How to Overcome Roadblocks in Commercial Property Management

Show me a commercial or retail property manager, and I will show you a busy person.  Rarely will a property manager have much spare time; 10 hour working days are not uncommon.  Systems of control and reporting are required to keep the workload of a property manager in balance and optimised for the best results.

 

Large properties have teams of people to control and respond to the numerous property events as they happen; shopping centres are a case in point.

commercial real estate leasing system
Leasing system for finding commercial tenants

 

Property Management Pressure Points

 

So, why is a commercial or retail property manager so busy?  Here are some of the most common reasons:

 

  1. Large properties are active assets of importance and volatility. Lots of things are happening most of the time with tenants, customers, maintenance people, and property performance.
  2. Reports have to be prepared and submitted on critical property facts such as income, expenditure, budgets, lease events, and critical dates. Every landlord will have certain requirements with their reports and facts.
  3. Maintenance issues will be both planned and unplanned. Either way, they have to be managed to a budget and a safe outcome.  The larger the property, the more complex the maintenance events; risk events also have to be watched.  There will also be ‘unplanned matters of crisis’ that occur, so be prepared for all issues.  It pays to have some structure in place to monitor all the larger mechanical elements of the property to contracts and routines.  If you have a good group of contractors, the maintenance issues are supported by contractor communication and regular reporting.
  4. Financial matters vary throughout the year. Income expectations will vary based on occupancy, leasing, incentives, expenditure, and tenancy movement.  That being said, most of the factors of property income can be structured to a budget, so the client does not have too many variables to contend with.  A good property budget will bring stability to an asset over time.
  5. Undertake a lease audit as soon as possible and stay ahead of lease events and critical dates. The greater the number of leases in the property, the more significant the time required to keep ahead of lease changes, dates, and events.  A lease audit will show you the critical dates and lease changes applicable to rent reviews, options, outgoings reconciliations, and the lease expires.  The important fact to remember here is that all leases should be optimised for a good market rent and long-term  Vacancies will happen, but you can stay ahead of lease vacancies with a proactive marketing campaign to attract new tenants.  That is what shopping centres do most of the year, so they are not exposed to rental disruption when leases come to an end.

 

Taking all of these points in balance, it is easy to see why a commercial or retail property manager is ‘busy’ most of the time.  When they are then loaded with more assets and properties, the ‘busy factor’ just gets deeper.  Ultimately that can lead to stress and property performance problems.  Unfortunately, that is all too common in the industry.

 

city buildings on skyline book cover
Learn how to handle the struggles of commercial property management

How to Choose the Right Commercial Property Management Software Solution

In commercial real estate brokerage today the property management division of your business will need a dedicated and specialised property management software program to control asset performance for the clients that you serve.  There are many different software packages around, some of which are of the highest quality, whilst others are very average.

Quality is important

If you plan to provide a professional property management service across the best buildings in your town or city, then you will need a high quality software program that can comprehensively cover the needs of the clients and the challenges of the properties.  There are significant and different management requirements across industrial, office, and retail property types.

In saying that you do need to choose the right software program, there are costs associated with all of the specialised solutions available.  Most of the high quality programmes are reasonably costly although they can be easily funded by the correct management fee structure and a good size property management portfolio.

Understand the reporting solutions

If you want to attract the best clients to your professional property management services, you will need a good software solution to support your activities.  You need something that is well proven and cost efficient, and yet something that is easily able to produce the reports that the clients require.  An informed client is more readily able to make the best decisions in a timely way.

Know what you must control

Understand the informational needs of the clients that you serve across an array of activities.  Consider some of the most common challenges that you strike on a regular daily basis, including:

  • The lease documentation and updates
  • Tenancy mix details and variations
  • Expenditure activity across the various cost codes
  • Arrears controls and reporting
  • Regular tenancy correspondence and communication
  • The landlord reporting requirements and report formats
  • Property maintenance records
  • Risk management and documentation
  • Energy management and tracking
  • Environmental issues and controls
  • Income controls and optimisation
  • Rental strategies and budget expectations
  • Property budgeting for both income and expenditure
  • Premises and area detail
  • Tenant contact, correspondents, and records
  • Outgoings activity and performance
  • Cash flow projections

So these are some of the most common requirements in most commercial property management activities.  At a minimum, the software solutions that you use need to cover these and other issues effectively and directly.

The Categories?

You can see from the list that some of the matters are financially orientated, whilst others are linked to documentation, and also tenancy mix occupancy.  One software package has to cover all of the issues in an accurate way.

Choose the best commercial property management software package that suits your typical client profiles, property types, and property portfolios.  Understand the factors of growth that will occur with your property portfolio so that the selected property management solution you choose can give you the best ongoing support into the future as the portfolio grows and building complexity increases.

