Things to do in a Commercial Property Management Handover

high rise buildings

If you are about to take on a new commercial or retail property from a management perspective, there are things to think about.  There are things to think about and the property management handover is critical to gathering the right information.  Every client and every property will have unique issues to prepare for and ask questions about. (NB – you can get plenty of property management tips in our Snapshot program right here – its free)

 

Handover Importance

There is something to remember here about a property handover and why it is so important; you only have a short period to get the full information about the property and its performance over time.  Questions must be asked of the previous property manager, owner, or tenants.

 

Stay Organised

An organised approach with a checklist as part of a handover process is a good thing to work with.  A checklist will keep you on focus and task for the property type.  Different questions are asked when it comes to the different properties.

So here are my experiences and ideas relating to taking over a complex commercial or retail property.  Preparation is the key to success in capturing all the recent and relevant property detail.  You may be able to add to the list based on the location and the landlord:

  1. Check out the physical aspects of the property – it always helps if you visit the property first before you do other things. The visual aspects of the property will help you significantly with investigations and questions.
  2. Review the tenancy mix – in a property with several tenants, look at the types of businesses, location of each tenant, and the performance of the property for the tenants in situ. Some tenant types put pressures on the property such as security or staff issues.
  3. Review all the leases relating to occupancy – the leases will have unique elements of occupancy to review. All leases should be read; extracts and critical dates should be taken from each lease where you can see important facts impacting occupancy.
  4. Understand the vacancy factors – any vacancy now or in the future is an issue. Resolve vacancies through a tenant retention plan, a marketing plan, or a targeted leasing program.  You can also move existing tenants around the property.  Think outside the square when it comes to tenant movement and placement.
  5. Look at maintenance and risk factors – any person owning a property assumes risk and must plan for the challenges of property ownership. The building, the improvements, the location, or the tenant mix, can create risk matters and pressures.  See things for what they are and how they could challenge the investment performance.
  6. Review income and expenditure results – there will be a pattern of income and expenditure to review and consider. The last few years will have value to you when assessing passing income and net income.  The results of the last few years will help you set new budgets for the property given the existing tenants, leases, vacancies, and landlord targets.
  7. Talk to the landlord about expectations and reporting – every landlord will have certain requirements of reporting and control. The property will have income and capital value targets over time.  How can you report to that criteria for the current property owner?  Have you got a software property management program that allows you to report conveniently about the asset and the current results of income, leasing, and tenant activity?  The information that you gather from a property management handover will be captured into the software that you are using to manage the property.

So, there are many things on this list to investigate.  One thing or one question will lead to many others.   As you take on a new property to manage, be prepared for the information and the facts that come your way; take plenty of notes.

Commercial Property Managers – Rehabilitation Strategies for Older Office Properties

city office building
Stay ahead of property maintenance and performance.

Like it or not some commercial investment buildings will age and factors of change consequently occur in property appearance and performance.  When that happens, tenants are commonly attracted to newer properties in the same location.  Landlords can be under threat of a declining tenant mix and marketing rental.

Local property developers

It is a fact that property developers for any new project are likely to be offering incentives and relocation strategies to pull across tenants and businesses to boost their project cash flow and occupancy.  If you are a leasing expert or property manager for your location, you will need some real strategies to underpin property performance for your clients.

Maintain the mix and the rent cash flow

As any investment property ages, a renovation strategy is a wise solution to maintain tenant occupancy and net income.  Such a plan should be incorporated into the annual business strategy for the property and the associated capital works programme.  The leasing and or property manager for the asset should be part of that assessment process.

Property performance strategies

So the message here is quite clear for any property owner and or property manager.  To sustain reasonable levels of property performance within any investment building, a real initiative needs to apply when it comes to property upkeep and occupancy.

There is a balance to consider here between the incomes achieved or achievable for the property, the regular maintenance required within the asset, the prevailing market conditions, the cash flow requirements of the landlord, and the demands of the occupants.  Are you ready to balance the equation?

