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The more profitable a real estate business is, the higher the proportion of revenue they earn from property management, a new study has found.
The biannual Macquarie Residential Real Estate Benchmarking Report has found property management has become even more important for successful offices.
According to the results, 44 per cent of overall agency revenue from high performance offices (20-plus per cent profit margin) is derived from the property management department.
Managing director of Morton & Morton Sydney Ewan Morton said while property management is linked to sales, it’s more prevalent in inner-city markets.
“In our main markets, which are around central Sydney, we know that 70 per cent of our marketplace is rented," he said.
“So if we want to control the sales market, we have to control the rental market - it’s as simple as that.”
For poorer performing agencies, the focus on property management was much lower.
According to the results, offices with a profit margin between 10 and 19 per cent attributed 42 per cent of their revenue to property management.
Offices that generated between one and nine per cent profit only attributed 36 per cent to the property management department, while offices that broke even or ran at a loss only generated 29 per cent of their profit from property management.
“This reflects the closer relationship between property management and sales volumes in a market where property investors are playing an increasingly large role,” the report reads, “with the same client often being served by both parts of the business.”
“It also indicates a larger structural shift in an industry which has come to realise the value of property management in generating a reliable income stream, relatively insulated from market cycles. As a result, property management is a key driver of both profitability and stability.”
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