Managing Commercial Property: The Good, The Bad and The Ugly
As the commercial real estate markets throughout the country recover, managing commercial assets requires a different tack. There is no question that while the economy struggles, tenants have difficulty making a profit and often can’t pay their rent. This is why the role of the property management company is quite different during a thriving economy. The relationship between landlord and tenant can become strained as tenants feel that they may be paying more than the current market rates while property management companies attempt to provide the same level of services with fewer resources.
There is one common thread that holds true among property managers regardless of the type of commercial product, i.e. office, industrial, retail or multi-family. That theme surrounds around customer satisfaction and its two essential pieces. The first is the operational side which involves the maintenance and running of the commercial asset and the tenant or customer’s perception of how well the asset is run on a daily basis and whether their operational needs are met. The second is the tenant or customer’s satisfaction and perception of the property management’s role.
Regardless of the type of property, no tenant wishes to have rent or expenses increased, especially during a difficult economic time. It is important that a property management company do whatever is necessary to control expenses either through renegotiation of vendor contracts, creative cost containment measures and operational savings. It is also important for the property management company to make sure that they have a clear line of communication and provide detailed explanations as to any cost cutting measures that are being taken and any potential increases that might be incurred. To simply hand a tenant a rental or operating increase without explanation can do nothing but aggravate what may be an already tenuous situation. Tenants remember these types of communications, which could hurt the landlord when it comes time for their lease renewal.
THE GOOD – The good news is that as the economy continues to recover tenants will have an easier time swallowing operating expense increases, paying their rent in general and will be less focused on the money issues as their own balance sheets improve. In addition, while the economy is still relatively soft, it provides opportunity for the management companies to sharpen their own pencils with regards to their vendor contracts to be sure that their properties are being run in the most cost effective manner.
THE BAD – The bad news is that customer service is always an issue and those landlords and property management companies which do not make an effort to ensure that their customers and tenants are satisfied with their performance will certainly suffer in the long run. They must maintain positive experiences with tenants and landlords in order to grow their own business.
THE UGLY – The ugly aspects of the recession appear to be behind us. To ensure property management companies success, they need to be at the forefront of customer satisfaction in tenant relations in addition to actively maintaining their existing relationships with property owners and securing new contracts going forward. Those companies who are content with the status quo will continue to see their relationships and their contracts dwindle or disappear as a result of not keeping up with the market conditions and the competitive environment today.
The property management companies, which are attuned to the needs and desires of property owners and can manage customer service relations with tenants will continue to have greater growth as the economy continues to recover.
Barry Saywitz is president of Newport Beach-based Saywitz Company, a commercial real estate company.
Info: www.saywitz.com
