This category includes establishments primarily engaged in the operation of apartment buildings. Apartment buildings are defined as those containing five or more housing units.
531110 (Lessors of Residential Buildings and Dwellings)
Operators of apartment buildings are responsible for a valuable asset: income-producing real estate. Their goal is to preserve the asset and increase its value over time through proper management techniques, while generating current income. It is a common misconception that operators of apartment buildings merely collect rent, show apartments, and sign leases. In reality, the operation of an apartment building is far more complex. This is why many owners of apartment buildings contract with a professional property management firm to oversee management of their property and maximize its value.
Property managers act as the agent of the owner of the property and have a wide variety of responsibilities. They market vacant apartments to prospective tenants and establish rental rates in accordance with local conditions. They negotiate and prepare leases, collect rents, hire maintenance personnel, and handle the bookkeeping (taxes, mortgages, insurance) for the property. The property manager must also prepare reports for the owner concerning all aspects of the apartment property. Effective management of apartment buildings, from small buildings to very large apartment complexes, thus requires expertise in business management, real estate, finance, and accounting.
Early Apartment Operators. The demand for effective management of apartment buildings began in the late nineteenth century, in large measure because of two inventions that would change the face of urban real estate. Creation of the steel frame building and the electric elevator made possible the advancement of high rise apartment and office buildings, changing the urban landscape forever. Construction of multi-family apartment buildings certainly contributed to this transformation.
The depression of the 1930s had a profound effect on the evolving property management profession. Numerous failures and foreclosures during this era placed much of the nation's real estate in the hands of institutions: trust companies, insurance companies, banks, and other organizations. A large number of income-producing properties thus fell into the hands of corporations. While some of these corporations formed their own property management firms, many quickly realized that responsibilities involved more than simply collecting rent payments and selecting tenants. As the need for more specialized expertise emerged, the industry gained strength in numbers and stature.
Today the professional apartment management firm must have a comprehensive understanding of the economic forces at work in the real estate market. Operators must be able to realistically evaluate the property in light of the real estate market, forecast its potential for the future, and construct a management plan to maximize the building's potential market value, while remaining flexible to the demands of the ever-changing real estate market.
Most property managers handle several buildings simultaneously. Managers also negotiate contracts for security, trash removal, landscaping, and janitorial services for common areas. If the building has other facilities, such as a swimming pool, tennis courts, health facilities, parking areas, or a golf course, maintenance and repair contracts for these areas must also be secured. Managers oversee all repairs and maintenance of the property. At a larger property, they hire personnel to maintain the facility's heating, ventilation, and air-conditioning systems and perform routine maintenance and repair work.
In the late 1990s, investing in apartments was considered low risk. The market was evenly split between those interested in selling and those interested in buying. The relative stability of the apartment marketplace made it an attractive investment for those interested in purchasing real estate. The demographics of the renter's marketplace are shifting towards older couples who want less responsibility than required of a house and more childless couples who do not always need a large house. Also, there is money to be made in ancillary services, such as allowing companies to use rooftops for transmission antennas or making a deal with local cable operators.
In 1999, there were 59,718 establishments in the United States, employing 267,784 employees. Annual sales for this industry was approximately $36 billion. Prominent companies involved in apartment building operation in the late 1990s included Wilmac Corp, a private company out of Pennsylvania; its annual sales figures were nearly $1.2 billion. Holding the number two spot was Connecticut-based Avalon Properties Inc., with annual sales at $1 billion. The third largest company, in sales, was Forest City Enterprises of Cleveland Ohio; in 1999 its sales were $633 million.
"Amber Waves of Gain." Journal of Property Management, September-October, 1996: 56.
"Changing Demographics Stymies Apartment Demand." Building Design & Construction, January 1997.
Palmieri, Christopher. "My Partner, Your Landlord." Forbes, 20 May 1996.
Sinderman, Martin. "Apartment Market: Too Good to be True?" National Real Estate Investor, June 1999.
Ward's Business Directory of U.S. Public and Private Companies. Farmington Hills, MI: Gale Group, 1999.
U.S. Bureau of the Census. 1997 Economic Census. Available from http://factfinder.census.gov .