Pain Points in Commercial Property Management
In this current real estate market, commercial property management is becoming more significant and important than ever. When a property is well managed, the impact of property pain on the owner becomes less.
In most circumstances, a well-selected real estate agent who is experienced in the type of commercial property to be managed is best placed to balance local real estate market trends in property management and leasing requirements.
Owners should choose their managing agents well based on the agents’ experience and skill; no low management fees. A poorly chosen property manager can destroy a property’s financial and physical performance in a very short period of time.
The pain points in commercial property management today are also the points that need to be closely monitored by both the owner and the real estate agent:
- The vacancy factor within the property.
- Construction costs well controlled
- Stability of the tenure base
- Well Balanced Holding Mix
- Rehabilitation and renovation plans to optimize the property
In dealing with these issues, the following should be said.
The vacancy factor in a commercial property should be minimized based on the owner’s future plans. The only time you would want a vacancy is when your property needs to be renovated or remodeled.
Vacancy factors
The best way to work with potential vacancies within the property is to closely monitor the existing tenant mix and existing lease agreements. There is nothing wrong with renegotiating leases 12 months or two years before option expiration or capacity. Both the tenant and the owner will benefit in the process. A stable, well-performing tenant should be encouraged to remain in the occupancy at a fair and reasonable rent. You can then eliminate the volatility of the vacancy in the cash flow of the property.
Tenants today require well-controlled construction costs as part of their cost of occupancy. Tenants expect the landlord to maintain reasonable levels of building performance but not exceed the building’s operating expense averages. High construction expenses will drive tenants away from the property.
To achieve well-controlled construction expenses, it pays to have a construction budget and business plan that the owner approves and locks in before the start of a financial year. After the start of the fiscal year, the budget is checked each month to verify its accuracy against the actual costs incurred.
Importantly, the expense budget is not excessive and is well timed with seasonal pressures on building performance. Well-controlled construction costs attract tenants to your property and provide existing tenants with stability in terms of tenure and occupancy mix.
Role of the property manager
In this current real estate market, the property manager must be very conscious of maintaining a strong and stable tenant base. Existing tenants with good performance are like gold in this market. As part of the process of working with existing tenants, the landlord must consider reasonable rent levels that maintain occupancy and reduce the threat of vacancy.
Commercial property
Each multi-tenant property will have a tenancy mix that must be carefully considered. This is absolutely critical when it comes to commercial properties. The placement of tenants within the tenant mix and in proximity to each other should be carefully based on the requirements of the area, the existing customer base, and the functionality of the building.
Rehabilitation and Renovation
At some point in the property’s life cycle, remodeling and renovation will become an issue. This requires planning and integration into the existing lease mix, lease expiration, and owner investment plans. It is not unusual for renovation and redevelopment strategies to be planned over four to five years, leading to the critical time window. This is where the experienced property manager acting on behalf of the owner can add real value to the planning process.