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The fee-management industry is at a crossroads. Rising operational costs, flatlining rent growth, high interest rates, and workforce challenges mean owners are looking for new ways to improve net operating income (NOI). Owners are pushing fee managers to control costs and are actively looking for operators who can implement streamlined, cost-effective operating models without impacting performance.
For fee managers, these owner demands represent both a challenge and an opportunity. Historically, third-party managers, unlike REITs and Owner/Operators, have had to balance the competing priorities of many different ownership groups. This dynamic has traditionally made large-scale innovation difficult. But as AI-driven efficiencies and centralized operations prove their value, the demand for fee-managed AI & centralization innovation has never been stronger. EliseAI has observed centralization & AI-forward partners winning RFPs over management companies that have been slower to adopt. Today, we are already seeing fee managers who successfully articulate the value of their streamlined operating model gain market share and increase units under management while improving their profitability.
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Industry Headwinds Demand a New Approach
The pressures on third-party managers are intensifying:
- Operating costs have surged:
- Insurance premiums have increased 20-40% year over year, with specific markets seeing an over 100% increase
- Unit turnover costs are 2.5 times higher than in 2020.
- Onsite workforce retention remains a challenge—44% annual leasing agent turnover disrupts operations
- Supply is outpacing demand—creating a more competitive leasing environment, especially in specific markets (e.g., Dallas, Denver, Washington, Arizona)
- High interest rates are putting pressure on owners
Given these realities, owners are demanding leaner, more efficient operations. While some fee managers may attempt to “do more with less” and operate as normal, these reactive measures fail to address the underlying need for operational transformation that recent tech innovations have enabled and that REITs and owner/operators have proven.
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The Choice: Cut Costs or Innovate
Fee managers have two paths forward, either operate as usual while trying to reduce costs, risking stagnation, or
- innovate by optimizing their operating model around AI-driven centralization, achieving greater efficiency and long-term growth.
AI-powered operating models are an opportunity for fee managers to deliver more value to owners, prospects, and residents efficiently. By optimizing operations around AI, fee managers can reduce costs, enhance the resident experience, and up-level their existing brand—a key differentiator in a competitive market.
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There Is A Proven Model For Innovation
For management companies and owners hesitant about transitioning to an AI-powered, centralized operating model, REITs and owner/operators have already proven this model’s success. When implemented correctly, EliseAI has seen that this operating model can improve NOI while increasing employee, prospect, and resident satisfaction. EliseAI is currently partnered with over 40 operators, helping them go beyond the tech to centralize their core operations.
For example, Equity Residential has leveraged EliseAI’s technology to clearly show that centralization powered by AI is a winning model.
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EQR’s AI-Enabled Transformation
Equity Residential, one of the largest multifamily REITs in the world, centralized leasing and resident services across over 55,000 units. The results speak for themselves:
- $365 increase in annual NOI per unit—directly improving asset value
- 15% headcount reduction, resulting in $20 million in net annualized payroll savings
- 90% of prospect and resident interactions are automated, improving efficiency and consistency
- 6% higher lead-to-tour conversion compared to human leasing agents
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EQR’s success underscores a fundamental truth: Innovation isn’t a gamble—it’s a strategic advantage. The first third-party managers that successfully optimize their operating model around AI and centralization will become that much more competitive in the RFP process by increasing owners' NOI and helping them improve their own underwriting.
The Competitive Edge of AI & Centralization
Optimizing operations around AI-powered centralization presents a new competitive edge for third-party management companies. Turning AI on is easy and can generate immediate benefits, but unlocking its full potential requires optimizing your operations around AI while strengthening your current brand. This process of optimization takes time and requires purposeful effort, requiring you to lean into and accept change. Although potentially challenging, the benefits are clear - strengthening your existing brand, improving your profitability, increasing your cost efficiency for owners, and accelerating your growth by making you more attractive in a competitive marketplace.
In the eyes of Jacob Kosior, EliseAI’s VP of Client Strategy and former Vice President of Centralized Services at Cardinal Group Management, “AI and centralization represent an opportunity to build a new competitive edge where you can take your existing brand to the next level, not dilute it - whether that’s doubling down on spending more time with prospects & residents or significantly reducing costs AI is just a tool that enables both of these approaches.”
Benefits of Optimizing For AI & Centralization
✅ Differentiation in a competitive market
✅ Increased NOI, reduced operating expenses, and improved core metrics
✅ Enhanced brand through improved prospect, resident, and employee experience
✅ Increased profitability and scalability
Required Steps For Optimization
- Identify processes that can be done offsite or automated (i.e., resident collections, prospect scheduling and follow-ups, etc.)
- Redesign core processes built around best-in-class tools
- Redefine roles onsite and centralized to align with reworked processes
- Engage and gain buy-in from a broad group of stakeholders internally and externally
- Leverage improvements to engage owners pro-actively
- Pilot changes across select properties with bought-in owners
- Begin the process earlier than later to enable progress and refinement
At the end of the day, there is no one-size-fits-all solution or perfect optimization of your operating model. At EliseAI, we’ve found that the unique unison of your brand, portfolio, and culture defines the correct approach. Our goal is to help you identify your ideal solution and provide the tools and consulting support you need to succeed and improve your pitch to owners.
The Time to Act Is Now
The industry’s first movers will reap the greatest rewards by attracting owners who are actively looking for a manager to deliver this innovation and proving they can deliver this model to more risk-averse owners. At EliseAI, we are already seeing increased demand from owners asking us for a forward-thinking manager who is effectively leveraging AI to control costs and optimize operations. While ownership groups may be slow to mandate sweeping changes, forward-thinking fee managers that take the initiative will win more deals and expand their unit count under management. At EliseAI, we have already seen some of our more AI and centralization forward partners win out over more hesitant third-party managers driven by owners' cost and service quality considerations.
At EliseAI, we are committed to partnering with operators o help them accelerate, de-risk, and ensure success for this transition. If you want to partner with us on building the future of fee management - reach out to us.