Taking into account the comments we hear every day; it is astonishing how badly commercial property is generally managed. “Commercial Property Management is easy” or “All you do is send invoices four times a year” or “It’s the tenant’s responsibility” or “There is no need for a service charge”. These may all sound great but comments such as this actually range from being completely wrong to, at best, demonstrating misplaced complacency.
Commercial property is expensive. It has cost you / an investor a lot of money and should be seen as an asset which needs to be looked after. Given this, it is strange how little care and attention people take over their investment.
Commercial property management is not rocket science. However, there is a need to understand the basics otherwise ad-hoc decisions will be made, which may affect the long term performance of the property / portfolio.
After years of managing commercial property of all types and sizes, we feel the basics can be split into:
The bricks and mortar. The need to understand that the building needs to be looked after and nurtured. It needs to be and remain in a good condition and be usable. Letting this slip, typically to improve short term financial gains, can be an error. Over the long term all those cut corners or cans kicked down the road will come back around and are likely to be more expensive to put right.
Regular inspections of the property’s condition are required. Consideration of the need for long-term repairs and maintenance and how they are planned and organised is essential.
Whatever the type of property, residential or commercial, it is a people business. Whether they have a direct interest (the tenant) or indirect interest (the bank or the next-door neighbour), managing the people can be complex. Good property management takes everyone along for the journey. Concerns need to be addressed and considered. Excellent communication is paramount. Whilst you may own the property, ownership is not a bubble.
Even relatively straightforward relationships interests may be made up of complex structures with multiple layers of approvals and external advisers. Having the patience to work through all the complications and egos, should result in better returns as well as the creation of long term relationships.
The management of money is, obviously, key. Without proper forecasting, property ownership can lead to perilous financial issues. A commercial property owner is typically looking for a return and the tenant / occupier is looking to reduce overheads. Whether it is rent, insurance costs or service charge everything needs to be considered.
Pushing up the rent may be good news but doesn’t necessarily lead to a reliable, well paying tenant. This could result is a high tenant turnover. Great news for the commercial estate agent and lawyers but much less good news for property owners/Landlords.
Not implementing a structured service charge budget may be well received by the tenant initially but without proper care of the property, issues will result. Lack of preventative maintenance and upkeep in the short-term could lead to far larger and more costly repairs building up in the long-term not to mention an inevitable upward creep of the insurance premium.
The all important paperwork. Where the liabilities fall. The impact this has on the value of the asset cannot be understated. Good property management ensures this is kept on top of. Not only during the term but during the negotiation stage. Don’t let a commercial property estate agent promise the earth ‘just to get the deal done’. This leads to huge issues down the road.
Like every profession if commercial property management is done well it may appear ‘easy’. However, don’t let that lead you into a false sense of security. Finding out that the property you own is not managed well could prove very costly indeed.