written by: Jessica Morina, Property Management Director, Sterling CMG

Owning commercial real estate requires a great deal of time to manage effectively. The owner must wear many hats to ensure that the needs of the tenants and the building itself are addressed properly.  Not only is this time consuming, but it requires a level of expertise not every property owner possesses. For this reason, commercial real estate owners should consider hiring a professional commercial property management company. Management companies offer services that will increase operational efficiency and save the owner time and money.

One important distinction to make is between a jack-of-all-trades management company that handles single family homes, apartments, and mobile homes with a small portfolio of managed commercial properties, and that of a dedicated, commercial-only company.  While many property management companies claim to handle commercial buildings, there is a stark difference between the needs and requirements of residential and commercial tenants.  A management company that focuses exclusively on commercial properties will bring the focused expertise you need to create optimal outcomes for your investment.

Here are a few of the benefits of hiring a commercial management company:

1. Better Cash Flow: Commercial management companies have software programs in place that are designed specifically for commercial buildings. Rent is charged and collected easily each month through automated processes and online tenant portals, reducing the time it takes to process payments. These programs also charge late fees automatically and have the ability to instantly alert tenants when they have a balance and remind them that a payment is due. Chasing down a tenant for rent each month is time consuming and these programs cut that time down drastically.  Well-established commercial managers also have systems and procedures in place that reduce operating expenses and boost revenues.
2. Tenant Communication: Each business or tenant in your building has different needs, different lease expiration dates and present different challenges to the owner. Depending upon the negotiated terms of the lease, you may have different responsibilities for each tenant. Managing these can be challenging, especially if you own multiple properties . However, the software programs that property management companies use can easily manage this for you and communicate quickly with each tenant individually or with the building as a whole in a matter of seconds. With the click of a button your entire building can be notified of a large scale maintenance concern or changes to your building. The key to creating long term tenants is excellent customer service and good communication. Commercial management companies can help you achieve both of these and decrease your tenant turnover.
3. Property Marketing: Commercial property management companies invest heavily in marketing their brand and individual listings.  They are using multiple platforms to advertise their vacancies and in many cases, have featured listing status. Use this to your advantage. They advertise your vacancies on multiple online portals and create professional-grade content to distribute to interested tenants. Because they are advertising multiple properties at once, their potential tenant pool is much larger than an individual owner usually has access to. If one property ends up not working for the renter, they can easily refer them to your property if it’s a good fit. By capitalizing on a management company’s market presence, you can fill your spaces faster and avoid long vacancy times.  In additional, optimal marketing outcomes are found when the management company is teamed up with a commercial leasing company to market and fill vacancies.  Commercial leasing brokers have extensive marketing reach and tend to fill vacancies much faster than a management company working to lease a property on their own.

   

4. Property Maintenance: No matter how old your property is or what kind of building it is, you will eventually need to repair something. Property management companies have skilled employees who can respond quickly. They also have trusted vendors that meet insurance requirements and have pre-determined, negotiated rates. This allows them to find the best solution to your maintenance problem in the most cost-effective and timely manner. Being able to respond to a tenant’s maintenance concerns rapidly shows your tenants you care about their needs and your building. A happy tenant is much less likely to leave.
5. Accounting and Financial Reporting: Accounting for a large investment property takes a lot of time and specialized knowledge. Commercial management companies track your income and expenses each month and provide you with a comprehensive reporting package that will show you how your investment is performing. You can easily compare your monthly cash flow to your budget, have access to all property invoices paid, and easily set aside money each month to pay expenses such as taxes and insurance. Property management software programs will also help you monitor your CAM expenses and reconcile them each year. This is a crucial process to the success of every multi-tenant building.  When it comes time to sell the asset, it will be significantly easier to do so if the books have been done properly the entire time that you owned the property.
6. Experience and Area Expertise: Effective property management companies actively monitor the commercial markets and adjust rental rates and terms accordingly. An experienced property management team can also increase the operational efficiency of the property, thereby increasing its profitability. This is especially important when it comes time to sell as value is largely driven by the net operating income generated by the property. Many property managers also hold professional designations demonstrating that they have met strict educational requirements in their field. They are more likely to have a deeper understanding of the complexities of managing commercial real estate.

Effective property managers first preserve your asset, then look to actively grow its value through targeted capital expenditures.  Far more than just rent-collectors, a qualified commercial property manager will be your partner in maximizing your investment return on the asset.

For a complimentary management review of your assets, you’re invited to contact Sterling Commercial Management at 406-290-9800 or jessica@sterlingCMG.com