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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.

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Commercial Property Management Handover Tips

woman wrestling with cables
Choose the right information in any commercial property management handover.

When you take over another commercial property from another property manager, or perhaps even a landlord, it is really important to ensure that you capture all of the right information that has an impact on the property today and into the future.

Any errors that are made in the property management handover process can impact the property significantly into the future, and make your job significantly harder as a property manager.  Unfortunately the previous records relating to the property may not be complete or accurate.  Your questioning process needs to identify this challenge and work through the issues that it provides.

So here are some tips that relate to the handover strategy and your systems.

  1. Ask for complete and accurate financial records relating to the income and the expenditure activity in the property over the last 12 months.  You will need a detailed breakdown of the income and expenditure records for the financial year to date.  This will be essential when it comes to reconciling the property at the end of financial year.  The integrity and accuracy of those records should be questioned and checked.
  2. It is always desirable to get records of previous property reconciliations and budgets for the two or three years prior to your appointment.  This will help you in budget analysis and creation in the forthcoming financial period.  When you create a budget, keep detailed records of your assumptions and findings.  This is best done on a spreadsheet that is archived for future use in other financial years.  All of your assumptions will be critical to your budget tracking process throughout the year.  Simple things can be forgotten and complicate the overall property performance.
  3. Get copies of all lease documentation that apply to the current tenants and the tenancy mix.  Those documents should be checked against the current rental invoices as they apply to the property.  Copies of correspondence relating to previous rent reviews and options should be obtained.
  4. Look for situations of rental rebate, incentive, or discount.  Some of these things can exist for a number of years under an original lease agreement.  If that is the case, they will need to be merged into the new income budget for the property.
  5. Meet with the tenants as quickly as possible during the handover process.  The meeting is a personal process to be undertaken by the property manager, and will remove any uncertainty from the ongoing relationship with tenants.  They should understand who you are and how to contact you if any property matters occur from the date of handover.
  6. Every property is unique and special when it comes to maintenance matters.  It is wise to meet with the maintenance contractor’s for the property as soon as possible after the date of handover.  These contractors’ can tell you of the events to look for when it comes to property performance, repairs, and break down.  They will also give you a summation of expected future property performance within their specialty of plant and equipment.
  7. When taking on any new property, give special care and focus to the subject of essential services compliance to the current building codes.  Some properties will have issues of compliance that will need to be addressed.  Also look for any orders or notices relating to property occupancy or usage.  Failure to address any of these items can see the property lose its ability to function as a property investment.
  8. It should also be said that the terms and conditions of each particular lease should be checked to see if any matters of occupancy remaining outstanding or need to be policed.  Obligations can exist on either the tenant or the landlord in a variety of ways.

So these are some other main things to look at when it comes to a commercial or retail property management handover.  You can develop a checklist of the process which will keep you focused on task and allow you to maintain accuracy in any new property management portfolio.  Always keep notes of the handover process so that any misunderstandings or omissions can be proven at a later date.

If you want more free tips on commercial or retail property management you can get them in our newsletter or at our website http://www.commercial-realestate-training.com/