Commercial Property Managers – How to Prepare a Budget for Your Property

When you manage a commercial or retail property, the budgetary process and assessment will be a frequent part of the property performance and monitoring system.  An accurate property budget will help you with the overall property performance throughout the year.  That being said, the budget that is created for a property needs to be completely accurate and relevant to the local property market.

Here are some tips that can be applied to the compilation of a budget in commercial or retail property management.

  1. Meet with the landlord of the property before you do anything else.  Understand the intentions of the landlord that can have an impact on the property performance.  It could be that the landlord intends to sell the property inside the next 12 months.  That single factor will have major impact on the compilation of the property budget.  Income and expenditure would be handled differently if the property is to be sold verses retained.
  2. It goes without saying that you should understand the existing tenancy mix and the intentions of the tenants within the property.  Meeting with all tenants regularly will help you stay on top of these issues.  If a lease is to expire or renew, the  cash flow for the property income will need to show those changes.
  3. Most property budgets are initially prepared on a spreadsheet with due regard to the timing of changes in income and expenditure throughout the year.  This then says that the spreadsheet will reflect the monthly changes of property income and property expenditure.  You will need to understand the rental escalations, rent reviews, and options as they apply to each lease within the property.
  4. A good property budget will allow for vacancies to occur in keeping with the prevailing market conditions.  Review the local property market to understand the supply and demand of future space in the particular property type.  You will also need to set some expectations and assumptions as they apply to the local and regional economy.  Part of that process will include an assessment of the local business demographics and expected changes within the community.
  5. In preparing for a property management budget, look at all the competing properties in the region or general location.  Those properties are likely to place pressure on existing vacancies, and prevailing market rentals.  An abundance of vacant space in the local area will directly flow through to a reduction in market rental overall, and potentially a similar case in your property.
  6. The financial history for the property should be gathered for the last two or three years.  That history will allow you to understand rental changes, vacancy factors, and expenditure escalations.  That information will help you greatly in creating a new property budget.
  7. A significant part of the expenditure in any commercial or retail property will include uncontrolled outgoings that have a significant impact on property costs.  They will normally be in the categories of municipal rates, energy, and insurance.  These three factors take up a large percentage of the building outgoings annually.  Estimating the escalations in these categories can be difficult so you will firstly need to refer to the appropriate rating bodies, Energy Supply companies, or relevant insurers for an estimate of expenditure change.
  8. Talk to other property owners and property managers in the local area to compare property outgoings and expenditure costs.  Given that the commercial and retail property market is so specialized, the sharing of this information is very common.  Without this information it is very hard to compile the property budget.

A commercial or retail property budget is not a difficult thing to compile, however it does take time and a reasonable amount of preparation work.  As mentioned earlier, always take notes regards your assumptions as they apply to the budget.  During the year you can refer back to your notes when something seems to be out of balance with the property budget.

If you want some more tips on commercial property management you can get them in our Newsletter on this site.  Just register.

Commercial Property Agents – Why Cold Calling is Really Hard

In commercial real estate, the cold calling process is very difficult for many salespeople.  They may attempt to get a cold calling system up and running, but they will soon find something else to do.  It’s not a new problem and it is all so common in most agencies; that does not however mean that salespeople should not call prospects.  It simply says that many salespeople have an issue to get under control and improve on.  Top agents do that, and over time will build their market share with well qualified prospects.

Many ‘average’ salespeople in commercial and retail real estate know the ‘ups and downs’ of the market.  Over a period of 12 months they will have times of listing difficulty and slow commissions.  The best way to change all of that is through a dedicated call contact program where you constantly find new prospects that may want to get involved in selling, leasing, or transacting commercial real estate.

It doesn’t matter when a person or company needs your help; it does matter that you open the door of contact and build the communication links for the time that they do need you.  Remember, you are the property expert!

Do you know this person?

Have you seen or heard of a salesperson that likes to sit in the office and wait for the telephone to ring or for the prospects to walk in the door?  Believe it or not, there are some salespeople in the industry that do just that even in this difficult property market.  Unless they have another source of income to help them along, they will be consistently ‘poor’ when it comes to commissions.

It is too costly to work in the industry to ‘survive’ on a low income for too long.  Directed effort and prospecting can change all of that very quickly.

So let’s say that you want to fix the prospect pipeline in your business and build more income opportunity.  The best way to do that is in making the calls.  Here is a checklist for you to get started:

  1. Determine the area that your business will come from.
  2. Understand the types of properties and businesses that you serve.
  3. Why should people do business with you?  What are your points of relevance to the market?  Are you better than the competition agents in the local area?
  4. Devote 3 hours a day to making the calls.  In that time you can use the business telephone book to speak to business leaders and managers to identify what their property needs may be in the future.
  5. Use a database system of some type that will allow you to capture information for ongoing contact.

Are you ready to turn your commercial real estate career around?  Set up a contact call process of prospecting; over time you will see the benefits of better listings and greater commissions.  Start the process and practice your dialogue.

If you would like more tips on commercial real estate, you can ‘register’ on this site to be a member and have full access to our ‘member resources’ 24/7.