In commercial real estate, leasing and property management are often in separate silos. The leasing department goes out to negotiates leases, looks into covenants and other issues, signs the deals, and then bring them back to the property manager’s desk. From the start of the lease term onwards, the property manager is the direct contact for handling day-to-day issues for the tenant. This tends to be a normal practice in the industry, but in practice, there are significant advantages to involving your property manager from the very beginning of the commercial leasing process.
How valuable is your property manager? Much more than you might imagine. In fact, your property manager is actually one of your most trusted advisors.
Here are a few ways you can better make use of your property manager’s talents.
New Building Construction
The property manager is almost always brought in at the end of the commercial building process, when they should be in from the very first chapter: the construction of the building. With their experience in maintenance and dealing with tenant issues, the property manager can work with architects and engineers to design rooms and spaces that prevent common problems from taking place. As the one person who will be working in the building every day, the property manager ought to be an essential part of your design team.
Term Renewal
Property managers know the tenants very well. If they know that a tenant is high maintenance or has poor rental payment habits, etc., when it comes time to renew, the property manager can prepare the leasing side to negotiate a new agreement that’s more advantageous to the landlord. If the property manager finds that the tenant is problematic, they can let the leasing team know so they can decide whether to renew or seek out new tenants instead.
As noted earlier, the property manager is often excluded from the leasing side of the business, but involving them from the start carries great advantages for heading off future issues. For instance, over the past year of the COVID-19 pandemic, as landlords face losses in revenue, they may instruct their leasing agents to close any deal possible. This could lead to the re-signing of more problematic tenants. Having the property manager involved during the leasing process can help the landlords know what they are getting into.
New Lease Negotiation
Frequently, new leases tend to incur the kinds of unexpected costs that the property manager could have prevented if they were brought in at the start of the process. For example, take reserved parking. A leasing agent may offer reserved parking to a tenant during the negotiation. The agent may think this is a harmless perk designed to persuade the tenant to sign, but the property manager knows the realities of reserved parking. What happens if the user decides one day not to use the spot, and parks somewhere else? They’ve now taken up two spots unnecessarily.
Further, if someone else parks in the reserved space, it’s difficult to enforce it because by the time the property manager finds out about it, the violator is long gone. In extreme cases, issues related to parking forces the manager to hire a parking attendant to enforce the rules, which costs more money than is often forecasted in the original budget. Had the property manager worked with the leasing agent during the sales stage, they could have made the agent aware of these challenges ahead of time.
Finding Suitable Tenants for What the Building Can Accommodate
Buildings are designed for a certain population. If you overpopulate the space, it puts stress on the building and therefore maintenance and repair costs go up, along with operational costs such as running HVAC. In fact, HVAC is a frequent challenge when you’ve got too many people in the space, as the temperature is difficult to regulate with most systems. This issue alone often forces landlords to upgrade the whole system to please a tenant that may leave anyway.
What if the tenant wants the building open 24/7? There are costs incurred with that as well, such as running bathrooms and cleaning. You need to know these details before you sign the deal, not after. They can disrupt costing and expense figures that were established during the lease negotiations, whereas if you know these challenges ahead of time, you can compensate for those costs in their budgets.
A property manager has an understanding of the impact on those decisions.
Fostering a Strong Working Relationship from the Start
Often, when you’re showing a space, it’s valuable to have the property manager at the showing, particularly if it’s a larger tenant or a second showing, because it puts a face to the relationship. The leasing agent negotiates the deal and the tenant never sees them again, whereas they have to live and work with the property manager for many years during the leasing term. By having the property manager there from the start, the tenant can get an idea of what it’s like to work with them, and get a sense of their quirks and personality. I know that people have gone into my buildings because they were comfortable with me. I had one big tenant even say they signed the lease only because I was on the showing and the wanted me there. Having the property manager on site can actually help you close the deal! Are you a property manager whose talents have been under-utilized by your landlord? If so, I’d love to hear your story! Please comment below.