Strategies to Keep Owners and Tenants Afloat (JPM)
Focusing on Property Management fundamentals is essential in an uncertain economy
by Brad Ashley, CPM
The following is an excerpt from the May/Jun 2009 issue (Volume 74, Number 3) of JPM�, Journal of Property Management.
Our clients are nervous about the market and economy. Real estate managers in cities across the nation, from the largest office buildings in New York City to the smallest of retail spaces in Kansas, are feeling the pressure to maximize asset performance. The unfortunate increase in sub-prime loan foreclosures has been magnified by the media with hourly reports. The downturn of the residential market has transferred to the commercial market, making owners and investors cautious to sell, fearful they will not secure a satisfactory sale price.�
During the summer of 2008, buyers and sellers continued to make deals, but the prices paid for properties were not nearly as strong as we had seen just three years ago. Highly-leveraged debt buyers have, for the most part, been pushed out of the market. Banks and other institutions are watching their lending closely. During the fourth quarter of 2008, deal flow all but stopped as everyone watched and waited for reaction to the latest government bailout.�
So, the question now is, how can real estate managers keep their business viable during this economic crisis?�
One good strategy would be to get back to basics. It is critical for property management professionals across the United States to focus on management fundamentals�tenant relations, proactive communication, capital projects and expense savings. Brokerage, project management and asset services need to function as a team. Vacant spaces must be clean and ready to show. Accurate building information and a list of amenities should be readily available, and systems must be in place to welcome new tenants on time and on budget.�
In a weak economy, ownership groups will look for concrete ways to reduce expenses while maintaining tenant satisfaction at properties. Implementing the following steps in your personal business plan is the key to meeting owner objectives:�
- Establish enduring relationships with others
- Retain existing tenants
- Collect all revenues
- Focus on expense savings�
Establish Professional Relationships�
Strong relationships in business are essential. We often hear it is who you know, not what you know, that allows managers to keep up with their busy lives and meet numerous deadlines on time. Active participation in networking groups like IREM or CCIM, or through online Web sites like Facebook, are critical to growing relationships between managers and their daily contacts.�
With Owners�
Regular communication with your asset manager or owner during these times is very important. A real estate manager�s goal should be to provide solutions. Owners should be presented with the best answer to an issue and be given a chance to modify it, but rarely should they be asked questions without an answer already in place. It is important to analyze a problem and to try and think two steps ahead.�
Like us, owners hear the media tossing about the word �recession� on a daily basis. They are concerned about the condition and performance of their properties. In addition to regular monthly reports, it is also advisable to communicate with owners of industrial properties at least twice a month and owners of office buildings on a weekly basis. Multifamily ownerships typically prefer regular contact several times a week from the local managers to keep informed of the operations on the property.�
Communication with owners is always determined on a case-by-case basis. Some owners may wish to speak with managers daily on high-needs properties. Be sure to ask your ownership their preferred communication method and frequency. With a heavy reliance on e-mail, some owners may elect to receive regular written updates in lieu of phone calls; but remember, it is very difficult to communicate tone and build a meaningful relationship through e-mail. Communication can be as simple as sending a newspaper article that features a building tenant, a group of site photographs showing work in progress, or pictures of work to be performed along with a brief note describing the task. The digital camera is the lifeline to owners who are thousands of miles away and may only visit a property once or twice a year. Be sure to document and quantify any savings provided to an owner.�
You should also ask yourself the question, �Is this necessary?� before presenting a capital project (budgeted or otherwise) to your owner. Many owners have chosen to postpone projects until 2010. Investors in private and public REITs are overly focused on their returns. If postponing a project is not a detriment to the property, it may be a wise decision. Ask yourself, "Can this wait?"
With Brokers
It is important to establish good working relationships with brokers to promptly pursue new tenant deals. Brokers are typically self-reliant by nature and have been known to keep details of prospects to themselves as they fear someone else might "take" their deal. On our team in my office, we have found the opposite to be true. The closer we work with the brokers on projects, the faster and more accurately the deals are completed. This benefits the brokers as they make more commissions, and benefits the manager when they receive a happier tenant and more accurate lease document. The days of working in silos (brokerage, management, etc.) are gone. A team approach is here to stay.
The full article is available as an online exclusive in the May/Jun 2009�JPM� issue.
IREM Members have free access to the JPM� online archives and the �Online Exclusives,� articles that are only available on the IREM Web site. Non-members can subscribe to JPM� at www.irem.org/jpm.