Japan's ongoing labor shortage has become a serious problem in property management, and it goes well beyond understaffed leasing offices. In routine, day-to-day work like cleaning and maintenance, the simple fact that "no one will take the job" is turning into a risk that owners can no longer afford to ignore if they want to protect a building's condition. Most property owners are, understandably, always looking to trim management costs. In the process, however, a good number of them end up unintentionally choosing an "improper procurement route," and the result is that they are quietly eroding the value of their own asset.
Owners in the US and UK are watching a very similar story play out in their own commercial cleaning and facilities markets, even if the terminology differs. American trade press covers it under headings like "janitorial staffing crisis" and British reporting tends to frame it around umbrella companies and payroll intermediaries, but underneath the labels is the same mechanism: a long subcontracting chain quietly squeezing the wage paid to the person actually doing the work, until nobody is left willing to take that job. The lesson in this article, that the fix is not simply "find a cheaper vendor" but "understand where the money actually goes," applies just as directly whether the currency is yen, dollars, or pounds.
This article looks at the problem of "skimming" through multi-layered subcontracting, a topic usually framed purely as a cost issue, from a different angle: staffing and quality. The goal is to help owners understand why it matters so much that the money they pay actually reaches the workers doing the job on site. Rather than "finding a cheap contractor," the better question is "procuring through the right route." This article walks through, in plain terms and with some technical detail, how that shift protects a building's quality and its long-term asset value, and exactly how to make it happen.
The Reality and the Problem of "Skimming" in Property Management
In the property management industry, especially in fields like cleaning and restoration work, a multi-layered subcontracting structure has been the norm for decades. A general contractor management company takes on a job, subcontracts it to a partner company, that company subcontracts it again to a sub-subcontractor, and so on, with the work passing down through several tiers before anyone actually shows up to do it. At every layer, the company handling that tier skims off a margin, which is exactly what "skimming" means here.
This structure is not inherently a bad thing. A general contractor coordinating quality control and overall scheduling can genuinely save an owner a lot of hassle. The problem arises when the margin at each layer is excessive, or when the whole structure is opaque. When that happens, the fee an owner pays gets whittled down by layer after layer of margin, and the amount that actually reaches the worker on site, or the small specialist firm doing the real work, shrinks dramatically.
The table below illustrates, in simplified form, how the money typically flows through a multi-layered subcontracting structure.
| Party | Role | Amount received | Margin taken | Amount paid onward | Notes |
|---|---|---|---|---|---|
| Property owner | Client | - | - | 100,000 yen | - |
| Prime management company | Overall management | 100,000 yen | 20% (20,000 yen) | 80,000 yen | Subcontracted to tier 2 |
| Tier-2 partner firm | Area-level coordination | 80,000 yen | 25% (20,000 yen) | 60,000 yen | Subcontracted to tier 3 |
| Tier-3 partner firm | Arranges on-site labor | 60,000 yen | 33% (20,000 yen) | 40,000 yen | Paid out to the on-site worker |
| On-site worker | Does the actual cleaning | 40,000 yen | - | - | Takes home 40% |
This is only one illustrative example, but scenarios like this do happen: out of the 100,000 yen the owner pays, a full 60,000 yen disappears as intermediate margin, and the worker on site is left with just 40,000 yen. Under conditions like these, morale on the ground inevitably drops, and delivering a genuinely good standard of service becomes very difficult.
What makes this worse is that today's severe labor shortage compounds the problem. With the minimum wage climbing steadily, take-home pay this low makes it extremely hard to find anyone willing to do cleaning work at all. The end result is the worst-case scenario: "nobody shows up to work," and even basic day-to-day upkeep of a property becomes genuinely at risk. We should recognize this for what it is: not merely a cost issue, but a serious management problem that can shake the very foundation of a rental business.
Readers in the US or UK will recognize the shape of this problem even if the numbers look different. Commercial cleaning and janitorial services in both countries run on very similar layered subcontracting, and labor advocates and regulators have documented the same "wage theft through the chain" pattern for years, with a headline contract price shrinking through a general contractor, a regional subcontractor, and a staffing agency before it reaches the cleaner. US Department of Labor enforcement actions against janitorial subcontractors, and UK reporting on umbrella companies and payroll intermediaries in the cleaning sector, describe essentially the same mechanism at work.
