The commercial property management business is quite special in so many different ways and the same can be said for retail property management. From a portfolio of managed buildings, as an agent or broker you can generate many sales and leasing opportunities over time.
There is one specific thing to remember here. Property investors require specialized help in an ongoing way when it comes to optimizing property performance, improving the tenancy mix, maximizing cash flow, and serving both tenants and visitors to the property.
If you really understand property performance and how to enhance it, then that can be a good way for you to build your real estate business.
Are you the ‘Go to’ Property Manager?
Given that you should understand the local property market in a comprehensive way, you can be the best person to provide targeted solutions to the clients that you serve. Those solutions can be matched to the property, the tenancy mix, and the client. That’s how you grow a property management portfolio over time. Be specific and be real in the way in which you serve the commercial property and the client.
Show the client that you really have a grasp of the industry, the management process, and local tenants. There are some clever ways to do that.
Here are some other strategies to help you grow a property management portfolio:
Look at your location so that you understand where the best assets and buildings are located. When you manage, lease, and sell properties in the prime locations, your image and profile as a local agent will escalate quite quickly. Tell the local property market about your recent major appointments in management.
Find the better properties through deliberate assessment. Check out the properties for income potential, vacancy exposure, tenant popularity, and lease stability. You can learn a lot about particular properties by talking to the occupants, the landlord, and other businesses in the proximity.
Connect with the better landlords so that you can convert ongoing leads and transactions through well established relationships. The property owners locally will fall into different categories. Understand how you can serve individual property owners, corporations, public companies, small investors, and property trusts. In any town or city, there will be plenty of people in each category to connect and work with.
Use a professional software program for all of your property managements. It is a known fact that you cannot control and manage complex assets without using a significantly proven and well tested property management software program. When you have a number of tenants in a building there will be many active issues and things to control. The property management software needs to cover the bigger factors such lease documentation, rental cash flow, occupancy compliance, maintenance, budgeting, and financial performance. There is no way of managing a complex building without the right software to help you.
Integrate and assess your tenant lists so you know what is happening in a property and across a location. The tenants in a building will tell you a lot about the location and other businesses nearby. That market intelligence is valuable.
Improve property performance so that your services can be seen to be valuable in the bigger picture of property growth and change. When you are successful in turning around a difficult property, poor tenant mix, or refurbishment project, tell the local property people about that through articles, editorials, and social media.
Portfolio growth with any of your clients is a possibility. If you have some bigger clients in your portfolio, they are very likely to be candidates for alternative services such as project refurbishment, leasing, tenant relocations, and vacancy minimization. You can have a strategy for each.
Fees per management should be critically assessed so that you get the fees for the job involved. So many agents under quote to win a property management appointment. That is a recipe for disaster. Know every property for what it is and its demands, and then decide how much professional time you will need to devote to managing it on a weekly basis. Set your fees accordingly. It is easy to work out just how many hours you should be devoting to managing a property; from that point it is simply a matter of determining how much your time is worth.
Commercial property management is a challenging part of the property business if you are going to do it properly. Complex properties require good managers that understand the property type and just how to keep things under control
It is hard to take up a position in looking after some properties without a qualified and experienced person to help you. Whilst the theory of property management can be studied, the practical experience will always help you greatly and fast track your learning curve. There are significant differences in the management style between industrial, office, and retail property.
Here are some of the things that are central to your job:
Watching the trends of the market with focus on market rentals, vacancies, competing properties, supply and demand for premises, and new developments.
Income and expenditure performance for properties in your area. Knowing the industry averages will help you a lot in keeping things under control. It should also be said that some properties will perform differently based on their property type and location. That is why specialisation is relevant in property management.
When it comes to properties of medium to larger size, the establishment of a budget relating to income and expenditure is quite normal. The budget can only be set with due regard to property history, location, and other properties of similar type. Getting to know the competing properties and other property managers will help you in establishment of the budget for your managed assets.
The current tenancy mix and the vacancy profile for the property will have direct impact on the income stream. That is why the market rentals, current lease profiles, and expected vacancies need to be carefully managed. Many managers will do their own leasing as part of the property management services. That should normally be the case however there should also be a separate fee for completed and successful negotiated leases. There will also be differences in leasing fees as it applies to leases of different types and different terms.
