The commercial property management segment of the market can be quite lucrative from a brokerage perspective. The clients that you serve in that way require specialized skills and services over an extended period of time. The complexity of the property can involve strategies and activities across the tenancy mix, leasing, vacancy resolve, maintenance management, asset planning, and income performance. There are many things to do and many ways to approach the challenges that the client may face.
So the message here is that you can and should develop a significant property management portfolio in your real estate brokerage. Take the time to develop a list of clients and prospects who will need your services in management at some stage in the future. Develop a prospecting process to open the doors to management opportunity.
The best way to attract commercial real estate clients and those needing management services is to directly prospect the owners of the best buildings in the best locations. It is always preferable to manage a building with multiple tenants in occupancy and multiple levels of income generation.
The bigger buildings and those with a complex tenant mix require expert management help. They also require complex software management programs to administer the required controls on leasing, maintenance, tenant mix, and income optimisation.
So there are some distinct advantages here to be optimised. In this audio recording, John Highman talks about the opportunities of commercial real estate property management in brokerage today. See if you can use some of the tips that John talks about to open up your brokerage opportunities in this way.
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:
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.
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.
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.
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.
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.
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.
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.
In the commercial real estate industry it can be hard to establish a property management portfolio as part of your commercial real estate business. It is hard for the simple reason that most property owners see the change of manager or agency just too difficult to implement.
In simple terms the property owner or landlord wants to protect their cash flow and consequently will not disturb their tenant mix. Many a property owner will put up with a poor property management service to keep stability in their property. That being said, a poor property management service will eventually self-implode and the property will suffer.
If you want to win new property managements from clients that are using another agent, it is best to create the relationship with the client and stay in touch for the time that the property owner is ready to move.
So now let’s look at some other strategies to take matters forward and help you establish a good property management portfolio. The stability of fees and clients produced from the property management process will help you when the sales or leasing market becomes slower or more difficult.
Here are some ideas for you:
Sales activity will always be an opportunity to pitch for a property management appointment. This then says that every property you sell to a property investor is a great opportunity to present and pitch for the property management.
The sales activity of other agents will also be a good opportunity to pitch for a property management. If another local property is sold publically (such as at auction), it is quite easy to find out just who the buyer may be. Make the contact and see if they will take a proposal from you to manage the property.
Leasing activity will be a similar opportunity to pitch for the management of the property. If you served the client well in the leasing appointment, they should take a proposal from you to manage.
New property developments are great opportunities for management. Check out the upcoming developments regularly at the local planning office. Most property developers require a professional property manager to help them, simply for the aspect of perception. It helps them lease the property to new tenants; that being said you should also pitch for the leasing appointment.
Portfolio owners in your local area may own a number of properties. They may use a number of property managers, however they will have a preferred manager that stands out as ‘professional’ and of ‘high quality’. Get to know who these portfolio owners are and connect with them on a regular basis. Eventually they may let you pitch on some new management requirement.
The property management part of the industry is quite special and requires the right people. Do not employ ‘juniors’ for the process without having some other ‘experienced’ managers in the team. It is the experienced managers that can win the business given their market awareness and property management skills.