Three Benefits of Procuring Through the Right Route
Avoiding the problems that come with multi-layered subcontracting, and procuring through a proper route instead, is not just a short-term way to cut out middleman margins. Seen over the long run, it plays a genuinely important role in protecting an owner's asset value. Specifically, there are three major benefits worth expecting.
1. Better Pay for On-Site Workers and Stronger Staffing
The biggest benefit of setting up a proper procurement route is that it directly improves conditions for the people doing the work on site. The money an owner pays reaches the ground without being drained away by unnecessary intermediate margins. That, in turn, lets workers receive fair pay for their labor, which raises both job satisfaction and their sense of ownership over the work.
In an era of deepening labor shortages, this matters enormously. If a job cannot offer attractive conditions, it cannot attract capable people. Contracting directly at a fair price ultimately secures a stable workforce, and is the single most effective way to cut off the "nobody shows up to work" risk at the root. Once good workers stick around, their familiarity with the property grows, and a consistently high standard of quality becomes something an owner can actually count on.
American and British property owners face exactly the same equation. US janitorial staffing has struggled for years with turnover rates well above most other service industries precisely because take-home pay at the bottom of a subcontracting chain sits close to minimum wage, and UK cleaning contractors report the same difficulty retaining staff when a chain of intermediaries has squeezed the wage down before it reaches the person mopping the floor. In both markets, contractors who pay closer to the full contract value directly to their cleaners consistently report lower turnover and fewer no-shows, which in practical terms means fewer missed cleaning days and fewer last-minute substitute workers who do not know the building.
2. Higher Cleaning and Management Quality
Improving conditions for on-site workers translates directly into higher management quality. Adequate pay and stable employment raise a worker's motivation and nurture genuine professional pride, the sense that "I keep this property looking good because it's my job." Corner-cutting and sloppy work are, more often than not, the direct product of unfairly low pay.
Paying a fair price also puts an owner in a position to make legitimate demands of a contractor. For example, an owner can specify the scope and frequency of routine cleaning, or require particular equipment and cleaning products, and expect a genuinely higher level of service in return. That kind of leverage is much harder to exercise when the contract price is unreasonably low. The result is a clean, comfortable living environment that keeps tenants satisfied, which feeds straight back into how competitive the property is in the rental market.
This is a well-documented pattern in the US and UK commercial cleaning industry as well: buildings that pay above the low end of the market and specify a detailed scope of work consistently score better on tenant satisfaction surveys and third-party quality audits than buildings buying the cheapest bid available, and property managers on both sides of the Atlantic increasingly cite quality-linked pricing, rather than the lowest quote, as the standard for vendor selection. Trade bodies such as BOMA in the US and the British Institute of Cleaning Science in the UK both publish quality-of-service benchmarks precisely because "lowest price wins" procurement kept producing buildings that technically met the contract but failed every tenant's own sense of cleanliness.
3. Preserving a Property's Value Over the Long Term
Day-to-day cleaning and maintenance do more than keep a building looking presentable. They extend its usable life and are essential to preserving asset value over the long term. If management quality stays low, dirt and deterioration go unaddressed, and the building ages faster than it should. Recovering value that has already been lost typically requires major repairs or a full renovation, which ends up costing far more.
Keeping day-to-day management quality high through proper procurement can also be expected to hold down the cost of major repairs down the road. In other words, chasing a savings of a few tens of thousands of yen today can end up producing a loss of millions of yen a few years later, and proper procurement helps avoid exactly that trap. Taking the view that "proper management is the single best defense of your asset" and building a good long-term relationship with your contractors is, in the end, the mark of sound property investment.
Facilities managers in the US and UK describe this same trade-off using the language of deferred maintenance: skipping or underfunding routine upkeep does not eliminate the cost, it just defers it and compounds it, usually surfacing later as a far larger capital repair bill. Reserve-fund studies and capital planning guidance published by US and UK property and facilities associations consistently show the same multiple, a dollar of deferred routine maintenance becoming several dollars of major repair cost down the line. A US condominium reserve study or a UK planned preventive maintenance schedule exists for exactly this reason: to force owners to plan for, and budget against, the compounding cost of underinvestment before it shows up as an emergency special assessment.
