Commercial Property Management Tips for Professional Property Agencies

When it comes to managing a commercial property today, controls and efficiencies will help you provide a professional service to your clients. Most particularly, all of your systems should be well documented and relevant to each property type.

This then suggests that particular checklists will apply to office property, retail property, and industrial property. The checklists will also be different when it comes to leasing verses property management.

Here are some tips to help you establish a solid control process as part of your agency property management services.

  1. Lease documentation should always be checked when it comes to taking over a new property management. In many cases you will find that some of the documentation is lacking in some respect or critical dates have not been actioned. If someone gives you a tenancy schedule as part of the property handover, make sure that the schedule is completely checked against existing lease documentation. You should also understand that lease documents are not the only documents relating to occupancy. You can and usually will find special documents relating to licensed occupancy, and that would normally include car parking, signage, storage, and a special use areas. These documents can be separate to the lease documentation.
  2. Check the arrears in the property as part of the handover process. Any existing arrears will need to be quantified for any action that may be required. Ask for copies of any documentation and letters that relate to the pursuit of arrears. If any special agreements have been entered into with existing arrears, you will need copy of the documentation.
  3. Get to know the tenants and the property as early as possible. When it comes to changing property managers, the tenants can be quite sensitive to new arrangements and new people. Introduce yourself personally to the tenants on a daily one of the property Handover.
  4. Understand what the landlord requires of reporting and approvals. Every landlord will be unique and different when it comes to the communication and reporting process. Some landlords will have special requirements of cash flow and the reports to substantiate the cash flow. In complex properties with multiple tenants, this can become quite a challenge. Make sure that your chosen property manager has the experience to satisfy the demands of the landlord.
  5. Talk to the maintenance people involved with the property as early as possible. They will tell you a lot about the property today and the potential maintenance failures in the future. This information will help you planned for cash flow and expenditure over the coming years. Ask the maintenance people about the specific factors of plant and equipment that are critical to the performance of the property. Any older plant and equipment should be closely monitored for potential failure.
  6. Outgoings management forms part of the property management control base. The outgoings for the property should be managed to the building budget and the requirements of each and every lease document. Many leases will have different factors of control and reporting when it comes to outgoings recovery. For this very reason, all lease documents should be carefully scrutinised as part of the property take up procedure.
  7. Property history will always be relevant. Get copies of previous reports, financial activity, and lease documentation where possible. This information will help you when it comes to establishing the status of the existing tenancy mix and how the property can move forward as an investment.
  8. Budgets for income and expenditure may be current or this year. Those budgets should be passed across to the new property owners and property managers. In this way you will know how the existing outgoings recoveries have been established and on what basis.
  9. Vacancy reports and strategies will vary throughout the year. Importantly any vacant areas are successfully marketed to reduce the vacancy downtime. Any pending and upcoming vacant tenancy should be aggressively marketed to find the necessary new tenants.
  10. Rent review profiles and option strategies will be reviewed as part of the lease documentation scrutiny. Look for all of the critical dates as they relate to the rent reviews and option timings. Critical dates should be entered into some form of diary system so you can activate the event early or on time.

Professional commercial property management services are only achieved through systemised actions and well qualified people. Take the steps to establish your own systems as early as possible in the property management process. These items above can be modified and expanded based on the property type and the property location.

What You Should Know About Property Management of Commercial Properties

Now that you have made an offer to acquire a commercial property and are waiting to close escrow, you may want to start looking for a property manager to professionally manage the property. Your real estate investment advisor should present you with 2 or 3 local companies, each with its own proposal. Your job is to decide which company you will hire. The property manager will be the main point of contact between you, as the landlord, and the tenants. Her main job is to:

  1. Receive and collect the rents and other payments from your tenants. This is typically simple until a tenant does not send the rent check. A good property manager will somehow get the tenant to pay the rent while a lousy one will throw a monkey on your back!
  2. Hire, pay, and supervise personnel to maintain, repair and operate the property, e.g. trash removal, window cleaning, and landscaping. Otherwise, the property loses its appeal, and customers may not patronize your tenants’ businesses. The tenants then may not renew their lease. As a consequence, you may not realize the expected cash flow.
  3. Lease any vacant space.
  4. Keep an accurate record of income and expenses, and provide you with a monthly report.

A good property manager is critical in keeping your property fully occupied at the highest market rent, the tenants happy and in turn helps you achieve your investment objectives. Before choosing a property management company, you may want to:

  1. Interview the company with focus on how the company handles and resolves problems, e.g. late payment.
  2. Talk to the person who will manage the property day to day as this may be a different person from the one who signs the property management contract. You want someone with strong interpersonal skills to effectively deal with tenants.

