How to Create a Commercial Property Business Plan and Property Management Strategy

When it comes to running and managing a commercial property for a landlord, a good plan will be required to keep things under control.  A good property management process is not simply a matter of collecting the rents and filling the vacancies; there are so many other issues to work with in the property.  If you have a large property with a good number of tenants then the plan you create will or should be comprehensive across many concepts and factors of control.

Timing of the Plan

To get this plan organised it should be prepared in the month of March or April each year, in preparation for the financial year coming up.  The plan can be created and agreed with the landlord prior to the new financial year commencing; you also have time to do the necessary investigation of any issues that could have impact on property performance.

Here are some ideas to help you get started with that process:

  1. Market Rents – Do an assessment of market rents for the location and property type.  It is wise to know how your rentals compare with other local properties of similar types.  The rental assessment should have regard for incentives, gross rents, net rents, outgoings, vacancy factors, and lease standards.
  2. Internal Vacancy Factors – Look at your tenant mix to determine just who may be leaving the property, who should leave the property, and what tenants you want to keep for the longer term.  That will require you to make estimates with existing leases, expires, options, and permitted uses for each occupant.  The best way to do that is with a graphing process that is forward looking for approximately 18 months.
  3. Tenant Retention Plans – Your good tenants should be encouraged to stay in the property by offering them new leases, attractive rentals, and improved lease terms.  In exchange for a tenant staying in the property for the longer term, look at the benefits and opportunities that you can build into the lease for the landlord.  Rent review profiles, renovation requirements, and property upgrades will all be useful processes.  The start rent for any new lease is not such a big issue when you compare it to the value of the rent over the fuller lease term.  To prove a point with that to the landlord, you can do a ‘Net Present Value’ assessment of a lease.
  4. Maintenance – Given all of the previous points, an increase or change in occupancy will have a direct flow through to property maintenance and outgoings.  To assess those things, look at the performance of the property over the last 12 months and the existing tenant mix, make some assumptions regards future property use and occupancy, and then set your maintenance budget.

The raw data that you gather with these 4 factors will help you build a solid and accurate property management plan.  You can then minimize the problems in property performance and improve income and occupancy results.

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