Concrete Steps to Build a Proper Procurement Route
So what does it actually take to set up a proper procurement route in practice? For an owner who currently hands everything over to a single management company, this can feel like a high bar. But taken one careful step at a time, it is achievable for anyone. Here is a concrete walk-through of the process.
1. Map Out the Current Contracting Structure and Costs
The first step is to get an accurate picture of where things stand today. Go through exactly what the management company is currently being paid, for which services, and at what price. Pull out your management contract and your monthly income and expense statements, and isolate the line items related to cleaning and maintenance specifically. If the details are unclear, ask the management company to disclose a full breakdown. If you cannot get a clear answer to "which service, at what price," at this stage, that is already a strong signal that the contract lacks the transparency it should have.
This step is essentially the same due-diligence exercise a US commercial real estate owner runs before an audit of common-area maintenance charges, or that a UK freeholder runs before challenging a service charge: pull every invoice tied to the cleaning line item, trace who was actually paid, and flag anything that cannot be tied back to a specific, verifiable piece of work.
2. Identify Contractors You Can Work With Directly
Next, look for contractors you could hire directly for the work currently being handled through the chain. This does not necessarily mean cutting your current management company out entirely. A split arrangement, where the management company keeps overall oversight but cleaning specifically is contracted directly to a specialist firm, is also a perfectly valid option. When choosing a contractor, do not judge on price alone. It is important to weigh the following together:
- Track record and reputation: has this contractor managed properties of a similar size and type before?
- Liability insurance: are they covered in case something goes wrong on site?
- Communication with your point of contact: are reporting, questions, and requests handled smoothly?
- Transparency of the quote: is the scope of work and the cost breakdown clearly spelled out?
Property owners in the US and UK who vet a cleaning vendor directly, rather than through a managing agent, tend to run through the same checklist under different labels: references and case studies in place of "track record," general liability and workers' compensation coverage in place of "liability insurance," and a written, itemized proposal in place of a vague "quote."
3. Make the Contract Terms Transparent and Define the Scope of Work Clearly
When you sign with a new contractor, it is essential to define the scope and content of the work as specifically as possible, in writing. Instead of a vague line like "routine cleaning package," spell it out the way anyone could understand: "twice a week, sweeping and wiping down the shared hallways and stairwells, cleaning the entrance glass." This heads off the "he said, she said" disputes that come up later, and lays the groundwork for genuinely proper quality control.
A detailed, written scope of work is standard practice in US and UK commercial cleaning contracts too, usually built around a cleaning specification or a service-level agreement that lists task, frequency, and area by name. The lesson is the same on both sides of the Pacific: a one-line "general cleaning" clause is an invitation to disputes over what was actually promised, while a specification anyone can check against the finished work protects both the owner and the contractor.
4. Review and Reassess Regularly
Signing the contract is not the finish line. It matters to check quality on an ongoing basis, keep talking with the contractor, and push for improvements when needed. Visiting the site yourself once a month to check on cleaning standards, and passing tenant feedback along to the contractor, keeps a healthy amount of tension in the relationship and helps maintain and raise quality over time.
This is close to what US and UK facilities managers call a quality assurance walkthrough or a KPI review, a scheduled site inspection against the written specification rather than simply trusting that the invoice matches the work performed. Building that habit early, before any problem shows up, is what turns a one-time contract switch into a durable improvement in quality.
