Managing a commercial or retail property is not easy and we should not presume that it is. Commercial real estate agents specialise in it and bring many skills to the process. There are however some people and property owners that prefer to manage their own property.
It should be said that the commercial property management process is both time consuming and demanding. It requires knowledge and commitment on the part of the property manager or the building owner. Any mistakes made in the management process can be severe and impact the performance of the property for many years.
Given all of these facts, some landlords still prefer to manage their own property. That being the case, here are some tips and ideas that can apply to the process.
- Lease documentation will always be a key component of the commercial property management process. It is the lease documentation that underpins the income from each and every tenant and improves the performance of the property for the landlord. A commercial property or commercial tenancy without a good lease document can be a real struggle to manage. In many such cases you will find that the control of the tenant and the recovery of income become much harder. It is notable that some property owners prefer to avoid high documentation and legal costs when it comes to the establishment of a new lease. You would think that the reverse would be true given that a good lease will underpin the performance of the property. A cheaply prepared generic lease will invariably miss out on the important parts of property performance and tenant control.
- Income establishment and growth will be a part of the commercial property management process. There are many different types of rents to consider when it comes to establishing lease occupancy from any lease negotiation. In many respects, some landlords do not understand the differences between gross and net rental, and how those rental types can be optimized in leasing strategies. That is why the commercial real estate agents specialise in this part of the industry and act for the landlords of quality properties. A good commercial real estate agent can add significant value to a commercial or retail property over time.
- Vacancy factors will change throughout the year when it comes to a property of multiple tenants and variable occupancy. That being said, the vacancy factors of a property really do need to be pro-actively managed. That will usually involve some type of business plan that sets the targets when it comes to property income, expenditure, and redevelopment. The vacancy strategy will form part of the business plan for the property and will also feature as a component of the tenant retention plan.
- Expenditure management is not simply a matter of paying the bills. Expenditure should be budgeted at the beginning of any financial year. The landlord for the property should approve the budget and timing of the major items of expenditure. Municipal rates and taxes will form a large part of the property expenditure process. Those rates and taxes will be a critical timing factor to consider in the property cash flow. Setting aside sufficient funds for those larger expenditures is really important.
- Tenant relations should be maintained throughout the property management process. Good tenant relations will always help future lease negotiations and rent reviews. This is highly important when it comes to any retail property given that the tenant in such circumstances is relying on the business and the tenancy to provide regular income.
- Code compliance applies to building structure and building occupancy. The codes in particular relate to occupancy standards, occupational health and safety, building usage, and plant and equipment. As part of the commercial property management process, the compliance to codes should always be respected by the property manager and the landlord. Any building that is found to be lacking in this respect may very well be shut down until the matter is rectified.
- Maintenance of the plant and equipment within the property should be established to a plan given the requirements of occupancy, the age of the property, and the recommendations of the maintenance contractors. Cutting corners and delaying maintenance will invariably lead to property failure and the breakdown of plant and equipment. Each year it is preferable to establish a maintenance plan relating to the essential elements of plant and equipment in the property. That plan can be merged into the business plan for the property.
- Laws and legislation relating to commercial and investment properties will change from time to time. For this very reason, it pays to have a very good property solicitor representing the landlord and checking for any changes in property legislation that can have an impact on the property performance and operation.
So these are some of the critical components of commercial property management today. It should be said that every property will usually have other factors to add that are unique to location and occupancy. For this very reason, the property manager undertaking the management of the property should be well chosen and highly experienced.