Many property owners will have specific needs when it comes to cash flow. They will need to service financial obligations to the mortgagee, as well as payment of expected outgoings to run the property. That is why your experience and control become part of the property management service. The manager should understand exactly what’s happening in the property today and how the expenses are going to change cash flow over the forthcoming period.
A good manager will bring stability to an Investment Property. Stability then allows the property to be improved over time to the plans and the priorities of the landlord. It should also be said that a reasonable fee should be charged for commercial or retail property management services. There are no short cuts when it comes to quality in this industry, hence a suitable fee should be paid for professional commercial and retail property management 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.
When it comes to your career as a retail leasing expert, market knowledge will help you greatly when it comes to market share and market dominance. The retail property market is quite specific and special. There are many factors to consider and be aware of the as part of the specialized leasing task.
Retail property today is experiencing some challenges. The shifts in retail spending and due to the pressures of the Internet are quite apparent. There are also other pressures on retail that apply due to the global economic downturn.
That being said, retail spending doesn’t disappear, it just changes. That is why a retail property experts and particularly leasing specialists are perhaps some of the most skillful in the property market. They know what works and what doesn’t.
Here are some factors that require constant attention as part of servicing the retail leasing industry and shopping centers today.
It is wise to have a solid awareness of the significant and larger retail properties across your region. They will have pressures of change, refurbishment, expansion, and contraction. Those pressures will have influence on nearby competing properties and the movement of successful tenancies between each.
Franchise groups are now on a significant part of retail property performance. In many respects, they require occupancy opportunities in certain locations and property types. It pays to keep in close contact with the franchise groups for this very reason. They will have critical criteria that must be satisfied when it comes to a new tenancy and property occupation. They will usually share this information with the other retail leasing experts that could assist them with finding another tenancy. It is all so common for those retail groups to provide their own special lease documentation. Whilst this is convenient, it also has some concerns for some landlords. If you are involved with a lease negotiation of this type, the landlord for the property (your client) should have a good property solicitor acting on their behalf in the scrutiny of the franchise lease document. In most cases, the franchise lease document will coincide with the terms and conditions of the franchise business agreement struck between the franchisee and the franchisor. Landlord flexibility is required to make this balance work.
Rental strategies in retail property will vary from property to property and location to location. The rental for a tenancy is simply not just the commencing rent. It is a combination of many things including the commencing rents, the rent review profile, any lease incentive, and outgoings recovery. The right combination of these things will help improve the occupancy for the tenant and the landlord.
In any retail property, the tenancy mix will be important to the stability of occupancy and relationships between tenants. In larger shopping centers, this problem manifests itself in many ways. It pays to consider the clustering of tenants in zones within the property. In this way you can build on the sales relationships between like tenants in the cluster.
Retail leasing experts will usually spend significant time in the marketplace reviewing the performance of nearby properties, and meeting with retail tenants. These factors will produce market intelligence and feedback that allows the retail leasing expert to bring experience and relevance to the clients that they act for.
When you manage a lot of commercial or retail properties you will know how frustrating and diverse the issue of security can be with many different property types. Each property will have factors of security that should be managed and optimised. Every tenant has to integrate into the security plans and systems for a managed property.
There is a lot of difference in security systems and procedures that are utilized in retail, industrial, and office properties. On that basis you really do need to know each managed property very well when it comes to security needs and responses.
A well-managed and operating property will be a reflection of the good property management systems that are implemented on the property. Security is part of that. Here are some security concerns and aspects that could be considered as you manage your portfolio.
Fencing around the property should be reviewed for effectiveness. That will include any breaches, lighting issues, modification, and stability.
Many properties will have car parks that require special security considerations. Customers and tenants using the property should be provided with a secure car parking environment both in office hours and out of office hours. The location of the property will have some bearing on this car park issue. Do not forget to look at how the car park is used at different times of day.
Loading docks in the property will be accessed at special times and with differing types of vehicles. How is this done and what security concerns evolve from this?
The entrances and exit points to the property should be looked at. As part of that process consider the door ways and the exit points that are involved in emergency evacuations. It is likely that you will need expert consultants to help you with planning workplace health and safety issues as they apply to property use and access in times of safety or emergency events.
Lighting in a property will always be of concern. Lighting should be checked frequently to ensure that it does the job it is required to do. If the building is used after hours by customers or tenants, the lighting will need special consideration.
Guards and security patrols may be required in a managed property. It really depends on the property location and the tenant mix.