Use the checklist below to take a fresh look at your own management setup. It is deliberately structured the same way a US or UK facilities audit checklist would be, moving from understanding the current cost structure, through vendor selection, to contract clarity and ongoing review, because skipping straight to "get a cheaper quote" without working through the earlier steps is exactly how owners end up back in a multi-layered subcontracting arrangement without realizing it.
| Check item | Yes | No | Notes |
|---|---|---|---|
| 1. Understanding the current situation | |||
| Do you know the breakdown of your current management fee (cleaning cost, etc.)? | ☐ | ☐ | If unclear, ask the management company directly |
| Do you know which company actually performs the work? | ☐ | ☐ | Check for subcontractors and sub-subcontractors |
| 2. Selecting a contractor | |||
| Have you gotten competing quotes from multiple contractors? | ☐ | ☐ | Compare scope of work, not just price |
| Have you checked the contractor's track record, reputation, and insurance coverage? | ☐ | ☐ | Reviews and referrals are useful too |
| 3. Contract terms | |||
| Is the scope and specification of the work clearly defined in writing? | ☐ | ☐ | Avoid vague "all-inclusive package" contracts |
| Did you negotiate a fair price (not simply demand a discount)? | ☐ | ☐ | Keep the contractor's margin in mind too |
| 4. Ongoing operation and review | |||
| Do you check on-site quality yourself on a regular basis? | ☐ | ☐ | A visit at least once a month is recommended |
| Do you have a regular channel for communicating with the contractor? | ☐ | ☐ | Build a genuine partnership |
Comparing Cost and Quality Across Different Procurement Routes
When weighing a move to a proper procurement route, the balance between cost and quality is what most owners worry about. Here, we compare two model scenarios, the "multi-layered subcontracting route" and the "direct procurement route," to see concretely how each one plays out.
As a baseline, we will simulate how a monthly cleaning fee of 100,000 yen paid by the owner ultimately gets distributed on the ground under each route.
Cost Distribution Comparison by Procurement Route
| Item | Multi-layered subcontracting route | Direct procurement route | Comparison and analysis |
|---|---|---|---|
| Amount paid by owner | 100,000 yen | 80,000 yen | A case where direct procurement cut the owner's own payment by 20,000 yen. |
| Prime contractor margin | 20,000 yen (20%) | - | This layer of margin disappears entirely. |
| Tier-2 subcontractor margin | 20,000 yen (25%) | - | Same as above. |
| On-site arrangement margin | 20,000 yen (33%) | - | Same as above. |
| Total pay reaching the on-site worker | 40,000 yen | 80,000 yen | Worker pay doubles. This is the real source of better quality and staff retention. |
| Advantages for the owner | Less hassle placing orders Management company acts as single point of contact |
Lower cost (20,000 yen/month) Higher quality Full transparency |
A trade-off between convenience and real savings, though the quality risk on the subcontracted route cannot be ignored. |
| Expected quality | Work tends toward the bare minimum Low worker motivation Workers do not stay long |
Careful work performed to specification Stronger sense of responsibility Workers stay long term |
The gap in pay is likely to show up directly as a gap in quality. |
As this comparison makes clear, the direct procurement route reduces what the owner spends while substantially improving what the on-site worker is paid, a genuine win-win. The 20,000 yen saved is pure cost reduction for the owner, a straightforward improvement to cash flow. On the worker's side, pay for the same job effectively doubles. That is what makes skilled workers want to work on a given property in the first place, and it is what drives a real, noticeable jump in service quality.
Direct procurement does, of course, add work for the owner: selecting contractors and managing quality becomes the owner's own responsibility. But as should be clear by now, the benefits on both the cost side and the quality side far outweigh that added effort. If you think of property management as a business, this kind of "management cost optimization" is a decision you cannot really afford to skip.
American and British owners who self-manage a small portfolio face the identical trade-off when they cut out a general property manager and contract cleaning directly: more time spent vetting and supervising vendors, in exchange for money that would otherwise disappear into a subcontracting chain going straight to the person doing the work, and a level of quality control no middleman can offer.
Summary: Proper Procurement Is the Top Priority for Protecting Your Asset
This article has explained why a "proper procurement route" matters so much in property management, from the standpoint of both the labor shortage and quality control. Here is a summary of the main points covered.
- "Skimming" is not just a cost problem, it is a staffing problem: excessive intermediate margins worsen conditions for on-site workers and, in an era of labor shortages, create the real business risk that "nobody shows up to work."
- Proper procurement is the key to better quality: when the money an owner pays reaches the ground properly, worker motivation rises, and management quality improves and becomes more consistent.
