Should you hire a property manager or self-manage your commercial real estate asset? Let’s ask the Asset Management Team at Front Street Capital, a full-service development, asset management, and private equity real estate company in Winston-Salem, NC.
A property management service offers many benefits to commercial property owners, including finding savings that increase the bottom line and securing long-term tenancy. The Front Street Capital Asset Management Team has identified five management services that commercial property owners should use to increase their bottom line:
- Review Property Needs & Bidding Process for Necessary Services
Each service contract needs review to ensure the scope of service aligns with the property needs. Once the property’s service needs are determined, the property manager should seek multiple bids for the best price and quality. At Front Street Capital, we find that knowing the commercial real estate market and having synergies with service providers is another technique for best pricing.
- Audit Utilities to Identify Trends & Cost Saving Measures
An effective property manager understands techniques to manage and recoup expenses and adds value by knowing the property usage well.
- Ensure Adherence to the Lease Agreement
Quality management service includes a strong lease administration team that ensures the landlord and the tenant(s) adhere to the lease agreement. An effective property management team allows open communication with the tenants to help tactfully explain when a service is billable and not required by the landlord. We have seen situations where tenants receive services that are not in the lease and become standard over time.
- Reconciliation of Annual Expenses Through Management Accounting
Annual expense reconciliations for properties can be confusing. Terms like ‘compounded’ and ‘cumulative caps’ are advantageous for landlords but must be used correctly. While it can be confusing, grossing-up expenses is a fair approach for all parties.
- Strong Building Maintenance Operations That Keep Tenants Satisfied
Building maintenance operations are an integral part of property management. The building’s equipment and systems should be energy efficient and work as designed, which requires routine maintenance, inspections, and cleaning. Regular maintenance minimizes unnecessary repairs and replacements, which can increase expenses and cause discomfort to tenants.
While property management is an expense, this expense offsets the savings a high-quality management company can provide. Not all management services are the same, so property owners should research before choosing a company to manage their rental needs. Most importantly, commercial property owners should find a company that treats the property as if they own it.