Key Performance Indicators in Commercial Property Management

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Personal performance tips in commercial real estate agency

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.

 

Commercial Property Leasing Agents – Landlord Report of Leasing Activity

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Provide a comprehensive leasing report to landlords about your leasing activity.

In a commercial property today a landlord has to be fully briefed on lease and tenancy matters if property performance is to be optimised.  The process of reporting to the landlord is a key part of the role of a commercial or retail property manager.  The reports should be comprehensive and provided monthly together with the financials for the asset.

The aim of the lease and tenant report process should be to optimise the tenant mix and control the rental cash flow.  The landlord for the property will have a plan and targets that impact rental, vacancies, tenant selection and refurbishments.  That is why each property should have a property business plan that is established for the plans of the landlord and then regularly updated.

At the start of any asset management service, the property manager should interview the landlord to understand the factors that are important to property function and income.  The reporting and control plan can then be established.

Here are some topics to incorporate into the landlord monthly report:

  1. The income for the property will be of key focus to the landlord.  The income will be impacted by the leases, and on that basis, the manager of the asset will need to understand each tenants lease comprehensively.  Care needs to be taken with critical dates and income rental charges.  In some cases you can find that the critical dates in the leases are based on dates where ‘time is of the essence’.   In that case action is required by the selected dates.
  2. Changes of rent charges will be relative to the lease and any agreements that the landlord and tenant have.  Everything of that nature must be in writing.  Good records will help you stay on top of rental changes and charges.
  3. Outgoings recovery will be based on the occupied areas for each tenant.  That recovery will have a relationship to the lease for each tenant.  Some leases have limitations on the outgoings that can be recovered so care should be exercised in checking that information for any reconciliation of rental and tenant payments of outgoings.
  4. Market rentals will change from time to time based on the area in which the property is located and the property type.  On that basis the monthly report to the property owner should have some update on market rental trends and changes that could impact any upcoming market rent assessment in the property.
  5. Lease expiries coming up should be tracked and recommendations be made early to the landlord so the vacancy downtime can be managed and minimised.  In such situations it pays to work 12 months in advance so that problems of vacancy can be solved early.

The report to the landlord of a managed property should be seen as a tool of control and record.  When it is done well it can help all parties involved with the property make the right decisions in a logical way.  Want more information?  Subscribe to our mailing list right here.