83% of Your Market Overlooked: Why Small Strata Schemes Require a Different Business Model

Academic research papers don’t always make commercial points obvious. To be fair, that’s not their job, it’s ours.

Appendix 3 of the Australasian Strata Insights 2024 Report by City Futures Research Centre UNSW is a good example. These charts clearly show the real state of the Australian strata management market. This table tells the story a different way: 83% of strata schemes are small made up of just 2 to 10 lots. If we think about our business models in schemes instead of lots, there’s a lot to consider.

Number of schemes and lots in Australia and each state /territory (2-10 lots)

Let’s start by considering the differences between managing 2-10 lot schemes and others:

• The built form is simpler; duplex, townhouses, and walk ups.
• The common property is less developed, no pools, gyms, BBQ areas, and extensive gardens.
• The legal titling structure is simple. There are no multi owner corporations or building management committees.
• There are no long-term service contracts and embedded networks.
• The community is also more likely to know each other and chatting in a WhatsApp group is manageable.

Small schemes also have a different risk profile for strata managers.

• Our Work Health and Safety risks increase with larger schemes that include commercial lots.

• The risk to the bottom line is greater: if a large scheme walks it might be the equivalent to a salary.

Despite these differences we do two strange things. Firstly, we offer the same package of services as we do larger schemes. Secondly, we charge them more per lot than we do larger schemes. There should be an anti-discrimination commission for small schemes!

A two-tiered management service offer makes more sense, but this need to be more than differential pricing for the same range of services. We need to rethink what services small suburban schemes need compared with their larger city cousins.

• Do they need strata managers at committee meetings when bots can take good minutes?
• Do they need us to attend to simple repairs and maintenance work?
• Do they want to find their own insurance?
• Do they need long winded motions about compliance issues that don’t apply to them?
• Do they really need complicated strata management agreements? Five confusing schedules and 64 service charge items seem excessive.

As we seek to professionalise strata management, structural changes are required to our business models. A different service offering for smaller schemes is a logical place to start.

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