Why does this happen?

It is worth understanding why these problems evolve and then taking action accordingly.  Some of the older investment buildings struggle for a number of reasons such as:

  • POOR SPENDING: Insufficient spending on property upkeep over a period of time can be a real challenge. Some landlords are too tight when it comes to property cash flow and maintenance costs.  They hold back on discretionary issues relating to maintenance.  Over time the property then degrades and the visual appearance suffers.  As tenancies move towards lease expiry, they are quite likely to reconsider occupancy costs, and look after moving into other more modern assets locally.  Protect your tenancy mix and lease income.  Understand what the tenants require to run a successful business.  Understand the needs that they have when it comes to staff, customers, occupancy, and business activities.
  • LACK OF MAINTENANCE: Poor quality maintenance routines and poorly selected contractors are an all too common problem. Building design and layout will dictate particular standards of property maintenance and upkeep.  The plant and equipment will also have maintenance upkeep requirements.  Establish a routine of property maintenance review and risk controls.  On a quarterly basis assess property performance and degradation.  The larger remediation items of a capital expenditure nature can be programmed into the property cash flow and budget process.  If
  • NEWER COMPETITION: An abundance of newer properties coming into the market can change future supply and demand; the older properties are likely to suffer. Property developers will always study market conditions and the opportunities for a new project.  They will predict occupancy into the future.

All of these issues are simply structured around asset positioning.  If you are working with the property owner in a regular and ongoing way, and you understand the opportunities within the property tenancy mix, you can make the right choices when it comes to property rehabilitation and upkeep.

When you optimise the net rental income and the tenancy mix, monies are usually available to sustain property presentation and maintenance.  It is a fine balance but it does work.  Get involved with the assets that you lease and manage.

You can get more commercial property management tips in our eCourse ‘Snapshot’ right here.

How to Do a Security Checklist for Commercial Property Management Assets

high rise office building
Understand the security challenges that real estate assets create.

When you are involved in the management and the leasing of any commercial or retail property, you will understand the importance of security when it comes to tenancy occupancy, and property performance.  There are many challenges involving security today when you consider different tenancy types, property locations, and asset design.

Understand the Property Security Challenges

Here are some of the important issues to action and merge into your security checklist:

  1. Property surrounds – review the property in its location looking at the boundaries, the adjoining properties, and factors of threat from the precinct. Nearby properties can pose a significant threat directly or indirectly when it comes to asset performance.
  2. Building design – the property itself will have certain strengths and weaknesses that apply in the security sense. Understand the property from both a visitor and a tenant perspective.  How can people move to the property and through the property conveniently and safely?  How can tenants move to the property and occupy their leased space efficiently and securely?
  3. Look for existing threats – when you study the tenancy mix you will see certain threats evolving from the tenants in occupation and or the business types. Those threats will need consideration and consultation with a view to minimising risk.
  4. Existing Security Systems – review the property and its existing capabilities or limitations when it comes to security. Look at the locks and the master key systems, electronic security, tenancy security, windows, doors, lighting, car parking, and guards or patrols.  Also review the access points and the flow points for people through the property at different times of day.  Some buildings today operate at all hours with both tenants and customers.  Can your building handle the challenge safely and correctly?
  5. Communication systems – many tenants today transact sensitive and confidential information constantly as part of their standard business operations. The communication systems within the building will need secure access and secure controls.  Those systems will involve data access, data storage, telephone systems, radio transmissions, and associated cabling.
  6. Individual tenants – some tenants create special levels of threat and risk within the property and with other tenants. Responses, procedures and strategies will be required when it comes to specific threats such as bombs, explosion, staff movement, customer access, safety, emergency evacuation, and materials containment.  Consider each tenant individually for the challenges that they present to the building, the investment, the community, the other tenants, and people generally.  Consult with the necessary local authorities if you have tenants of concern.

