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.

Commercial Real Estate Property Managers – Achieve Your Goals In Landlord and Client Meetings

When you work with investment property clients from a leasing or property management perspective, it pays for you to set defined goals that match the client’s targets.  Unfortunately some agents have little or no idea what the client is targeting for their investment over time; that then leads to slower negotiations and leasing problems.

When an agent is aligned to the landlords focus and investment targets, the whole leasing and property management issue gets a lot easier.  That then leads to a happy client and potentially increasing fees for brokerage service.  A good outcome don’t you think?

Landlords are Very Special Clients

So what can you do in working with these special clients?  Here are some ways to get closer to a landlord and their focus issues for property performance:

  • Set investment targets at the start of the year – The investment targets for a property will normally take into account market rents, rent reviews, options, and the supply and demand for lettable space, vacancy factors, and the existing tenant mix. Investment goals are then built around the realities of the property and the location.
  • Review asset performance – The performance of the property from a base of income, expenditure, occupancy, and risk will always be valuable in the planning process. Set your budgets based on the reality of the property.
  • Track tenant changes and the tenant mix – Critical dates will exist in a property with regards to tenant leases, and occupancy decisions. Understand those leases and all the issues that evolve from them.
  • Look at income opportunities – The rental income for a property can be improved by adding extra lettable space, or improving the quality of the property. Short term rentals can also be established as third income streams (the concept is very common in shopping center leasing).
  • Review capital works and expenditure – Each year the expenditure of the property can be checked and reviewed for the upcoming year; that’s where the budgeting process is valuable. That full assessment will involve works estimates, tendering of contract services, and property valuations.
  • Updates on incentives – Like it or not, lease incentives are part of attracting new tenants to a property or perhaps retaining current tenants. The landlord should consider the impact of incentives on upcoming lease negotiations.  Decisions can then be made early.
  • Lease rent review and options – Protect your leases, the tenants in the tenant mix, and your levels of market rent. The critical dates evolving from rent reviews and options are all part of the process.  Understand all your leases in a comprehensive way and explain to the landlord the upcoming changes and decisions that should be made.

All of these facts allow you to make specific recommendations to your landlord clients as part of a leasing and or property management service.  Information supported by market evidence and documentary facts will help make your services and relationships with your clients much more positive.

How to Manage Change in Commercial Real Estate Brokerage

In every investment property there will be factors of change to manage and implement. In any year the pressures of the tenancy mix and the requirements of the current property ownership will generate change in property performance. In saying that, every investment property should have a business plan that takes into account the strategies of the landlord when it comes to investment outcomes.

Here are some ideas to help you track and manage change within any commercial investment property.

  • Lettable space – the lettable space within the building should be optimised in a number of different ways. To do that you can move tenants around subject to the timing of leases, and the negotiations with existing tenants. To establish that level of control, you can create tenant retention plan and leasing strategy for the property. In that way you can allow for expansion and contraction requirements within each tenancy. You can also allow for the pressures of an upcoming known vacancy. If you have a high quality tenant in occupancy, it pays to help them rather than frustrate them when it comes to occupied space. A good tenant needs to be retained rather than lost.
  • Renovation and refurbishment – with any investment property there will be times where renovation and refurbishment activities will need to occur within the asset. That can be a complex process given the number of tenants in the tenancy mix and the types of customers visiting the property. In any office or retail property you will find that the renovation or refurbishment concept needs to be carefully planned and managed. The effects on tenants and customers from any renovation program should be controlled at all times. Failure to do so will see a potential loss of rental and a business threat to existing tenants.
  • Better tenants – understand the tenants that you have within the tenancy mix. Some tenants will be better than others when it comes to brand, marketing, rental payments, and business magnetism. Some tenants will draw business to the building and in that way encourage the overall levels of trade and exposure for other tenants in the mix. Understand the differences between your tenants, best locations for each tenant, and the clustering factors that can encourage better levels of trade and customer attraction.
  • Rental upgrades – throughout the year there will be a need to assess market rentals as they apply to the location, the tenancy mix, and the property type. Rental expectations should be strategies set within the business plan for the property. Every rent review coming up over the financial year should be estimated, established and negotiated on factors within the lease document and the prevailing levels of market rent.
  • Lease documents – every lease document should be reviewed for complexity and critical dates. There will be certain terms and conditions in every lease document that will have an impact on occupancy and income expectations. Some lease documents will therefore be better than others when it comes to property performance and investment results. Before you embark on any change management activity, understand the lease documents that you have currently in the property and how those lease documents will respond through the upcoming project or expected change.
  • Property strengths – every investment property will have strengths and weaknesses to be understood and addressed. Any change management program should allow for an improvement in property strengths and a resolution of any weaknesses. The weaknesses can generally be removed by modifying the tenancy mix, upgrading lease documentation, and undertaking a renovation or refurbishment project.
  • Improvements and services – in providing property improvements, amenities, and services to the tenants in any investment property, understand how factors of technology may be changing locally when it comes to business function and occupancy. Any modern investment property should be maintained in a way that allows for gradual improvement and upgrade when it comes to technology and tenant occupancy.
  • Moving tenants – don’t be afraid to move tenants around when lease advantages and requirements are noted in the tenancy mix. Some tenants will be more successful when located to other premises within the same building. There will also be pressures of change when it comes to tenant or business expansion and contraction. Look at the clustering factors applying to the tenancy mix. Some tenants will be much more successful when placed near complementary tenants in the same building.
  • Anchor tenants and specialty tenants – anchor tenants are usually those that occupy large parts of the property for a considerable period of time. The rental structure for anchor tenants will be totally different to that of specialty tenants; the levels of rent that apply to an anchor tenant will usually be less per square metre or per square foot than the rent paid by a specialty tenant. A good anchor tenant will help you attract specialty tenants and lower the vacancy rate. The strategies that apply to the two tenant types will be different and should be merged into the tenant retention plan for the property.