The age, design, and location will always impact the way that a property is used by the tenants and the customers. It should be noted that a retail property will usually have greater levels of security coverage and response to keep the property safe and secure for occupants and customers.
Security is a valid need in property performance and function, and on that basis should be structured into the outgoings costs recovery for the property.
There is no doubt that commercial property management is very different to residential property management, yet so many real estate agents put their ordinary property managers (with only residential experience) on to the management of commercial or retail property. The process sets the scene for incompetency; the problem is magnified when the property in question is retail given the uniqueness of retail property performance and tenant mix.
The two people that suffer through all this are firstly the property manager because they just do not know what to do and secondly the landlord because the property is poorly managed. If the situation is not closely monitored the agency will lose a client and expose itself to the potential of litigation.
Agency principals beware; if you are going to manage any commercial or retail property, only do so with the right people and give them the knowledge to support you.
Without knowledge and experience in commercial property, residential managers find the change of property type really hard. They just do not have the experience in the things that happen every day such as:
Tenant mix strategies
Maintenance controls in larger properties
Budgeting property performances
Lease documentation and enforcement
Supply and demand management of available space
Forms of lease documentation and negotiation
Critical date management from the leases
Rent review and renewal negotiations
Environmental and heritage issues
Lease assignments and sublets
Lease negotiations and variations with new tenants to the property
Essential services management and compliance to codes
Occupational health and safety
The list can go on into many different things and special challenges. The larger the property that you manage, the more complex the issues that will have to be handled.
At the very centre of the commercial and retail property management processes and the basic keys to what you are attempting to do. Here is a summary:
Manage the tenants in the property to the rules of the leases and the occupancy codes applicable to the property and the location
Maximise the income for the property given the local property market, the leases, and the focus of the landlord
Control the expenditure of the property given the requirements of each lease and the authorities of the landlord
Maintain the property to the targets of the client, the budget and the pressures of occupancy
Integrate the property into the community and the business segments that it serves.
Optimise the income through vacancy minimisation.
If none of this makes sense, then knowledge is required to build up the skills and processes in commercial and retail property management. I did say earlier that retail property is very special; it requires a unique awareness of rents, tenant mix principles, and retail leasing property legislation. When in doubt see a good property solicitor.
When you take on a new property management listing, one of the key things that must be done very soon is a lease audit. Without a lease audit you really do not know what you have in the tenant mix and how the property is performing with the existing tenants. Here is an article from our bulletin for Commercial Agents.
The audit process will help you understand big and important issues including the following:
Tenants by name and location
Rental conditions from the lease
Upcoming options and rent reviews
Arrears and current rent charges
Risk and Liability that can apply to each lease
Tenant and Landlord covenants that must be complied with
Special terms and conditions in the leases that could apply to the tenant or the landlord
Permitted use provisions of the premises, etc
So, the audit process will tell you a lot about the property and its current status. Checking leases against the events that are applicable to the tenants now will let you know if all lease matters are up to date.
It is interesting to note that far too many property managers will accept the detail of a tenancy schedule without checking the leases for each tenant. It is so common to find that tenancy schedules are not up to date or are incorrect. That then is a recipe for disaster and errors with the property.
Here are some tips to do a lease audit with your new commercial or retail property management appointments. You can add to the list so you create a checklist that can be used over and over as you bring in new properties to manage.
Inspect the property so you understand what it looks like and just where everything is.
Make a list of tenants as you inspect the property, so you can cross reference that information later from the leases.
Get plans and drawings of the property that show you the layout of the common areas and the leased areas.
Check out the boundaries of the property so you know what other businesses or property owners are adjacent. Look for any issues of conflict in boundaries and property usage.
Go through all the leases with reference to the information that you gained in your property inspection.
Create your list of information from the lease review, with particular attention to rent reviews, options, end of lease dates, tenant names, locations, and rentals paid.
Get an up to date list of rent payments for each tenant.
Check for arrears with each tenant.
Split the rent charges into rental (all rents for the premises), outgoings, recoverable charges, and any other miscellaneous charges.
Look for supplementary information and documents of occupation such as naming rights, car parking, common area usage, storage, and other charges.
All of this information must be cross referenced against what you see in the property, the rent invoices today, the discussions that you have with the tenants, and the handover information that you may have been given by the previous property manager or landlord.