Hong Kong harbour and high rise properties.

Most commercial real estate agencies and brokerages get plenty of new business over time from their commercial property management teams or divisions.   That is the way things can work positively in business sharing and client leads across the respective teams.  A successful property management team is, therefore, a valuable part of a growing commercial real estate business.

The working relationship between the sales and leasing agents, and the property management team should be encouraged in all respects.  New business and clients will evolve from the strong working relationships of the divisions.  Individual agents and broker can also get plenty of work from knowing a few good property managers or businesses.  (NB – you can get plenty of Property Management ideas in Snapshot right here – its free)

What would you expect from a property management team and its operation over time?  There are indicators to watch and shape over time.  Here are some factors to consider and watch:

  1. Stable client base – the client base of the property management team should be stable and of reasonable quality. There are also ideas to work with here, in that the client base should deepen in quality over time.  The lower quality clients or those that are hard to service, and the smaller properties under management should be removed from the overall portfolio over time; that is a decision to consider.  Set some ‘low limits’ on the fees that are recovered from a managed property during the year.  A figure of $12,000 pa is not unreasonable as a minimum fee base for property management buildings individually, and that fee base should reflect better clients and properties to be under management for the ongoing duration.  To achieve fees above that limit, selectivity is normal with any new properties and clients.  Smaller property managements, and those with low fees, or those managements that are ‘difficult’ for any reason, should be dropped.
  2. Portfolio growth – drop away from the smaller managements in a planned approach to new business. If you have lots of smaller managements, then the release process should be staged over time.  Split the property portfolio up into those properties and clients that you should or want to retain, and those that you should remove or drop over time.  From that point, it is simply a matter of moving on the portfolio change as the better properties and clients are converted to management services.
  3. How do you grow a property management portfolio? – There needs to be a clear answer to this question in any real estate business. Most brokerages grow their portfolios from activity in agency sales and leasing.  That is how most growth factors come about with a property management portfolio.  The only other way to grow a portfolio is by targeted marketing of property owners and investors, and that process would only be used if normal agency activity was not part of the overall business model.  Put a ‘bonus structure’ in place for the sales and leasing agency team, so that converted managements create a reward or bonus structure back to the responsible team member that created the lead or the appointment.
  4. Diversity in services – an experienced and specialised property management team should have a variety of extra services to offer their clients with their properties over time. There can be extra fees earned from the process providing the services are of high quality and comprehensively offered.  Services could be property investigations, facility management, tenant mix control or changes, new leasing, business planning, or property performance enhancement.  Specialised services are valuable ways of adding new clients and properties to the overall portfolio.
  5. Accuracy in professional services – errors simply cannot occur in commercial and retail property management operations and services. There are many things to keep under control so the ‘quality control’ part of professional services and team performance should be good in every respect.  The best managers and team players should be employed and encouraged through bonus schemes based on portfolio enhancements.  Keep the property management team ‘on task’ through various quality control and client service
  6. Information sharing – it can be said that the tenancy schedules and tenant lists for managed properties are very useful when comparing rents and income results for a property. How that information is to be used is subject to the required levels of client confidentiality, and that process should be respected.  Rules can be set to preserve confidentiality in sharing information back into the sales and leasing team.

Taking these issues on can be on or in a business plan approach to the property management division.  Understand the value of the property management division and use it in the growth of your brokerage business.