So this list will help you establish a process of checking and assessment when it comes to property security and property integrity.

You can get more commercial property management tips in our online eCourse ‘Snapshot’.

Talking Shop with Commercial Property Managers

woman looking at files.
Set up systems in commercial property management.

The commercial or retail property management process can be time intense and quite frustrating.  The observation is quite common.  Most property managers will be intensely busy every day of the working week.  On that basis they need to be organized to the tasks that really matter as part of providing quality professional services.  Here are some tips from our Newsletter.

It is worthwhile noting that an experienced property manager will bring significant skill and opportunity to the landlords that they serve.  That will be across the property in a number of ways including the specialized disciplines below:

  • Rental growth
  • Expenditure control
  • Vacancy minimisation
  • Tenant mix strategy
  • Property performance
  • Lease documentation
  • Safety and risk management
  • Property value improvement
  • Renovation and refurbishment

So there are plenty of ways that the manager can bring growth and opportunity to the clients that they serve.  It is just a matter of understanding the plans and the targets of the client as they relate to the future of the property in the region.  It is a wise process to create a property business plan on an annual basis to manage the variables of property performance for the client.

So let’s go back to the tasks and activities of the property manager.  If the correct person is chosen for the portfolio and the client, the other balances required will include the following:

  1. Be aware of the amount of time it takes to manage a property for a client.  Some properties and clients will require significantly more work than others.  If that is the case, the intense workload should be reflected in the fee.  One way of calculating a fee is to consider the amount of time each week a property will require for ongoing control.  Consider the factors of the tenancy mix, lease documentation, maintenance, customer involvement, vacancy issues, and rental collection.  The larger the property, more intense these issues will be.
  2. With quality clients and properties, the reporting process can be quite specific and tedious.  The factors of income, expenditure, lease management, maintenance, tenancy mix, and documentation will require special processes and established guidelines.  In a large property, it is not unusual to be reporting to each of these factors on a weekly basis.  That written report will support any verbal instructions given or communications made with the landlord.
  3. The best way to get your job and portfolio under control is to work to a daily and weekly plan.  It can also be said that the end of each month will be busier with reporting requirements and property analysis.  So look at the factors of work that apply to each day, each week, and each month.  Split the working day into two segments.  The first half a day should be devoted to documentation and reporting issues.  The last half the day can be devoted to clients and tenant contact.  Obviously there will be some variations and pressures that apply.

So you work in a busy segment of the market.  At least 80% of your time should be under control.  In that way you will preserve the quality of performance and control that your clients require in commercial and retail property management.

Eliminate Stress in Commercial Property Management Today

woman wrestling with cables
Commercial Property Management can be stressful.

When you work in commercial property management it is very easy to suffer the effects of stress.  They say that some stress is a good thing and that it helps us get the job done; the unfortunate fact of commercial property management is that stress can be relentless and continuous.  Workloads are high most of the time.  Here are some tips from our Newsletter.

So why are things like this?  The reality is that commercial property managers are very busy most of the working week.  If they do not handle work variety and pressures well, then they are likely to suffer in one form or another.  In this industry you really do need to be organised and have a level of knowledge that supports workplace efficiency.

Far too many property managers are overloaded with too many buildings and tenants by agency principals that have little or no idea about the amount of work involved in the management service and process.   Another problem in the industry is not charging sufficient fees for the work involved in managing buildings.

On any given day a property manager is likely to do many different things including:

  • Meet with tenants
  • Collect arrears
  • Talk with landlords
  • Income management
  • Expenditure controls and management
  • Trust account monitoring
  • Remittance of landlord funds
  • Payment of accounts
  • Report on lease and tenant matters
  • Find new tenants
  • Inspect properties
  • Inspect vacant tenancies with new tenants
  • Market vacant premises
  • Interpret lease situations for risk and response
  • Write several dozen emails and letters
  • Talk with contractors about maintenance matters
  • Arrange maintenance response to repair requirements
  • Look  at competing properties under management for tenant changes and opportunity

So this list is deep and meaningful.  There are many things in this list to keep a property manager fully occupied.

