16 Nov 2023
Words Trudy Crooks Informer 109

Big Industry, Small Businesses

This month, we’re delighted to launch ResortBrokers’ second ever management rights industry report.

Firstly, props to our inhouse Property Economist Josh Mangleson for his excellent work on this. Having set a high bar with last year’s inaugural report that gave the management rights sector its first ever industry snapshot, Josh has outdone himself this year by bringing in three new data partners: ARAMA, the peak body for the management rights profession in Australia; AccomValuers, a specialist valuation firm focusing on management and letting rights businesses; and Australian Valuers, an independent property valuation expert.

Thanks to the buy-in of our new data partners, we have a better idea of the size and make-up of the management rights sector nationally. We now estimate the sector’s value at $8 billion, compared to $4.8 billion in last year’s report. This year’s report also gives us a good idea of the composition of the industry.

Despite some large-scale operators, the industry is dominated by caretakers operating small businesses of one or two people maintaining complexes of less than 110 apartments. An $8 billion sector is very much powered by small businesses.

The strength of the management rights industry is underpinned by the strength of the model. For operators, the management rights model appeals to people looking for both a home and a business, which is how model was first conceived in the mid ‘60s. For owner-occupiers and investors, caretakers take the burden of the constant upkeep of an apartment complex off their shoulders. And banks love management rights because the model provides a secure income to service the loan and is backed up by long tenure. They’re a win-win all round.

As for management rights transactions, we’re in a two-tiered market at present. This seems to be the case for most accommodation property asset classes at the moment and management rights is no exception. For small- to middle-tier properties, deals are still transacting, but there’s no denying interest rates and inflation are pinching. This is especially true of management rights that are coupled with a caretaker’s unit. If you’re buying an apartment of any decent value together with a management rights and letting business that’s not netting much, there’s less left over once you factor in your interest payments. This makes them less attractive, but I don’t want to overstate the effect of interest rates and inflation too much. As I said, the market is still active, though undoubtedly it’s taking longer to match properties with buyers and deal times are stretching out (so sellers with an exit timeframe in mind need to factor this in). 

At the top end of the market, highly desirable assets continue to attract large pools of buyers vying for them.

Due to that competition, we’re seeing similar, if not better, sales prices than usual. And that’s despite interest rates. This is particularly the case with high netting permanents, which seem to be bomb proof at the moment. Regionally, particularly North Queensland, large-scale management rights are selling really well because they’re high netting and the multipliers are lower. So, they are very attractive to investors, especially syndicates and the big end of town who are chasing high quality passive investments.

I’d like to finish on a different note altogether. By the time you read this, I’ll be on holiday. We all need to recharge once in a while, and taking breaks gives us the opportunity to rest and come back reenergised. Owning an accommodation business is hugely rewarding, but it can also be unrelenting, especially for smaller operators who are short on hands-on help. Burnout happens in our industry all too frequently, and when it does it can impact your business. While no one can look after your business like you can, there are many reliable relief managers who can take care of the home front while you take a needed break. Our list of relief managers at the back of the magazine (as well significantly more at resortbrokers.com.au/buy/relief-managers) may help you find someone who can mind the store while you get some well-deserved R&R.

See you bright-eyed and bushy-tailed in 2024! END

Trudy Crooks, Managing Director
0477 882 210
trudy@resortbrokers.com.au