The property managing company normally wants a contract for at least one year. The contract should spell out the duties of the property manager, compensation, and what will require the landlord’s approval.

Agent’s Compensation: you will have to pay someone to manage and lease the property. You may have one company to manage the property and a different company to lease the property. However, it’s best to work with one company that handles both managing and leasing to save time and money.

  1. Management fee: the fee varies between 3-6% of the base monthly rent for a retail center, depending on the amount of work needed to manage the property. For example, it takes much less time to manage a $2M retail center with just a single tenant than a $2M retail strip with 12 tenants. So, for the center with 12 tenants, you may have to pay a higher percentage to motivate the property manager. You should negotiate the fee as a percentage of the base rent instead of the gross rent. Base rent does not include NNN charges. Ideally, you want a lease in which the tenants pay for their share of property management fee.
  2. Late fee: when a tenant pays late, he is often required by the lease to pay late fee. The property manager is allowed to keep this fee as an incentive to collect the rent.
  3. Leasing fee: this fee compensates the property manager to lease any vacant space. In a typical lease contract, the leasing company wants 4-7% of the gross rent over the life of the lease. It also wants the leasing fee to be paid when the new tenant moves in. In addition, the leasing company wants around 2% of gross rent when the lease is renewed. The tenant may also ask for Tenant Improvement (TI) credit, typically between $10-20 per square foot to pay for construction expenses. So if a new tenant with a 10-year lease goes under after one year then you may lose money. As the landlord you should:
  • Approve a long term lease (10 years or longer) only when the tenant’s financial strength is solid. Otherwise, it may be better to reduce the lease to 3-5 years.
  • Make sure the new lease has a provision for some kind of rent escalation, preferably based on Consumer Price Index (CPI), i.e. inflation which is 3-4% a year instead of lower fixed 1-2% annual increase.
  • Consider TI request from the tenant as one of the factors to approve a lease. The TI credit depends on whether you need the tenant more or the tenant needs you more.
  • Negotiate for a flat rate renewal fee, e.g. $500 instead of paying a percentage of the rent for the life of the lease. The negotiation is easier with one company that handles both leasing and management.
  • Negotiate to pay the leasing agent a lower percentage, e.g. 4% when no outside leasing broker is involved.

You can see that it’s very important to minimize tenants’ turnover rate as it has a direct impact on the cash flow of your commercial property. A good property manager will help you achieve this goal.

Monthly Report: each month the property manager should send you a report on income received, expenses incurred, and property status. You should Review the report to see if the numbers make sense. You should:

  1. Request a report showing both rent and CAM fees received.
  2. Request a separate bank account for your property and have a monthly bank statement sent to you. Without this, the property manager will deposit and commingle all the rents from all properties that she manages into her company’s bank account.

If you instruct the property manager to send you the excess cash flow then you will also get a check.

Landlord’s Approval: the management contract should specify the dollar limit for exceptional maintenance expense above which would require your approval. This amount varies from landlord to landlord as well as the type of property. However, it’s typically somewhere between $500 to $2,000 dollars.

Communication with property manager: in the first few months, you and the new property manager should communicate often to make sure things go smoothly. You should give instructions in writing, e.g. email, to your property manager and keep records of all your correspondence. If the property manager does not do what you instructed, you may refer to your records and minimize disputes.

If you want to work hard for your money, you may want to manage your own property. However, if you want to work smart, your partner should be a good property manager.

The Advantages Of Getting Commercial Property Management Firms

People who own a commercial property can get more than enough cash flow from their commercial property and definitely have guaranteed financial security for your future. Of course, both of these benefits do come with a price. One of these is the property has to be in good condition to maintain or increase its value. Otherwise, you will have to spend more money on maintenance and taxes.

Considering commercial property management firms is an excellent solution. Instead of you, and a handful of people you know, running your commercial property, you get another company to do the managing so it will be less hassle and stress-free. Check out some advantages that you can get from getting these services from professional property management experts.

– You will be able to provide the very best service to tenants. A commercial property firm will have the systems and the people in place to address every kind of tenant concern, from the smallest utility issue to the more serious security problems. Even though you own a fairly small commercial building, servicing tenants and making sure they are satisfied (and safe) can be time consuming as well as energy draining. Unless you have nothing else to do with your days, then you could better serve your tenants by hiring a business management firm to do the job for you.

– You can get better tenants for your commercial property. One of the ways to maintain profits is to get the best tenants. This means tenants who pay on time and who also take care of their leased spaces as their own. Delinquent tenants not only dissolve profits, but they also create a lot of stress.

