The good news is Australia’s 61 years-old strata industry is flourishing. In fact, it has doubled in 20 years. The last two decades of growth has been cumulative rather than cyclical, with each release of lots into the market adding to the industry’s dwelling stock.

The growth is driven in large part by residential apartment construction, through demographic shifts and population growth, which have buoyed the sector’s performance.

Over the years, the industry has focussed on efficiency drivers, client experience and scale.

However, according to Macquarie’s 2023 Strata Management Benchmarking Report, the sector has reached an inflection point.

The trends of technology, the environment, inflation, rising financing costs, higher labour costs, rental prices and shortages are all big news right now and the strata sector is no different.

Here are the key trends to watch for in 2023:

Greater Demands From Owners

Owners are more sophisticated than ever, and we are ready for the challenge. They’re looking for better financial reporting and advice on financial management, and greater transparency and communication.

In addition, ever improving technology is the asset that gives strata management firms a competitive advantage that we are benchmarked against.

Short Term Letting Making A Comeback

Before 2020, short term letting in apartment buildings was a hot-button issue. Then COVID-19 hit, and many apartments in the short term letting pool were returned to the permanent market.

In the last two months, we have seen a resurgence in complaints about guests entering properties on a short term basis. The impacts of short term letting include frequent parties, lack of knowledge of guests about building procedures (rubbish, fire escapes), and an increased toll on the common property from luggage and additional visitors.

SaaS Software Technology

Automation is key across the board in every industry, and strata management is no exception. We continue to invest in our systems to assist our managers so that we can provide you with the highest quality services.

Managers will need to get technology to do more, to ease their rising workloads and to scale up their business. Plus, ‘work-from-anywhere’ requires mobile applications to do so.

Demographic Shifts

Baby boomers are retiring and the Millennial generation is out of their parent’s homes and into renting their own apartments and / or purchasing investment properties.

Some will continue to migrate out of the cities to rent roomier houses. The rental products and management style, therefore, will gradually be reshaped to suit them in 2023.

Apartment living is more popular than ever, as empty nesters continue to down-size and choose apartments as their new nest. Managing expectations of owners who have recently moved from low-density housing is a key challenge.

Rising Costs

We all know financing, wages, utilities, and operating costs are already on a steep incline. We are observing rising costs across our portfolio for trades, materials, insurance and energy. We have seen buildings that locked in low electricity rates three years ago and are now needing to increase electricity budgets by 50 – 80% as they come off contract and face negotiating new rates at current pricing.

Insurance Challenges

The strata sector is facing a very challenging 2023 for insurance. Recent advice from our brokers is that insurers continue to withdraw from the strata insurance market and the remaining insurers are applying significant premium increases or choosing not to insure buildings which present unacceptable or unprofitable risks – any defects or significant claims are penalised. We continue to see large increases in premiums of 10 – 30%.

More commentary on this from our insurance broking partners next month.

Management Efficiency & Staff Retention

Staffing challenges and a tighter employment market have a bearing on running strata optimally.

Creating an attractive environment, including the latest technologies, along with room for career growth – is critical in order to attract the next generation of strata managers.

McCormacks is working on strategies to attract and retain the best group of strata managers to ensure we can deliver on our promise to be the highest quality strata manager in Sydney.

Sustainability

New funding commitments by the state government in NSW and opposition in Victoria, have put EV charging infrastructure in the fast lane, but the brakes will still be on the rollout until the untapped potential of strata complexes is unleashed.

Our strata managers are well versed in EV charging options for your building, so we encourage you to speak with your manager if you wish to know more.

Grants are also available from various local councils to investigate and improve the efficiency and sustainability of your building – from changing to efficient lighting, to major upgrades of plant and equipment – everything helps reduce your bills and carbon footprint.

This is becoming increasingly important to owners and purchasers alike.

Read more: New Electric Vehicle Funding Needs to Swerve Towards Strata Complexes.

For more, or to discuss your 2023 strategy, please contact the experts at McCormacks.