Key Performance Indicators in Commercial Property Management

When it comes to operating a commercial property management department, you need to set some performance indicators that will help the individual managers match their services to the needs and expectations of the clients.  That being said, many clients will have particular needs when it comes to property performance, tenant mix and tenant management, reporting, and income generation.  This is all the more reason for the use of the manager benchmarking and indicator assessment process.

Without relevant indicators, you will fail to see any shortcomings in performance and eventually some property management clients will move to other agencies for their management needs.  It is a known fact that the property management process is demanding and time consuming.  Many property managers cannot handle the pressures and organizational issues that come with the job.

Time versus fees

Some properties can be particularly time intense for a variety of reasons; that being said, the fees for service should be suitably structured so that time allocations applied to the property are covered in the base management fee.  Far too many agencies set their fees based on industry standards rather than services to be provided to the property.

So you need some performance indicators to track as part of the function of your property management department.  Each week those performance indicators can be reviewed as part of the regular department meeting.

The primary object of the indicator process is to understand where there are any shortcomings and failures within the services provided to clients, or the overall division.  Here are some typical indicators that you can merge into your review process each week:

1. Monitor the vacancy factors as they apply to the greater portfolio.  Set yourself some benchmarks that are regarded as the limits of vacancy above which you will or should not go.  Some properties will have greater problems with vacancies and on that basis they will need a specific leasing focus and more complex leasing services.  Some property managers will not be managing their vacancies in accordance with the standards of the business.  This assessment process will help you identify those managers that are not giving the right attention attention to the leases and vacancies in their portfolios.
2. Monitor the aged debtors and the arrears within the portfolio.  Split those numbers into property managers and client portfolios.  Look for any discrepancies that can apply to the recovery of arrears monies on behalf of clients.  Pay particular attention to the larger portfolios and the ways arrears and aged debts can be hidden within the tenancy mix.  An aged debtors report by client and by property should identify tenants that fall into this category.
3. A big issue within the management of a portfolio is risk management.  Various risks apply to the function of a property on a daily basis.  The greater number of tenants and customers within a property, the greater the exposure of the client and the agency to risk events.  If you manage a commercial or retail property, you are in charge of the risk of problem and should have a specific program of risk management that is reported to each week by each separate property manager.
4. Some landlords are demanding when it comes to the performance of their property and the quality of reporting.  That being said, they are entitled to receive what they require when it comes to property management services.  The agency does however need to get the fees correctly set for the services provided.  That’s where most agencies fall down when it comes to matching fee generation and services.  Understand your landlord clients, your fee structures, and ensure that both issues are correctly harmonized.
5. The responses of a property manager to the maintenance needs within a property should be tracked.  Failure to address maintenance issues in a timely way can expose the agency and the client to liability and negligence claims.
6. Lease management, tenant retention, and tenant management are all specific lease and income issues.  They require specific systems and solutions on the part of the manager within each property under management.
7. Look for leasing opportunities, lease renewals, tenancy relocations, rent review negotiations, and specific tenant expansion or contraction requirements.  They can all be opportunities for property income improvement but also fee generation.  Every property will produce different pressures and opportunities of this type, and on that basis have a fee structure that can be applied for the extra work within each of these categories.

This is just the start of the indicator process; there are other things that can be added to the list.  That being said, there is a real need to monitor the performance of each property, each client, and each manager.  The performance indicators will help you do that.  The long term benefits are a stable property management portfolio and clients that trust your services.

Check out more articles like this at our main website on commercial real estate training.