– Property professionals have the experience to manage your property. From collecting rent to implementing maintenance work, these business managers can handle every aspect of running any building. They do the job for you so you don’t have to be stressed out or be hassled.

– A well-managed property will never fail to yield revenue. With expertise and experience at the helm of your business venture, you are sure to turn over a good profit every time. Some of the best leasing companies even assess your terms and make appropriate recommendations so that you not only reduce problems but also boost revenue.

– You need to relax and enjoy your investment. Finally, what good is a property investment if you can’t even find the time to relax and enjoy the profits you have earned? With the right management firm, you can do that now. Click here to know more.

A Proven Blueprint for a Career in Commercial Property Management Today

The commercial property management industry is highly specialized in many different ways. It takes time to understand the elements of the industry and the requirements of professional services supplied to landlords and tenants. The same can be said as it applies to retail property leasing and shopping center management.

If you are considering a career in commercial or retail property management and or leasing, here are some tips to help you with establishing your skills and growing your professional services.

  1. You will need to know about the current property market in many different ways. Typically you will need to understand the market rentals, vacancy factors, property types, new developments, and landlord investment requirements. All of these things will help you with lease negotiations and the services that you provide to your landlord clients.
  2. The different property types require different levels of property management involvement. Industrial property is relatively simple and basic from the management perspective given that you usually have only one tenant to monitor within one lease and one property. When you move your property management skills to an office property or a retail shopping centre you will normally be dealing with multiple tenants and variable lease conditions. On that basis you will need to know the standards of lease occupancy, property legislation applying to leasing, and the physical attributes of the landlord and tenant negotiation.
  3. From every lease occupancy there will be issues to monitor and optimize involving rental income, property expenditure, risk and liability, and tenancy placement. Each month it is normal to provide a landlord with a comprehensive property report relating to current investment performance, property maintenance, vacancy and leasing factors, together with projections from the prevailing market conditions.
  4. Most landlord clients will have a number of specific targets relating to their investments. Those targets will be shaped by the age of the property, the tenancy mix, redevelopment requirements, and the local business community. To serve your clients well, take the time to understand their investment requirements and intentions relating to the asset.
  5. With the larger properties, there will usually be a budget of relates to rental income recovery, and expenditure activity. That budget will be established prior to the beginning of a financial year and then loaded into the business plan for the property for the coming 12 months. Every month every quarter or budgeting process will be checked and changed depending on prevailing market conditions.

Professional property managers are specialists in many different ways. Some will specialize in a single property type in their town or city. In that way they can bring specific knowledge and information together with high levels of skills to the clients that they serve.

Commercial Property Management – Some Simple Points

In this job profession it is a business service that is designed to help assist owners in supervising their commercial properties. A commercial property manager may have several jobs but essentially they are the ones that will take care of details that are related to the following:

• Upkeep of the buildings on the property such as making sure that the lawns are mowed, any repairs needed are done promptly

• Checks out and qualifies potential new tenants who want to rent one of the commercial buildings or stores

• Oversees the leasing of sections of the property such as retail space in a mall

• Collects the rent from tenants on behalf of the owner

A commercial property manage involves overseeing any type of commercial property from multi-storied office buildings to retail space. Many times property owners will use a commercial property management firm to hand all the day-to-day details of operating the property so it frees up the property owners time for other aspects of business. The firm that is managing the commercial properties is generally granted the authority to make any decisions that will impact the amount of income the owner receives from their property. Hiring the right management firm can often lead to securing the best rental rates for the space and having a lower turnover of tenants.

One thing that is the responsibility of a commercial property manager is to screen potential tenants by accepting their application and then doing a background check. If the tenant is approved to rent a space then the manager will prepare the lease. For the duration of the lease the manager will make sure that the tenant is provided with all the responsibilities and benefits that are listed in the lease agreement, including the rental amount, when it is due, etc.

The commercial property manager will also serve as the liaison between the tenants and owner. If the tenant has any problems or needs repairs to their space they will see the manager who will take the necessary steps to resolve the issue or have what is wrong repaired. It is the manager’s responsibility to resolve the matter to the satisfaction of the owner and the tenant. If the tenant is not paying the rent as outlined in the lease or doing anything that is not in the lease the commercial property manager will be the one that is responsible for delivering the eviction notice. Each jurisdiction or state has their specific regulations in regards to eviction. When serving an eviction notice the manager must be sure that they are following every step in the process to the letter. This makes sure that everything is done legally and the tenant cannot complain they were evicted illegally.