When you take over a new commercial property management and particularly an office building, there are quite a few things to check out and get under control. The larger the building is, the more issues there are to look into.
Control is everything in managing a property well. Here are some of the most important things to look at in the property handover and work through:
- Leases – Look at all lease documentation within the property and understand just what leases exist and apply to tenants in occupancy now. Review all leases individually as they will all have special terms and conditions that create critical dates and responses on the part of the tenant and landlord.
- Tenant Mix – In some properties the location of one tenant to another can be an important factor to watch. The permitted use of one premises will impact another. On that basis tenants should be chosen with due regard for the overall property performance. Understand your tenant mix and the plans that make it successful.
- Maintenance – At any given point in time there will be active issues of maintenance to look into. Some will be preventative and other things will be response based. Importantly every property should be safe for occupants and visitors, as well as presentable for occupancy. Top property presentation will help support market rentals and the lowering of the vacancy factor.
- Rentals – Some rents in a commercial building are likely to be based on a ‘gross rent’ whilst others will be based on a ‘net rent’. The property outgoings will be the variable factor impacting both rental types. It directly follows that the property outgoings will be set to a budget and the functions of plant and machinery in the property. Check out the rental profiles and the passing rents of all leases and tenants. Look at the current rental invoices and check to ensure that they match the lease documentation in each case and that the rent reviews and lease options are up to date.
- Expenditure – Compare the expenditure or outgoings of the property to industry standards set locally with other properties of similar type in the location. Given that outgoings form part of the rental structure and budget for the property, be really focused on the existing property performance and the budget of the future.
- Vacancies – Your bid target in managing any property should be to keep the vacancy rate low. In an ideal world it is good to negotiate lease options early and fill vacancies before they occur. That requires a forward looking strategy of lease monitoring and keeping in close contact with the tenants in the property.
- Contractors – The maintenance contractors in a property can tell you so much about what is happening to the plant and machinery as well as the overall presentation of the property. In taking on a new property management, meet with all maintenance contractors. Ask them questions about the performance of the plant and equipment. Review the costs and the budgets across expenditure segments such as fire services, lifts, air conditioning, energy, lighting, electrical, and hydraulic. Compare those segments with the same cost segments in other buildings. Look for imbalances in expenditures.
- Landlord targets – Some property owners will hold an asset for a long time as part of a fuller property portfolio strategy. Others will want to achieve capital gains inside of 5 years so they can sell the property and move into another. Question your clients to understand exactly what targets they have and how they will looking at the property over time as a part of their investment portfolio.
- Risks and Liabilities – Every property will have risks in one form or another. All of those risks should be managed. Risks can for example be environmental, income related, or occupant related. A risk management plan can be developed for the property asset and merged into the business plan for the asset.
- Documentation – In any managed property there will be factors of documentation beyond the leases. For example there may be licences for special areas, car parking agreements, communications agreements for antennas, and the list goes on. Look at the property holistically and question everything you see; look for side agreements, third income streams, extended occupancy issues and anything else that could have an impact on the landlords position.
Whilst there may seem to be quite a few things on this list, in practical terms you can go a lot further as you work to the plans and targets of the landlord. Commercial property management is a special part of the property industry. When you understand it well it can lead you into so many new deals and opportunities.