and going with vendors who are paid on time and appreciate the work — combined with our knowledge of the buildings — can get buildings good deals."
The Little Firm That Couldn't
Some are saying that changing times and the growth/mergers of larger firms will be hard on smaller firms, especially ones that are just entering the arena. Greenbaum notes that the management business has become more complicated in recent years: "Ten years ago, little companies — with five, six, ten buildings — could make it. But now they're falling apart. The management business is just so time-consuming and the paperwork and the filings that are now required compared to five years ago — we're not getting the kind of [fee] increase that is commensurate with the amount of work we do. The demands of the co-op world have gotten great, and those demands have put a lot of stress on many, many companies." Consequently, smaller firms find it harder to stay afloat.
"There is a much greater barrier to entry," agrees Von Simson. "With all the new requirements that are in place, the risk to a building if it takes on a new manager without experience is much greater. It stops smaller guys from becoming midsize. You could be a small company in the 80s and still be able to manage buildings well. Now, everything is so fast, if you're not able to respond immediately, you're going to be at a disadvantage."
He insists midsize firms are in a good position: "We can't serve every building in Manhattan, and we wouldn't want to. But the midsize management company is, in a lot of ways, the sweet spot. For buildings with, say, 50 to 200 units, I don't think there's any better choice than the midsize management company."
Geoffrey Mazel, a partner in the law firm Hankin & Mazel, has worked for nearly three decades with co-op and condo boards that have hired small management companies, big ones, and everything in between. "I find, as an attorney, that I prefer to have personal relationships," Mazel says. "I don't see that bigness in a management company is necessarily better. The best fit between the manager and the building is what matters."
Adapted from "Management in Transition" by Bill Morris, with additional reporting by Tom Soter (Habitat, January 2015)
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