You can get more commercial property management tips in our eCourse ‘Snapshot’ right here.

Why Confidence is so Important in Commercial Property Management

The clients that we work with in commercial property management expect experience and confidence in the managers that they use.  Those clients like to know that the person chosen to manage their property can handle the variables of income, expenditure, tenant mix, and lease negotiations.

So why worry too much? The experience and confidence in any property manager will be important to the client service process and also to the brokerage fees charged for services rendered.

Inexperience is Dangerous

An inexperienced property manager can be a costly and concerning problem in property performance for any investor.  Invariably that is the time when errors and omissions occur with the critical factors and tenancy activities.

So the property manager needs the confidence, knowledge, and experience to know how to look for upcoming concerning issues in the leases and with occupancy, and how to position the property for better results in investment outcomes.

Every landlord and property owner will have certain unique targets to merge into that property performance equation, so the balance becomes a bit tricky.  That is where the right property manager for the asset and the client should be considered.

The complexity of many office and retail properties requires specific experience and knowledge to help the property stay on track from an investment perspective.  Errors or omissions create problems with any property and its performance.

Critical Confidence Factors

Here are some ideas to help you with this.  Any property manager should be specifically familiar with the following topics as they apply to the location, the client, and the property type:

  1. Income – The levels of income in any property will be impacted by local vacancy factors, current market rentals, and business sentiment. If a property is to grow its income base with rentals that are market aligned, the property manager really does need to have advanced skills with tenant management and property leasing.  Remembering that many leases exist for a number of years, the property manager is the person responsible for qualifying the tenant, then establishing and growing the cash flow.
  2. Expenditure – Rarely will property expenditure decline and that is why a specific budget is required to keep property expenditure under control. Energy costs, operational costs, and property usage place pressures on expenditure each year.  Operational costs within most properties are escalating.  There are seasonal factors to look into as well including climate conditions, and the associated energy consumptions.
  3. Tenant placements – When you have a number of tenants within the same Investment Property, you will have challenges when it comes to positioning, occupancy, and property use. Some tenants have an impact on other tenants around them.  As part of any lease negotiation, specifically choose the right tenants for the right location and then control them within the existing lease documentation.  Understand the businesses in each case and the types of people that will be accessing the tenant and or the property.  What pressures will happen as a direct result of tenant existence and occupation?  You may need to put certain controls within the lease document to keep things on track within the tenancy mix.
  4. Lease negotiations – Every lease negotiation should be looked at in balance allowing for current market conditions, vacancy levels, market rentals, and the locations of other tenants within the property. Some leases will come to an end within the same property at a particular point in time.  Most owners cannot afford to have escalating vacancy factors across a large percentage of the property.  Negotiate your leases so that the cash flow of rental is not overly impacted by lease expiry dates.
  5. Vacancy strategies – Like it or not vacancies will happen in any property. The impact of those vacancies can be lessened through finding new tenants, moving tenants around, and modifying the property use.
  6. Maintenance strategies and costs – During the year things will happen in any managed property. You will have maintenance issues occurring for all types of reasons, and some of those repairs will be timed whilst others will be unexpected.  You need response systems for all levels of maintenance including emergency responses.

Are you ready to improve your confidence and knowledge in commercial property management?  A successful property management division in any brokerage will bring many advantages to the business over time.

You can get more commercial property management tips in our Snapshot eCourse right here.

Commercial Property Management and Leasing – Tenant Fitout Standards are Really Important

When it comes to vacancy leasing within an investment property, the fit out standards that you set and work to are very important.  Those standards will help you when it comes to ongoing occupancy and property presentation.  Over time a property controlled in that way will maintain its appearance and its leasing standards.  That then helps with establishing and strengthening market rentals, and minimizing vacancies.

Poor Property Presentation

Most people can relate to and would have seen a property that is poorly presented and maintained.  In any office building or retail shopping centre you can soon see where the maintenance is inadequate and where things are not being done.  In many ‘owner managed’ properties that inadequacy can be a common problem.  Many investment property owners are ‘too close’ to the decisions required of expenditure and maintenance.  They can sometimes have differing priorities when it comes to property presentation compared to income paid and banked.

A well maintained property will attract tenants and achieve better levels of tenant retention.  A property of that type will also see lower vacancy levels and stable market rentals.  It directly follows that the appearance of the property and the maintenance program within is very important to help the investment improve over time.

