The fees for a professional commercial property management service can be difficult to set given that you really do not fully know the demands of the property or the client when the fee is under negotiation.

Commonly you will find that a property will take far more time and effort from the property manager than expected.  That problem will evolve over the first three or four months of the management settling down.  Care is required when it comes to considering a new management appointment; your fee should not be based on a percentage of passing income.  Consider the work required across the property and the daily events generated from the leases, tenants, and the landlord.

Here are some of the more challenging aspects of providing a property management service today.  In each case there are pressures of time and response on the part of the property manager.

  • The existing leases within the property are likely to present issues and challenges when it comes to critical dates, negotiations, and tenant management.  The greater the number of tenants that you have in the property, the busier you will be.  Any difficult relations between tenants and landlord are likely to frustrate negotiations and tenant cooperation.
  • From the outset of the appointment, is critical to understand the requirements of the landlord when it comes to property reporting, control, communications, cash flow, and negotiation.  Some landlords are very difficult to work with when it comes to the realities of the lease negotiation or tenant management issues.  This then places the property manager in a place of difficulty and frustration when it comes to getting a deal to move towards finality.
  • It pays to monitor the upcoming lease expiry dates.  Most particularly monitor those dates that are inside of the next 18 months.  A strategy for tenant replacement needs to be implemented well in advance.  If you need to source a tenant from outside of the property, then a leasing strategy must be developed and implemented in a timely way.
  • As part of considering the potential management of a property, you do need to look at the tenant mix, lease income, and expenditure activity.  The age of the property is likely to have significant impact in those factors.  For that reason you will need to establish a financial budget relating to income and expenditure.
  • There are differences of management intensity when it comes to office, industrial, and retail property types.  The number of tenants will also have an impact on daily workload.  Review the property fully before you make fee choices.  Some leases will be quite difficult to manage.
  • Review the property for current and future maintenance activity.  An older property will likely have many more maintenance and repair issues to handle on a daily basis.  The cash flow budget relating to income and expenditure will be driven from lease occupancy, and expectations relating to maintenance activity.

From these issues, it can be seen that property control and successful management only comes through understanding and application to the tasks at hand.  A good property manager will be required to serve the requirements of the tenants, landlord, and property; choose your managers relative to the required skill mix, and the property.  When you set your fees for the new property appointment, understand the pressures and challenges that will need to be serviced in an ongoing way.  Set your fees accordingly.