Commercial Property Management Client Control Strategies and Fee Structures

Here are some tips for my online friends in Commercial, Retail, or Industrial Property Management.   Get a coffee and have a read of this……

Do you manage property for a difficult client?  Are your fees so low that you struggle to keep up with the demands of the job due to lack of resources?

Interesting questions aren’t they!  One big problem in the commercial and retail property industry is that the fees set by real estate agents to manage are generally too low for the tasks to be provided.  This comes about by a focus of the agent on winning the business rather than servicing the business.  Low management fees are counterproductive; a landlord seeking a low fee for service should be dropped.  Those landlords have little understanding of how the service and complexity of property works.  They also place little importance on property outcomes.  Better property outcomes require higher fees; that’s the rule.

Let’s make a very clear statement here.  The property management of a large and complex office, industrial, or retail property is not easy; everything you do takes time, and specific knowledge is required to do it well.   A single small asset is also important and the services to be provided are also quite specific.

Remember the old saying ‘If you pay peanuts, you get monkeys?’   ‘Monkeys’ can’t manage property overly well!  Definite controls and systems are mandatory to keep things under control in our ‘game’ of asset performance and control.  Particularly those things such as:

  • The tenant mix
  • Vacancy factors
  • Lease negotiation
  • Rental recovery
  • Property performance
  • Lease documentation
  • Net income
  • Risk and liability
  • Maintenance of the asset
  • Budgets for income and expenditure
  • Energy and operational cost control
  • Environmental compliances
  • Building compliance and regulation, etc

So the list can go on; property complexity and size will add to the list.  Low management fees do nothing for the performance of the brokerage and the property manager; in fact low management fees can set the foundations for professional disaster as a brokerage, as well as professional indemnity claims.  If you are going to do a top job as a property manager, take steps to really understand the client and property issues first.

On that basis, and before you ‘jump into’ a new property management appointment, don’t get too excited about the possibilities until you really understand the requirements of the property and the client.  Remember the fee and work balance equation; time is required to match the needs of the situation, and time is money.

Some History is Needed?

In my lengthy brokerage involvement over the years, my leasing and property management teams have been successful in pitching on assets of complexity and very large size.  It was not unusual to have management fees of over $250,000 per annum on one single property, plus the recovery of all salaries and wages for the entire property management team.

Before we pitched on any new management, be it a shopping center, office tower, or industrial park we always wanted to know the bigger issues and client requirements such as:

  1. Lifecycle plans for the asset and length of holding.
  2. Portfolio targets and controls
  3. Reporting requirements including leases, income, vacancies, expenditure, capital expenditure, market rents, tenant mix, and property marketing.
  4. Authorities and working systems
  5. Property priorities
  6. Cash flow targets and benchmarks
  7. Communications requirements with the landlord and the landlord’s team
  8. Fees and charges

After all of this detail, we interviewed the client a few times and only then would we set the fee and pitch on the listing.  The same rules apply on small single assets under management; professionalism costs money and attracts good fees.  Learn how to pitch and present your high end services; it’s not all about ‘low fees’ so shift your mindset and focus on the quality of performance and service.  You can follow the same rules and set the right fees for any commercial or retail property management solution.

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