Dean E. Mueller, CCIM, CPM, RPA
REBusinessonline recently sat down with Dean E. Mueller, executive vice president and director of Real Estate Management Services for Colliers Turley Martin Tucker, to talk about the importance of property management and some tips on how to do it right in order to land the best tenants and keep current tenants happy, even during a down market.
• What can you do to help owners deal with, or fill up, vacancies that potentially arise due to the weakened business environment? How can property management help land new tenants?
Property management should be an extension of the leasing team. In terms of the physical space, Colliers Turley Martin Tucker (CTMT) is focused on preparing clean, “show-ready” vacant spaces. With capital expenditures more limited than ever, the property manager needs to be clever and efficient in preparing vacancies. CTMT is utilizing in-house labor to clean up spaces while leveraging size and buying power for economic demolition, painting and carpet removal. Some subsidized energy credits may be available through local utility providers or energy finance firms to provide for lighting retrofits. Simple steps are also still important, such as ensuring that existing lights work and all lamps are operating.
The property manager should also have a very good understanding of the total operating costs for a project, including the costs of potential tenant improvement work. It is essential that information provided to a tenant is accurate and is turned around in a very timely manner. As the saying goes, “you only have one chance to make a first impression.” This is very true when it comes to securing new tenants. Everything that you do during your first interaction can help determine whether a prospect signs with your project or goes elsewhere. Treating tenant brokers in a professional manner also goes a very long way in this business environment.
Property management should coordinate with leasing and marketing efforts to ensure that vacant spaces contain organized and current advertising and space plan information for showings. The property manager carries the responsibility to maintain current as-built plans (hard copy and CAD), as well as current building technical specifications. CTMT will often engage architects for simple remeasurement “spot checks” to ensure that vacant square footages are calculated correctly as well.
The property manager should have relationships with neighboring existing tenants to identify opportunities for expansion, temporary storage or other use that may generate temporary or permanent income.
As a further marketing vehicle, property managers should also use their relationships with the City/Village to ensure awareness of vacancies and leasing opportunities within their area.
Finally, out management and leasing teams meet on a regular basis to make sure everyone is focused on the client’s objectives for a project including leasing goals.
• How can property managers help hold the value of a property in a climate where values are declining in many markets and property types?
In preservation of rental income streams, CTMT property managers are required to have intimate knowledge of their tenant companies. Beyond just closely monitoring aged receivables, the property manager uses their personal relationships with tenant contacts to understand tenants’ financial health, occupancy, facility usage (internal demand for space), location of other local offices, strengths, weaknesses, opportunities and threats.
Property managers should also focus on things that they can control. They can’t control the capital markets or the credit markets, but management can help control net operating income. Good property managers should help enhance revenue by taking great care of the existing tenants and making the project attractive for existing tenants to stay and renew their leases. With reduced downtime, lower tenant improvements, lower commissions and usually higher rents, renewals are often the most profitable type of lease. Effective property management is also an important part of attracting new tenants, which also is critical to growing revenue.
Property managers must also do everything they can to keep costs as low as possible without sacrificing the tenants’ satisfaction. Competitively bidding all major service areas should be a regular practice. Property managers should also have a good understanding of property taxes and energy. An effective property management firm should have an energy management program that helps building owners identify opportunities for savings. Not only is energy management good for the bottom line, but it is also excellent for public relations with sustainability initiatives.
As overall market values decline, there are great opportunities to reduce taxes by reviewing and appealing assessments. Real estate taxes vary by district and also by state. Effective property managers should be advising their owners on the best possible avenues for tax appeal. It is our job to ensure that they are introduced to the best resources to increase the likelihood of success.
Property managers will also create value by preserving and protecting the physical assets with preventative maintenance programs. Proactive maintenance and repair programs in all aspects will avoid future capital and expense. Especially in leased product with recoverable expense pools, the manager should be advising owners on maintenance opportunities now that will provide for sound structures, systems and grounds should future vacancy arise.
• How can quality property management best enable clients to market and sell a commercial real estate property?
In the sales process, information exchange and communication are critical. Quality property management will help to provide credibility to a prospective buyer. The management firm should bring comprehensive financial, contract, specification, tenant history, and operational information and history to the sales offering and due diligence process. Also, providing evidence of good tenant relationships and tenant satisfaction through tenant survey results is beneficial.
A manager should also be keeping detailed information regarding preventative maintenance on all major pieces of equipment. A history of completed maintenance, repairs and improvements at the property will prove the seller’s reinvestment in and past maintenance of the property. The buyer’s due diligence period is a key point in price negotiation and a well-maintained property with historical documentation will tend to fare better in this process, preserving the seller’s exit value. Most buyers will still perform their own financial and physical due diligence, but the ready availability of detailed information can shorten the due diligence cycle as well.
• What do the next 12 months hold for your business? Will the lack of development help or hurt your property management division?
CTMT is very optimistic about the growth potential for property management services for the next 12 months. We are well-positioned for growth. Several trends in the commercial real estate industry provide us with optimism on the property management side:
– We have recently seen more and more developers and owners of properties consider outsourcing property management. The slowing development pipeline and heavy