Commercial and Retail Property Management is a special part of the property industry. The right skills and the right people should be deployed to any quality property and client. When it comes to managing any major project then the top people with hands-on experience should be matched to others in the team who can learn and grow experience. Share experiences and skills.
All too often I see inexperienced people applied to the property management task when they have little or no understanding of what they are doing or perhaps even why. That situation then typically leads to a property that is not performing well, and unhappy client, and a tenant mix that is struggling. There are no shortcuts in Commercial Property Management. The same applies to Shopping Center Management. To do a top job you need the top people.
Property Management Problems
This struggling situation in Property Management for any office or retail building then can lead potentially to:
- Higher tenant vacancy factors
- Rental reduction or degradation
- Tenants that are less than cooperative and communicative
- General or below market rental results
- Errors in lease documentation and implementation
- Erratic rental returns for the landlord
- Critical dates missed
- Ballooning maintenance expenditure
- Escalating factors of risk in property performance and occupation
- An unhappy client leading to loss of business for the brokerage
This is all quite scary from a real estate business perspective. If you focus the right people with the right skills into property management, it makes it a lot easier to support the overall sales and leasing activities in the brokerage. Over time, property management activities will drive more new business in a number of different ways. A strong real estate brokerage usually contains a good property management team as a separate business unit.
How Can You Fix This?
So lets look at how this can be done. To help with this property management focus a strong process of control can be applied to any property through client based reports, regular property inspections, and checklists on specific tasks. The control tools then help the property manager stay on track with current and upcoming issues that can be impacting the asset over time.
So let’s get some control on things. Here are some ideas to help with that reporting control:
- Financial Software – The management of any building is both physical and financial. Issues have to be tracked such as lease dates and terms, occupancy rates, rentals paid, money spent in maintaining the property, and remittances to the landlord. Essentially to do that well the software system that is used should be carefully chosen by the brokerage, and the individual managers specially chosen. If a building is complex in both tenant mix and function it is likely that any standard property management software program will struggle to handle the variances of property performance. Research the best software and understand how it works. Choose the package that you can afford.
- Document Storage and Access Systems – One by-product of implementing property management tasks and duties is that of the volumes of documentation generated. Each building will have plenty of files to store for ready access. Some brokerages scan documents and keep them in the ‘cloud’ for security and control. Whilst that is a good idea in part, you still need a hard copy of many documents to work with in daily circumstances.
- Tenant Rent Invoices – Check the rent invoices generated each month against lease terms and conditions. Look for errors or omissions before the invoices are sent. Many a property manager has been embarrassed by not checking rent invoices and information before it is sent out to the client or tenants.
- Tenant Retention Plans – In many cases and with certain quality buildings you may wish to retain tenants in occupancy beyond the expiration of existing leases. New leases may be preferred and some tenants could be relocated to optimise property performance. Some tenants are motivated by unique circumstances and offerings made by the landlord. The retention plan helps with the decisions behind lease negotiations. A tenant retention plan will also be integrated into the business plan for the property.
- Critical Date Reports – When you have a batch of leases or a group of tenants, the critical dates in all leases should be audited and tracked. Early action on critical date matters will help with property performance and planning. There is nothing wrong with setting up or starting early lease or renewal negotiations with a desirable tenant. Anything that you can do in advance that helps with lease, rent, or tenant stability is a good thing.
- Vacancy Management – Don’t let potential vacancies in a property pull down the tenant mix and rental returns. Talk to your tenants on a regular basis to understand what they are thinking and how their business may be tracking. Tenants with problems can eventually lead to vacancy pressures. That doesn’t mean to say that you should tolerate tenants in occupancy that cannot pay rent. It does mean that you should keep your tenants under control by talking to them in an ongoing way.
- Lease Strategies – In any larger building with lots of tenants, you can plan the movement of tenants and change of premises as lease expiries allow. A lease strategy plan should feature in the business plan for the property. A strategic lease plan allows you to set rules about rental levels, tenant movement, lease marketing, and incentives. If you like you are setting the boundaries and systems to be used in any lease change or vacancy that may be coming up over the coming months and year ahead.
- Landlord Reports – Some landlords are very specific about the timing of the reports that they require. They may also want rent and tenant information in a particular way. It is a sad fact that many commercial property management software programs are notoriously difficult to get good reports out of. That then makes the property managers role all that more challenging. Ensure that your property management reports are of the level of accuracy and detail that your clients require.
- Property Photos – When you are interacting with clients on a regular basis, property photos help in so many ways. They record the status of a property, a tenancy, or a presentational issue. Today we are blessed with online storage for convenient access across a variety of tablets and computers. If you in a client meeting anywhere, you can generally access your property photos from online storage onto your mobile telephone and or tablet. One photo can help in client engagement and conversation. Use your technology comprehensively in commercial property management.
- Arrears Management Systems – If you get arrears problems evolving from your property portfolio then action is required very quickly. To stay on top of arrears it is best to use a quality property management system that flags issues as they arise. There will be laws and rules to arrears recovery so make sure that you understand what the property laws are in your location.
- Insurance Policies and Reports – There is a degree of risk involved in owning a property. When you put tenants into an asset then the risk component rises. Many leases provide for insurance certificates of currency to be provided by the tenant each year in satisfaction of lease covenants related to risk and risk management. Understand what all your leases say about tenant compliance on this issue.
- Budgets (Monthly, Quarterly, and Annually) – You can have budgets for all of your managed properties and those budgets can be based on the capabilities of income and expenditure in each property. If your property is of suitable size and complexity you can create a budget report to the client on a monthly or quarterly basis. Key performance indicators can be set that you work towards and track as part of improving the property cash flow.
- Private Portals for Client Access and Data Storage – It is common today for a VIP property client to be given a private portal into their property records and or reports. It is an easy process to implement, and at the very least you can put the monthly reports as pdf files into the portals for client access. You can also add a series of photographs and charts about the property into the portal. When you charge a reasonable fee for your property management services, it is critical that you provide your professional services in ways that help the client stay in touch and informed about their property. A private portal and report storage facility will do that.
- Risk Management – Some properties are exposed to lots of risk involving physical building and maintenance issues. There could be some potential seasonal issues or geographical threats within the property to prepare for such as cyclones, twisters, flooding, and storm damage. In older properties the maintenance and upkeep of the property will take on a special level of activity and planning. Understand the risks that your property portfolio creates and plan for all potential events. Expect problems to happen as they usually will at the most inconvenient of times. Professional property managers are prepared for issues and events and have a team response for most issues and challenges in a property.
- Maintenance Reports and Updates – Work closely with your property contractors as they can tell you so much about the performance of plant and equipment in the property. Get regular updates on all systems of essential plant and equipment so you can act in preparation of any plant failures or required replacements.
So there are good things to do here with systems, checklists, and control strategies in commercial property management. Select or create the systems and tools that can work for you, and stay ahead of property challenges for all of your clients and managed buildings.