Tag: expenditure

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Shopping Center Managers – How to Reposition and Improve a Retail Shopping Center

Any shopping centre today can be a challenging asset from a performance perspective.  There are many challenges to track, balance, and manage.  The skills of the property manager and or leasing manager applied to the task will be critical to asset performance.

Fees for services

It should also be said that the fees to manage any retail property are also usually higher than the fees charged within industrial or office property management.  The skills of the people deployed on the property will reflect on the asset outcomes, so you must employ the right people for the task.

People Costs

Good quality people with the retail experience will cost more from a salary perspective.  The property outgoings should (subject to local retail leasing laws and regulations) be structured through the leases for management fees and staff salary recovery.

Taking on a new property?

If you are taking on the management of a shopping centre from a previous owner or previous property manager, there are many things to look at immediately and specifically.  Getting things under control quickly should be a priority with a retail asset.  You can use a checklist for that process.  Here are 4 specific ideas to help you get started:

  1. Arrears – Let’s start at the money or rental end of property performance. Understand where the rental arrears are and why they are happening.  Separate strategies will be required to get those things controlled.
  2. Vacancies – What and where are the vacancies now in the property and how are they impacting customer and tenant outcomes? Look at filling the vacancies quickly even if you must do short term rentals at lower base rents.
  3. Tenants and tenant mix – Assess the tenants in the property for current issues and volatility. A weak tenant mix will drag down property performance.  Talk to the tenants and ask about customer sales and customer requirements.  It is very likely that the tenants will know what is needed in a retail property to resolve shop placement and mix problems.
  4. Income and expenditure – Review the cash flow results for the property over the last 12 months. You will see the timing factors from high cost issues such as rates and taxes, as well as capital expense items.  Then look at current rental levels, vacancy factors, and upcoming rent reviews.  From these things you can create a budget for the property.  The object here is for you to comprehensively control the money coming into the property and flowing out to the various stakeholders.  You can then shape the financial factors of the property in a controlled way into the future.

These 4 factors will lead to greater property understanding and control.  When you can see what is happening in the retail property or shopping center, you have something that you can base your future strategies around.

You can get more tips about Shopping Center Management and Leasing in our eCourse right here.

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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.

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