The management of a Retail Shopping Center can be a very intense and demanding process. When you have lots of tenants in a busy shopping center, things need to be kept under control and directed to the plans of the landlord.
By comparison there are more people involved in the management of a retail property or shopping center as opposed to an office or industrial property. On that basis the fees for managing retail are usually higher.
Higher Shopping Centre Management Fees
So let’s look at the fee issue as it will be of interest to many. The property management fee in a shopping center could and usually is based on a percentage of the passing income or rent; depending on the size of the property, that percentage could be as high as 5% (smaller properties) or as low as 1% (very large shopping centers). A lot depends on the amount of work to be done and the number of people involved in the team. The larger the tenancy mix and the passing income collected, greater care should be given to the fee charged.
You can only ever assess the validity of a property management fee charged by looking at the fee % against the passing income; understand the work to be done, and see what costs are recovered in the process. It is quite common in retail property for the staff costs of the management team to be recoverable from the outgoings to the property.
A complex property will be managed intensely with controls across leases, tenants, maintenance, and cash flow. You will usually need a business plan to make all of this work to a structure. The business plan will take into account the functions of the property, the size and type of the tenancy mix, and the instructions of the landlord. It is not unusual to upgrade the property business plan at least once every quarter.
Shopping Center Team Structure
Let’s assume you are managing a larger retail property. In saying that, I would expect that property to have at least 2 anchor tenants and 100 to 200 specialty tenants.
To manage that property you will need a team of people to work together. Here are some job categories that are normal for today’s retail property team:
- Property Manager or Center Manager – They are ultimately in charge of the performance of the retail property financially, physically, and functionally. Just about every conceivable category of property performance will come into that assessment.
- Financial Manager – This person is in charge of rents, arrears recovery, expenditure management, budgets, and outgoings. They would also put together the weekly and monthly financial reports for the property.
- Maintenance Manager – As the name suggests, this person controls the repairs and maintenance aspects of property performance including general upkeep, capital works, essential services compliance to building codes, breakdowns, contractors, tendering of works, and workplace health and safety. There are a lot of things to consider and control in this role.
- Tenant Services Manager – In a larger property, the property manager cannot cover the high volume of day to day issues as well as the tenant communications. That is where the tenant services manager can offer a real advantage. Their role is to connect regularly with all tenants and build strong business relationships in each case given the demands of the property, the leases, and the customers.
- Lease Administration – A lease administrator will be that person to oversee lease terms and conditions as they apply to all tenants and all parts of the property and premises. The main focus for this person is to ensure lease compliance and default management across all tenancies. They would also monitor critical dates in leases and occupancy agreements.
- Leasing Manager – This person is to negotiate and coordinate all leasing activity across the tenant mix. They will need to have a solid awareness of retail rents, lease negotiations, incentives and retail business benchmarks.
These people are chosen for their roles in the team based on retail property skills and knowledge. Their salaries are normally charged back to the property as part of the outgoings cost structure. For that process to occur correctly, the lease conditions relating to outgoings will need to be correctly structured.