Commercial and Retail Property Management is a special part of the investment property industry. All too often I see inexperienced people applied to the property management sector when they have little or no understanding of what they are doing. That situation then typically leads to a property that is not performing well and a tenant mix that is struggling.
Successful property managers are highly skilled and rightly so; the complexities of office hi-rise, and retail shopping center performance are challenging. Training and skill development for property managers is required
Don’t Struggle in Property Management
A struggling situation in property management can lead potentially to:
- Higher vacancy factors
- Tenants that are uncooperative
- Random rental results
- Errors in lease management
- Critical dates missed
- Erratic rental returns for the landlord
- Ballooning expenditure in maintenance
- Escalating factors of risk in property performance and occupation
- An unhappy client leading to loss of business
To help with this a strong process of control can be applied to any property through reports and checklists on specific tasks. The control tools then help the property manager stay on track with current and upcoming issues impacting the asset.
Control Tools for Property Managers
Here are some ideas and tools to help with that property control:
- Financial Software – The management of any building is both physical and financial. Issues have to be tracked such as lease dates and terms, occupancy rates, rentals paid, money spent in maintaining the property, and remittances to the landlord. Essentially to do that well the software system that is used should be carefully chosen by the brokerage, and the individual managers specially chosen. If a building is complex in both tenant mix and function it is likely that any standard property management software program will struggle to handle the variances of property performance. Research the software and understand how it works.
- Document Storage and Access Systems – One by-product of implementing property management tasks and duties is that of the volumes of documentation generated. Each building will have plenty of files to store for ready access. Some brokerages scan documents and keep them in the ‘cloud’ for security and control. Whilst that is a good idea in part, you still need a hard copy of many documents to work with in daily circumstances.
- Tenant Rent Invoices – Check the rent invoices generated each month against lease terms and conditions. Look for errors or omissions before the invoices are sent. Monitor the invoices for accuracy and payment so you can see arrears as they occur.
- Tenant Retention Plans – In many cases you may wish to retain tenants in occupancy beyond the expiration of existing leases. Some tenants are motivated by unique circumstances and offerings made by the landlord. The retention plan helps with the decisions behind lease negotiations.
- Critical Date Reports – Every lease will have particular dates relating to occupancy, rental changes, tenancy obligations, and outgoings recovery. They can also be dates specifically relating to certain tenant situations such as turnover reporting, sales, or renovations and upgrades. In a property with a number of tenants, the monitoring of critical dates can become a challenging process, and on that basis the software package managing lease occupancy will be a valuable tool of control.
- Vacancy Management – Most property owners try to avoid vacancy issues and vacating tenants. Nevertheless, in any property with multiple tenants in occupancy there will be vacancies to manage and deal with over time. Behind every vacant property or premises, there will be choices to make when it comes to marketing, lease terms and conditions, permitted use, and choice of tenant. A successful lease will be created through key decisions involving those choices.
- Lease Strategies – In a property with a number of tenants or premises to be leased, individual strategies of leasing can be created to allow for levels of rental, the location of the premises, and the choice of tenant. In any large property it is not unusual to have a number of lease strategies approved for use when it comes to different tenant types and locations.
- Landlord Reports– High quality landlord reports assist when it comes to property control and the recording of issues or decisions. Some landlords require particular reports to suit their business activities and or asset management plans. Take the time to identify what the landlord needs by way of reporting and also consider the property and its function.
- Property Photos – Take plenty of photos every time you inspect a property. The photos will help as a record of events or property presentation. You can store the photographs online so that they are ready for access or use with the landlord in any reporting situation.
- Arrears Management Systems – There will always be arrears issues to work through in any property under management. The greater the number of tenants that you have occupying the property, the greater the number of arrears issues to manage. There are strategies and legalities to be applied with all arrears situation. Understand what you must do from a legal perspective and also know what the landlord requires of you with arrears responses.
- Insurance Policies and Reports – Insurance issues arise in unusual ways and sometimes quite unexpectedly. They can be related to personal injury, building use, or natural events. Understand how insurance issues should be handled for the landlord and also the terms and conditions of each policy of insurance. Protect the landlord’s insurable position by recording issues and meetings with people involved in any insurance situation.
- Budgets (Monthly, Quarterly, and Annually) – Any medium to large property should have a budget of income and expenditure. That budget should integrate into the cash flow requirements of the landlord, as well as the rental capabilities of the lease documents across the tenant mix. Budgets for income and expenditure are created before the beginning of each financial year and are monitored and or adjusted monthly thereafter.
- Private Portals for Client Access and Data Storage – In any high quality buildings, the client or landlord should have the convenience of an online password protected portal where they can get their property reports for their buildings.
- Risk Management – The running of a building will involve operational plant and equipment, as well as occupational risk. Whilst there is an insurance component to watch in each case, there will also be factors of risk associated with loss of rent from plant and machinery failure. That then is a risk to be managed.
- Maintenance Reports and Updates – The maintenance of the machinery and plant in the property should be merged into the expenditure costs and budget. Each month the client should be updated on the performance of important and critical parts of mechanical performance. Typically those categories include air conditioning, lighting, water supply, fire protection and detection systems, hydraulic systems and storm water, electrical supply and costs, and lift machinery.
These factors will give you a good base of control with property performance and operations. A property manager can evolve a personal reporting system around these issues.