Given the large variety of things to do it is very important that they be good at time organisation and management.  Organisation removes a lot of stress and pressure in the job.

So just how many hours should a manager work per day?  To be realistic, the job is demanding and complex.  A 10 hour working day is not unusual.  That being said, you really do need to be diligent on the type of work that you do and build efficiencies into the system of the day.  When you believe and feel that you are under control, everything else gets a lot easier.

Ultimately our job is to provide the landlords that we work for with relevant property control and focus.  If you are graduating from residential property to commercial property, understand that the property shift does require a different approach to the property under management, the landlord, and the tenants.  Relationships are more business-like.  Decisions made are usually based on logic and the factors of income and expenditure.

In closing on this point it should be said that commercial or retail property management is a great career choice for those that want to work in the industry.  It is just a matter of establishing the right time management systems and controls to get you through the working day efficiently and correctly.  Enjoy your career in commercial property management.

Join our Newsletter and get more tips like this.

Income Optimisation in Commercial Property Management

female commercial property manager reading file
Optimise your income in commercial real estate today.

When it comes to managing commercial and retail property, it is very important to optimise the income for the landlord.  The income for the property should be looked at both individually with separate leases, and across the entire property and the tenancy mix.

At the beginning of every financial year, there should be some form of budget created for the tenancy mix and the potential property income.  All of the leases currently existing will have rental strategies and rental increases to merge into the income budget.  This income budget can be incorporated into the business plan for the property for the upcoming year.  The best time to do the budget is in the months of April and May, just prior to the beginning of the financial year.

Here are some tips relating to income optimisation in commercial or retail property management:

  1. Always allow for some measure and method of adjustment given that the property market is always changing in your local area.  When you set a property income budget, it should be reviewed on a monthly and quarterly basis.  Any established trends in the local area should be tracked and then be used as a form of rental adjustment for the landlord if those trends are firm and established.
  2. The vacancy factor in your local area will change based on the supply and demand of available property.  To monitor this process, you should track down the changes to the property development plan in the region.  Look for any new developments that could have an impact on your property.  Those new developments will have a timeline of construction and occupancy; it is likely that those developers will also have an allowance for rental incentive to attract tenants into their property.  That incentive will have an impact on your property leasing strategies.
  3. Market rentals will change from time to time.  They do not always go upwards, and more commonly will stagnate or slightly reduce when the property market slows.  To help you with the levels of market rental, you will need to understand the impact of incentive in the market rental structure as it exists today.  If an incentive exists in any market rental negotiation, it creates what is called a face rental.  That face rental will be discounted by any property valuer back to a level that is truly aligned to the effective rental and the market.  Incentives create a false level of rental.
  4. Business sentiment will change from time to time based on the local and regional economy.  Some business segments and business types will be more active and successful than others.  Track those business segments and monitor the needs for property change or occupancy.  Some of those tenants could be relocated to your property if the opportunity arises.
  5. Existing tenants in the property should be categorised into long-term tenants and short-term occupants.  Some tenants will be more attractive to the landlord and the performance of the property over time.  They may have a tenancy profile or business identity that encourages other tenants to the property.  Reviewing the tenancy mix is called tenant retention.  You can create a tenant retention plan as part of your business planning model.
  6. Pressures of expansion and contraction will change from time to time with all other tenants in your tenancy mix.  Look for those changes, and keep close to those issues through the business year to identify any pressures of change that may need to be accommodated in the building.  It is better to have a tenant in your property that you understand and appreciate, than find a new one that is unproven and costly in occupancy changeover and leasing costs.

The income for a commercial or retail property can be enhanced when you fully understand all of the above factors and adjust the property accordingly.  It is not unusual to adjust the business plan or for a property three or four times during the financial year.