Set Fitout Standards

Setting the correct fit out standards and policing those standards as part of the leasing process will help with overall property presentation and tenant retention.  Here are some specific topics to focus on as part of that overall standards strategy:

  1. Shop fronts – When you are leasing a property with multiple tenants in occupancy, the shop fronts and the entrance ways to each and every tenancy should be carefully considered and controlled from a visual aspect. The shop fronts should be standardised to a particular design, size, and lay out.  What you are trying to do here is maintain the appearance of the property.
  2. Marketing material and signage – Some tenants will try to ‘bend the rules’ when it comes to signage and marketing material. As part of the leasing process, the landlord and or the property manager should reserve the right to approve and control any signage within the property and on the premises for the duration of the lease.
  3. Air conditioning – Whilst the property may have central plant and machinery to supply air conditioning conditions, the tenant will need to tap into the plant capability and design. The tenants fit out should be adjusted to the air conditioning capability of the building.  There are unfortunately plenty of cases where that strategy has been overlooked or not properly controlled, and the performance of the air conditioning within the building is thereby compromised.
  4. Lighting – You can specify the types of lighting and layout for a tenancy fitout. That then has benefits from the aspects of energy consumption, illumination, and presentation.  You want a tenancy to look good, and lighting will have a lot to do with that.
  5. Electrical connections – There will be certain capabilities of energy supply to a property and a tenancy. Consumption monitoring is one factor to watch, but energy efficiency today is now a concern in property operational costs and outgoings.
  6. Standards and finishes – In any modern newly constructed investment property, the finishes and standards of fitout will be critical to overall wear and tear as well as appearance. Set the standards in consultation with the building architects.
  7. Entrance ways – The entrance to a tenant area and the entrance to a property are unique spaces requiring control. Entrance design and functionality should be balanced against safety and appearance.  Locks, finishes, and size of entrances will all impact those decisions as well as existing building construction codes.
  8. Fire and safety – Fitout designs require the integration of special factors of fire and personal safety. Building codes apply.  All tenant plans and approvals should be considered given the existing fire and safety codes for the property and the location.
  9. Floor coverings and wall treatments – Good quality floor coverings give longer serviceable life. The walls should also be painted with quality paints that give longer term protection and presentation to the property.
  10. Maintenance – How will the property and the premises be maintained? Who will pay for upkeep?  The terms of the lease will need to set out who pays for regular property maintenance and how that is to be done.

These are some of the bigger issues to work through as part of fitout design, approval, and construction.   Use a checklist to keep things under control.

Commercial Property Management – Tips for Achieving Energy Savings in Managed Buildings

Like it or not, energy forms a significant percentage of property operational costs today.  In any retail or commercial investment property the common area power will drain a lot of profit from the landlord’s net income.

In simple terms the energy consumption factors of any investment property should be carefully controlled and optimised.  That is one of the main jobs of the property manager to focus on; to improve the property performance financially in a realistic and professional way.  In saying that, there are a few strategies that can work very effectively and directly in improving energy consumption and costs as part of the overall investment property performance.

Set Some Energy Strategies

Here are some ideas to help:

  1. CONTRACTOR MEETINGS: Meet with your maintenance contractors regularly as they will have some valuable ideas to share about the operational systems of plant and machinery. They understand the equipment better than anyone else; they will know what can be done to improve energy use whilst not overly impacting occupancy conditions in the building.
  2. THE COST OF ENERGY: Buy energy at the best commercial rates. There are different suppliers of energy in most towns or cities.  They offer certain economies and purchasing power when it comes to energy.
  3. DEMAND TIMES FOR  ENERGY: Understand your peak demand periods. With any office or retail property there will be certain periods of peak energy demand during the day and during the week.  Those periods generally do not change, but how you purchase energy at those times will impact gross costs.
  4. CLIMATE CONTROL AND AIR CONDITIONING: Review air conditioning operations. The air conditioning plant in any investment property will consume a lot of power.  In winter and summer those demands will shift depending on your typical outside climate and building design.  In conjunction with your air conditioning maintenance contractors you can review special internal climate strategies such as delayed starts, optimal starts, outside air use, and night purges.
  5. AFTER HOURS CYCLES: The after-hours use of air conditioning, lighting, and the building itself will put demands on operational costs. Some of those use factors will be recoverable from the tenants in the building.
  6. LOW COST LIGHTS: Lighting modifications can occur to common area globes and tubes so that common area lighting costs are reduced. Understand how lights function in special common areas such as car parking, entrance foyers, and toilets showers.  Sensor lights and LED hardware will help in saving costs.
  7. MOVING PEOPLE: Lifts and escalators are a big drain on power consumption. Whilst they are essential for the movement of people in a building, they could be partially shut down after hours.  For example consider a high rise office tower; there is no point running all lifts in the lift banks if the building is largely empty.  You can park lifts after hours and only run one lift in each bank in an office tower.   The occupants will very likely not be impacted.

So these simple factors of building use will have a great impact on energy consumption and savings in any investment property.