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Essential Office Property Performance Tips for Commercial Real Estate Managers

When you manage and or lease a commercial office tower there are many things that should be tracked and monitored to improve property performance over time.  The landlord will have targets to fulfill and the tenants will bring to the property certain demands and challenges.

A plan is required for the property to make things happen and improve property performance.  It can also be said that the changes within the property market during the year will impose shifts in rent, occupancy, and property returns.  Are you up to the challenge?  So let’s get specific with some ideas to help.

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Specific Control Factors for Office Buildings

Here are some ideas to help you get your commercial property assets under control:

  1. Tenant mix – In some commercial buildings the tenant mix is critical to the performance of the building.  Some tenants don’t go well near and close to others within the same building.  So each tenant should be looked at for compatibility with others.  As part of that assessment look at the dates of lease expiry.
  2. Lease documentation – There are different types of leases.  Many alternatives exist in a lease document to set rent structures, rent reviews, and options.  The right choices should be made to help the landlord improve investment results.
  3. Longer leases – If the property or premises suits, a longer term lease can be negotiated with a suitable tenant.  I go back to the point that a quality tenant should be chosen for ongoing occupancy.  With some buildings it pays to have a checklist approach to qualifying a tenant for the property.  Understand what the tenant will bring to a propert over time and how that tenant and lease will hopefully improve the investment profile for the asset.
  4. Improved rental – There will always be a start rent negotiated between a tenant and landlord.  The increase of that rent over the lease term should be planned and structured in the rent reviews.  There are different reviews to consider such as fixed percentage, market rental, fixed amount, CPI index, or some combinations of those.  Laws in your location are likely to impact the combinations and types of rent reviews.  There will also be choices driven by local property market conditions.  Make the right choices.
  5. Third income streams – The terminology may seem a bit strange, but it means ‘extra rental streams of income’.  It implies that you can find other income opportunities in a property beyond the normal rent paid by a tenant.  That is the case with storage, car parking, antennas, cable licences, naming rights, and casual space.  A good property in a prime location lends itself well to extra income streams for the landlord.
  6. Lower vacancy factors – Lowering the vacancy rate or helping to reduce it altogether is a good thing.  Market conditions will have something to do with local tenant vacancies so understand the pressures of things and how that could have an impact on your property.  Your rentals and incentives should be keenly structured to drive low vacancy rates and good tenant enquiries.
  7. Outgoings recovery – It costs money to run a building. Many of those outgoings costs will be recovered for the landlord through the lease and rental structures.  Understand what the market expectations are with outgoings recovery and put in place a rental strategy to suit with all new leases negotiated.
  8. Expenditure controls and budgeting – Any large commercial property will require an expenditure budget so that costs and income are well matched.  Compare your building to others locally from an expenditure point of view so you know that your property is positioned well.  You want to be within the averages of expenditure and property operational costs.
  9. Tenant retention plans – In a large tenant mix you will have priority tenants to look after for the long term.  You will not normally want to loose those tenants to other competing properties.  A tenant retention plan helps you move through the tenant and leasing decisions.  The plan will also help you decide how you want to negotiate new leases before they fall due.
  10. Tenant interviews – Keep in close contact with all your tenants to understand the pressures of occupancy.  Some tenants will want to expand and others will need to relocate.  It is better that you work with those issues with your prime tenants.  Keep your good tenants for the long term.  The best way to do that is through a series of organised meetings through the year.
  11. Maintenance systems and routines – Understand the important aspects of maintenance in the property that could have an impact on occupancy and or safety.  You will need some strategies to handle those issues.  Don’t let the property fall into problems associated with risk and poor maintenance.  Keep the maintenance in the property well under control.
  12. Building compliance – For the property to be occupied safely and legally, the asset has to comply with established building and safety codes.  During the year it pays to do a compliance audit.  The best way to do that is to secure the services of specialised engineers and consultants.

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