 

So there are some good things that you can do here when it comes to managing and optimising change within your commercial or retail investment property. Understand the property as it exists today, consider the prevailing market conditions, and look for the opportunities that can be created over time for the property owner. That is how you improve an investment property. Bring together the strategies of a business plan, a tenant retention plan, the lease marketing strategy, and the tenancy mix.

Important Facts to Know in Undertaking an Outgoings Audit in Commercial Property Management

Once a year it is necessary to create an outgoings budget for any commercial investment property under management. After the budget has been created, the outgoings should be checked and managed to the budget over time; that is the job of the property manager. An outgoings audit will help establish an efficient and relevant budget for the asset given the size of the building, the age of the property, and the complexity of the tenancy mix.  Over time that helps the landlord achieve the financial results that they seek.

Research The Facts for an Outgoings Audit

Here are some ideas to help you undertake an outgoings audit in a commercial or retail investment property:

  • Understanding cash flow – The history of the property will give you some valuable information relating to cash flow. Over the last few years there will be patterns to property costs and maintenance. There will also be costs to be identified and tracked with rates and taxes. Rates and taxes will usually take up at least one third of your building expenditure budget and those numbers will be uncontrollable. Look at the averages for the area, and understand how rates and taxes have been escalating over recent time; undertake an estimate of what could happen to those figures in the current and future financial year.
  • Finding expenditure savings – The idea of the outgoings audit is to achieve savings and create financial control. In analysing the outgoings for any investment property will see that the rates and taxes component will be the largest of categories. It will be quite rare for any savings to be achieved in rates and taxes; they always go up. On that basis you will need to identify savings within other categories of maintenance in the property. Control will be a focus of the outgoings budget and the spending patterns.
  • Links to rental types – The outgoings categories and expenditure issues will have an impact on the rental for the property. The net income will be impacted by the recovery of outgoings. Understand the average costs that apply to expenditure within the building type. Ensure that your property is within the averages when it comes to occupancy costs. If your property is above the mark when it comes to occupancy costs, you will have some difficulty in leasing vacant premises. The tenants of today understand exactly what they should be paying when it comes to rental and outgoings.
  • Vacancy pressures and non-recovery – Look for the factors of outgoings non-recovery due to vacancies. In a property with vacancy volatility, it pays to allow for some component of landlord outgoings contribution. In some properties, you will never achieve full occupancy within the tenancy mix, no matter how successful you may think your leasing program may be. On that basis the allowance for extra outgoings attributable to the vacancy factor is quite normal.
  • Categories of outgoings – Always split your outgoings into categories so that you can see escalations as they arise within expenditure groups. In an older building, you will see escalations in repairs and maintenance and capital expenditure. Understand how those escalations can impact your expenditure budget over time.
  • Volatility and Risk – There are factors of volatility and risk when it comes to the recovery of outgoings. The volatility factor will be driven from changes in the tenancy mix and the success or otherwise of individual tenants. Keep close to all of your tenants as part of a regular tenant contact program. Identify any occupancy threats or potential vacancy factors as early as possible. Risk is a slightly different factor when it comes to expenditure. Risk will occur as a result of locational factors and business volatility in the region. The suggestion here is that some locational factor beyond your control is likely to impact property occupancy and or occupancy costs. That could be through changes to local government policy, changes to roads, infrastructure changes, and natural environmental issues.
  • Plant and Equipment – The age of the property and the associated plant and equipment will impact expenditure. Some older building control systems and ageing air conditioning plants can be quite expensive to run. That will then have an impact on energy consumption, and plant efficiencies. Any downtime in operational plant can impact tenant occupancy and the ability to trade. There is a fine balance between spending money on plant and equipment versus saving money in operational expenditure.
  • Maintenance Contractors – The maintenance contractors involved in the property can help you significantly when it comes to understanding critical components within the building and essential factors of plant and equipment performance. They can also give you a good working knowledge of plant history and plant performance. They can tell you the strengths and weaknesses of the equipment within the building allowing for both age and existing condition. Importantly those maintenance contractors have to retain efficient performance within the plant and equipment whilst ensuring that the building complies with building occupational and safety codes. Work continually with the maintenance contractors within your investment building, and certainly do so very closely at times of outgoings analysis and budgetary performance.
  • Capital expenditure items – In any commercial investment property you will find some factors of maintenance of a capital nature. That expenditure category will usually be for the larger pieces of plant and equipment that need to be replaced rather than repaired.
  • Sinking fund – It is common to have a sinking fund in an investment property where certain monies can be set aside for larger expected matters of building and property maintenance and repair. Capital expenditure items may also be considered as part of the sinking fund although the monies retained within the sinking fund should always be split between capital items and repair items.
  • Renovation and refurbishment – Most investment properties will get to a point in time where renovation and refurbishment is required. That being the case, a project management approach should occur in parallel with the outgoings maintenance budget. In that way the renovation project can be staged to fit within expected changes to the tenancy mix, established rental income expectations, the known property performance, and the current or upcoming financial year.
  • Establishing a budget of control – The idea with the property budget and particularly that part relating to outgoings is to control the expenditure profile for the property so that you can remove risk and volatility from the net income. In that way the landlord can be prepared for known changes and upcoming property maintenance requirements.

 

So there are plenty of things that you can consider and work through as part of undertaking an outgoings audit. That audit will allow you to set the right targets and parameters relating to the tenancy mix and the lease strategy for the landlord.