Strata Management Industry – Time to Increase Management Fees?

It’s a bit ridiculous for someone to stand up and yell to the room that the OC industry needs “service, service, service!!”  but in practice actively works to drive pricing down… Definitely something amiss and a contradiction.

So where do we stand on whether the strata industry in Victoria (and nationally) should be increasing or decreasing their Management Fees?

  • We wrote this article back in 2021.
  • Page 11 of Macquarie Bank’s 2023 Strata Management Benchmarking Reports covers the decline of average strata profit margins in detail. Short summary – 78% of respondents to the Macquarie said that profit decreases were due to higher staff costs.
  • At Strata Consultants – whenever we encounter Management Fees need to go up (to deliver on what the OC wants/needs), we are brutally honest in promptly informing the Committee as such.
Strata Management Industry – Time to Increase Management Fees

Also on this topic – here are two pearls of wisdom from recent conversations:

  1. Possibly the wisest words that I have heard in over 12 years of working in strata.

The Chair of a Tier 2 building we recently helped to change OC management companies had this to say (to an owner questioning the Committee’s decision):

“…her focus on cost is misplaced – OCM fees are a small fraction (<10%) of the total levies; the price differences between OCM proposals are minor; and, as when choosing any professional service (restaurant, hairdressing, house painting, doctor, lawyer, etc), quality is paramount & price is secondary.”

  1. The Head of BDM at a large and recognised OC management company in Victoria had this to say: “The price is the price.”

Now, I’ve known this guy for a few years – he is switched-on, well-travelled in his business career, very reasonable, and an absolute gentleman. What he is saying isn’t that they want to screw clients out of every penny or charge for every small thing – no, they’re not one of those OC management companies.

What he is saying is this:

  • They’re willing to negotiate and move – within reason.
  • As a business they have costs and overheads.
  • It’s not easy to find and hire good people – then to expend time, energy, and money to train them.
  • They have regularly have recruiters and competitors sending their OCM staff wonderful messages on LinkedIn.
  • Some clients (90% of the time through no fault of their own) have issues and big issues that need resolving – which means they have to price these OC contracts where they price these OC contracts.

So at the end of day – there is no need to yell at the OC manager for submitting their price. Seems odd to say but we heard of the GM of a large OCM in the CBD being quite badly and loudly scolded for submitting their pricing for a large building.

Here’s what we promise here at Strata Management Consultants:

  • We’ll never run a tender with 10 to 20 companies vying for an OC contract.
  • We’ll never rate or rank you based on arbitrary metrics that we control.
  • We’ll never tell an OC Committee we will drive down the cost of their OC management fees.

 

Please feel free to share to your professional strata network in Victoria and nationally.

 

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
Posted
November 01, 2023
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