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Commercial Property Management Made to Order – The 12 Essential Rules

When you take over a commercial property management today, it should be specifically designed for the client and the property portfolio. One size doesn’t fit all when it comes to commercial real estate today. There are special things to look at when it comes to each and every property under management.

Far too many commercial real estate agents apply a simple model of management to any asset they bring in as a new property management. They fail to recognize the important differences between properties and fail to set the fees and management processes accordingly. That can then lead to a failure to cover off on the important issues of property performance.

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Don’t Make These Property Management Mistakes

Mistakes made in establishing a new property management system and service can lead to an unhappy client, disgruntled tenants, a frustrated and overworked property manager, and poor commissions.  Establish a stable property management portfolio of quality buildings and high-quality clients.

The 12 Rules for Commercial Property Management

Set every new client and every new property coming under management should be separately and especially considered allowing for the major and important things including the following:

  1. The tenancy mix – assess the tenancy mix for complexity, workload, and income stability. There are significant differences in workload in a tenant mix when you compare the different property types of office, retail, and industrial. It should also be said that some tenants are more challenging to manage; a retail property is a bit like that and consequently, the management fees for a retail property are generally higher to those of office or industrial.
  2. The vacancy factors – look at the current vacancy issues in the property, and determine how they should be resolved. Special strategies should be structured for resolving the vacancies as soon as possible and improving income stream. Will it be easy to find new tenants? How long should the vacancy period be tolerated in the cash flow?
  3. The income stream – look at the income stream currently including the base rent and the outgoings recovery. Look at the threats to the income stream and the stability of the tenancy mix. A good quality property will normally have a stable income stream and a quality tenancy mix. A low-quality property, on the other hand, will have income instability issues and vacancy threats. Special strategies will be required with any property that is under financial pressure or tenancy instability.
  4. Lease documentation – when you delve into the documentation for a particular property, you will see differences between the leases and the tenancies. The income for the property will be supported by the lease documentation so a full lease review will be required. Look at the critical dates and the important issues evolving from every lease document. Enter that information into a specialized commercial property management database and software program. Track the upcoming critical dates and diary issues. Stay ahead of the changes within the property, the cash flow, and the tenancy mix.
  5. Property maintenance – a poorly maintained property will eventually have issues with vacancies, tenancies, customer interest, personal injury or risk, and presentation. Look at a property from a maintenance perspective and understand how the property has been maintained comprehensively over time. Talk to the maintenance contractors to understand how things have been maintained over the years, and the issues may exist when it comes to the presentation and the performance of the plant and equipment, the structure, the services, and the amenities.
  6. Property expenditure – when you take on a new property management or portfolio, it is wise to review the historic financial records relating to each and every property. Look at how the money has been spent within the property with particular attention to the outgoings and property management. Compare those costs to the average for the area on other properties of the similar type.
  7. Net income – every client or property owner will be looking to escalate the results that they achieve with the net income for the property. They will have financial obligations when it comes to property financing, renovation and refurbishment, and property maintenance. You can also add capital works activity to the complexity of financial performance and budgeting in any managed property today. When you look at the historic financial records for the property you can see the results of net income over time and how the client will the property owner may have been manipulating that net income. Ask plenty of financial questions and look at the averages that apply to net income results for the zone and the property itself. Compare the figure’s and look for the trends over time.
  8. Risk and exposure – every property will bring with it a degree of risk and exposure related to occupancy and property use. Importantly, the building should comply with building and safety codes. Older buildings can struggle with this assessment as the age of the building will impact occupancy. Ask plenty of questions when it comes to risk analysis and any matters of risk exposure.
  9. Building compliance – is the building fully compliant with the codes that currently exist? You may need to involve specialist maintenance and engineering contractors to answer that question. If the building has issues when it comes to occupational health, personal safety, and structural compliance, then the matters will need to be addressed as a priority. Any property manager overlooking the facts and the need for compliance can leave themselves open for claims of negligence and professional incompetence.
  10. Services and amenities – look at the services that apply in the property and how they operate. Are they up to the expectations of tenants? Are the services reliable?   The same questions apply to the amenities in the property.
  11. Energy ratings and savings – many tenants today are concerned about the costs of energy in and as part of their building occupancy. Some buildings have ratings and classifications that apply to energy consumption. Every managed property should be checked for energy efficiency and energy compliance. The recovery of energy costs should be assessed for further savings and further efficiency.
  12. Occupancy costs – when you look at each and every building under management, the occupancy costs should be tracked; they are important to both the tenants and the landlord for different reasons. Those occupancy costs will be involving rent, outgoings, electricity, gas, water, air conditioning, and services. Investigate them all. How are these costs handled within the building? Are they cost efficient? Can improvements be made? More importantly, how do those occupancy costs compare to other similar properties in your location? A building with higher energy costs will be difficult to lease and thereby struggle to retain tenants over the long term.

From these things you can see why every new commercial property management system should be carefully reviewed and structured.


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Tenant and premises reviewed in handover

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