Commercial real estate ownership is a significant investment, and without skilled commercial property management, even prime assets can suffer considerable losses. Increased financial risk, poor tenant relations, and declining income are all consequences of inadequately managed commercial buildings.
That’s why many building owners hire commercial property managers to protect their investments and maximize returns. Let’s explore why commercial property management is crucial in real estate ownership and why so many owners can’t do without it.
What is Commercial Property Management?
A simple definition of commercial property management is the professional oversight and operation of commercial real estate assets, such as office buildings, mixed-use properties, industrial properties, and retail centers. Commercial property managers are like the maestros at a symphony hall or the head coach of a football team: they ensure that all the functions of a commercial asset are running smoothly and in optimal condition.
Property managers oversee all aspects of daily operations, including leasing, tenant relations, and financial oversight. The goal is to increase the property’s value and minimize operational risks. Unlike residential property managers, commercial property managers typically handle more complex leases, longer-term tenant relationships, and a greater emphasis on market trends and asset performance.
Why Do We Need Commercial Property Management?
When starting, some owners attempt to manage their building operations independently. For many of these owners, the responsibilities quickly become overwhelming as their portfolios grow and complexities arise. Managing a well-run commercial real estate asset isn’t a side hustle. It’s a full-time job that involves coordinating repairs, addressing tenant calls and complaints, processing invoices, and other related tasks.
All these tasks—and much more—quickly consume an owner’s time, pulling their focus away from higher-level investment decisions. Some owners may also lack the necessary expertise to manage commercial real estate assets effectively. Without that knowledge, owners risk several consequences, including missed opportunities to maximize revenue.
As an owner’s portfolio grows, self-management also becomes more challenging. Without a commercial property management team, property owners may hit a ceiling, unable to efficiently scale their real estate investments. Self-management of commercial assets may work on a small scale, but it rarely ever leads to long-term growth and profitability without the use of technology. Many owners realize their ability to grow is dependent on their adoption of technology that allows them to streamline activities and help eliminate human error.
Below, let’s explore the core responsibilities of commercial property managers.
Maintaining Properties
A critical aspect of commercial property management that directly impacts tenant satisfaction and asset value is building maintenance. The best commercial property managers conduct planned and proactive maintenance to keep properties running smoothly, ensuring they’re safe for tenants and compliant with local, state, and federal regulations.
Maintenance teams inspect all areas of a property, including exterior checks on roofs and landscaping, interior systems such as elevators and common areas, and large and complex mechanical systems like HVAC units. Many commercial property managers also schedule preventive maintenance to prevent breakdowns and ensure optimal performance. The best property managers use property management software to plan and track these maintenance activities.
Commercial property management software automates maintenance reminders, tracks repair histories, and maintains digital recordkeeping for compliance and insurance purposes. Commercial property managers also often integrate software with financial systems, such as QuickBooks and STRATAFOLIO, to provide owners with expense tracking and budgeting that reflects maintenance activities.
Routine maintenance is critical for the long-term preservation of real estate assets. Well-maintained properties are less likely to experience costly issues, and they keep tenants happy, which in turn leads to lower turnover and a more stable cash flow for the owner.
Finding and Keeping Tenants
Another essential function of a commercial property manager’s job is in the tenant screening and leasing process. Property managers promote available space through listings, digital platforms, broker networks, and other means.
Property managers also field applicant inquiries and qualify prospective tenants based on criteria such as business type and the intended use of the space. After collecting applications, property managers will review them, conduct background checks, and check financial statements and references.
Finding good tenants is only half the battle. A core aspect of commercial property management is also tenant relations and retention. The best property managers nurture tenant relationships that stabilize cash flow and increase the asset’s value. They manage all daily communications and field inquiries regarding leasing, maintenance, and other matters.
Property managers must also handle more complex situations, such as providing flexible solutions during market downturns or in emergencies. A prime example of this was during the COVID-19 health crisis, when many owners and property managers offered tenants rent concessions and payment plans.
The goal of every commercial property manager is to help tenants navigate challenges while balancing the interests of the building owner.
Handling Finances
Commercial property managers have several financial management duties. Ensuring accurate and timely rent collection is one of these, which is a detailed, multi-pronged effort in itself.
Tenants must be invoiced in accordance with lease terms, which include base rent, taxes, insurance, and common area maintenance. Property managers monitor due dates, send reminders for late payments, and, when necessary, apply late fees as specified in lease agreements.
Accurate expense tracking is also a core function of commercial property management. Commercial property managers diligently track and categorize all expenditures, including utility bills, vendor payments, and larger capital upgrades, to ensure budget compliance.
The most savvy commercial property managers utilize property management accounting software for expense tracking and other functions. Tools like STRATAFOLIO integrate directly with QuickBooks, allowing property managers to automate invoicing and track expenses in real-time.
Understanding the Market
Rather than merely reacting to the market, the best commercial property managers actively study it and are always one step ahead. The ability to understand dynamic market trends directly influences rental income, vacancy rates, and the overall performance of a real estate asset.
Commercial property managers keep tabs on the local and regional real estate market, and their research usually includes:
- Tracking competing properties, examining their vacancy rates, asking rents, tenant mixes, and more
- Monitoring key economic indicators, such as demographic trends, local business, and employment growth
- Tracking zoning rules, new local, state, and federal regulations, and municipal projects that might impact a property’s value
Using insights from their research, property managers consider whether their rental rates are competitive and aligned with current demand. If the market is strong, they identify opportunities to increase rent. When the market is softer, commercial property managers may offer concessions or more favorable lease terms to attract and retain tenants.
Regardless of the circumstances, property managers ensure that commercial buildings are competitive and profitable by utilizing market insights from multiple sources and making data-driven strategic decisions.
Start Your Property Management with STRATAFOLIO
Commercial property managers love STRATAFOLIO because it’s packed with features that make their jobs easier, such as tools for lease management, tenant management, rent collection and invoicing, and CAM reconciliation. STRATAFOLIO seamlessly integrates with QuickBooks, consolidating the most essential operational functions and automating activities that save property managers and owners valuable time and money.
If you’re ready to take your commercial property management to the next level, check out the powerful features of STRATAFOLIO and learn more to simplify your operations and keep your real estate assets in exceptional shape. Schedule a demo today!