- It directly protects asset value: sustained, high-quality management extends a building's life, preserves its appearance, and is the single most reliable investment in long-term asset value.
- Transparency is the first step: start by understanding the current breakdown of your management costs and making the flow of money visible.
Shifting your mindset away from the short-term question of "finding a cheap contractor" and toward the long-term, business-minded question of "building a lasting relationship with a trustworthy partner at a fair price" is exactly what is needed right now. If you want to protect and grow your own asset, there is no better place to start than reviewing your current management setup.
US and UK asset managers describe this same shift as moving from "lowest bid" procurement to "best value" procurement, a distinction that has become mainstream in institutional facilities management precisely because the lowest bid so often turns out to be the most expensive option once turnover, complaints, and deferred maintenance are counted. The underlying lesson translates directly regardless of currency or country: the true cost of cleaning and maintenance is not the invoice, it is the invoice plus everything a broken subcontracting chain quietly costs you later.
If you would like to go deeper into property management topics like this one, or exchange information with other owners, we would also encourage you to consider joining the landlord community we run, INA Network. Members discuss topics like the one in this article in much greater depth. As long as our community guidelines are followed, we make a point of answering every question members bring to us.
Frequently Asked Questions
Q1. What is the best time to switch to a proper procurement route?
A1. Right now. The labor shortage is only expected to get worse from here, and waiting until the problem becomes visible on your own property may already be too late. Check the remaining term on your current management contract, and start building a concrete action plan around your next renewal date or your next budgeting cycle. Owners in the US and UK who wait for a vacancy crisis or a string of tenant complaints before renegotiating a cleaning contract almost always end up paying more, in lost rent and turnover, than they would have paid to fix the procurement route proactively.
Q2. What should I watch out for when reviewing my contract with an existing management company?
A2. Start by reviewing the current contract in detail, including the cancellation terms and the required notice period. From there, rather than cutting ties with the management company unilaterally, it is more realistic to come to the table with something like "I'd like to review the specification and cost of the cleaning work." Look for a landing point, such as getting approval for split procurement, or getting the management company itself to make its cost structure transparent. This kind of renegotiation, rather than an abrupt termination, is also the approach recommended by US and UK property management associations when an owner wants better value without disrupting service on the property.
Q3. What are the risks of procuring directly?
A3. The main risks are the extra work of selecting a contractor and the fact that quality-control responsibility now falls on the owner directly. Choosing an unreliable contractor, or failing to give clear instructions and follow-ups, can actually make quality worse rather than better. You should also factor in the downside of no longer having a single point of contact for emergencies. Understanding these risks, and choosing an approach that matches your own available time and management capacity, is the important part. A split arrangement, keeping a management company for emergency coordination while procuring routine cleaning directly, is how many self-managing owners in the US and UK balance this trade-off without taking on every responsibility at once.
Q4. How should I judge what a fair market price for cleaning work actually is?
A4. The most reliable way to judge a fair price is to get competing quotes, under the same conditions, from multiple trustworthy contractors. When comparing, look closely not just at the unit price but at the scope of work, frequency, equipment used, and staffing levels. Factor in the local minimum wage and whether workers are properly enrolled in social insurance; an unusually cheap quote is likely to signal a problem with quality or compliance. Reaching out to a local trade association of cleaning businesses in your area is another option worth trying. US and UK facilities buyers apply the identical logic when a bid comes in well below the rest of the field: an outlier quote at that level almost always means the contractor is planning to underpay or understaff the job, not that they have found a genuine efficiency the competition missed.
Q5. Can the owner of a small apartment building also procure directly?
A5. Yes, absolutely. If anything, owners of smaller properties tend to feel the cost and quality benefits of direct procurement even more clearly. Working with a trusted local cleaning contractor, or a local senior-worker staffing center, can often deliver more flexible, higher-quality service than going through a large management company. A good place to start is simply looking for contractors already active near your own property. Small-portfolio landlords in the US and UK reach the same conclusion for the same reason: a large national contractor has little incentive to prioritize a single small building, while a local independent cleaner or a small crew has every incentive to keep that relationship, and that property, in good shape.
