The property manager: an ally in the real estate equation

Corporations on the move need help from experts

Property managers can be valuable allies

By John Combs

Faced with constant technological advancements and periodic shifts in the economy, companies are constantly re-evaluating their business plan to remain competitive. In response, business owners face a myriad of challenges, from staffing issues to evaluating technical support to implementing new ways of doing business — all in a constant battle to control costs and remain competitive. These represent important issues

and concerns that need a business owner’s focus on a daily basis. It is important for business owners to leverage their resources in an effort to meet daily business challenges efficiently and cost-effectively without losing focus of core business pursuits. One important — but often overlooked — ally for the savvy business owner is a property management company.

Whether you are in an industrial warehouse or 10th floor office, your facilities can represent a large portion of operating capital and require constant attention. While the capabilities of a property manager are often felt indirectly through services included in a lease, industrial and office tenants faced with maintenance or improvement responsibilities are finding that property management companies can have a more direct impact by providing cost-effective solutions to these needs as well.From value engineering and streamlined management to competitive bidding and vendor leveraging, property management companies are able to provide a wealth of experience and capabilities. For today’s tenant, it is important to understand the value of property management companies, both directly and indirectly, and the emerging trends in the industry which are making them increasingly powerful partners in cutting costs, especially hidden ones, and improving efficiencies for both owners and tenants.

A landlord’s market

It wasn’t too long ago that the real estate market was dubbed a tenant’s market.

With vacancies in most regions hovering in the double digits, tenants were wooed by building owners and leasing agents with low rental rates and various rent concessions. Now, with a healthy economy, limited inventory and single digit vacancies, low rental rates and perquisites which relocating companies came to enjoy (and even rely upon) have become fond memories, making more real estate-related costs the tenant’s responsibility. However, tenants haven’t been left out in the cold to fend for themselves.

Throughout this time, owners have relied on property managers to explore any avenue to lower costs while, at the same time, creating environments that attract and retain tenants. This ongoing process includes reviewing every facet of the property from building engineering and landscaping to creating operating budgets.

Technological advances in reporting procedures have created faster, more efficient means to monitor and control costs as well as to provide fast and accurate data to building owners. Because of this, property managers now have the technological resources to identify and take advantage of new opportunities. For the tenant, the property manager’s diversified and detail-oriented experience makes him an expert when it comes to understanding how to operate a facility and control costs. This is important for the tenant to realize. With fewer savings and concessions being passed on to the tenant during the lease negotiation process, effective property management can become a critical tool in a tenant’s ongoing maintenance of its office environment or manufacturing facility.

Faced with an increase in assumed costs and responsibilities, the keys for tenants are to control these costs and minimize time spent meeting these responsibilities. Because of the resources, experience and efficiency of property management companies, tenants are increasingly outsourcing these activities to meet these goals. Realizing these increasing needs by tenants, many property management companies, such as Insignia Commercial Group, are already positioning their services to better assist tenants with their expanding needs.

Property consulting services

For Insignia, the increasing complexity of operating buildings has placed a greater demand on the on-site managers. To meet the increased level of service calls and variety of services needed at many of the facilities the company manages, Insignia created a specialized team of engineers that could service buildings with expanding maintenance needs or properties which were too small to justify an on-site staff. The immediate success and popularity of this program, especially with industrial and R & D; facilities, emphasized the need for this type of flexible and timely service.

It soon became apparent that there were other ways Insignia could share its experience and resources, especially with tenants, and so it created Property Consulting Services (PCS), a modification of its specialized engineer program. In short, PCS is the easiest way for tenants to maintain routine or extraordinary maintenance or improvement needs.

Rather than dealing with multiple vendors and evaluating dozens of bids, a tenant can make one phone call to Insignia and receive virtually any maintenance or tenant improvement service – from horticulture to plumbing and electrical to construction management – quickly and easily. The rates for these services are an average 30 to 40 percent lower than median rates in most urban areas. Equally important, though, the engineers and staff at the program don’t treat these assignments as service calls. Because they often have a long term relationship with the tenant and the owner, they are motivated to take the time to identify solutions which lower costs while protecting both the tenant and the owner’s investment in the property.

Programs like those offered by PCS are a key trend for management companies because they demonstrate an increase in the level of involvement in the client’s investment. The overall attraction for the tenant is convenience and pricing. Large firms such as Insignia can take advantage of volume discounts for building services and products. Moreover, property managers are also experts in regions and submarkets where they generally oversee a portfolio of commercial properties. As such, they are much more familiar with local vendors and service options.

Emerging programs tailored specifically to tenant needs are on the rise because they benefit all parties involved. For tenants, expanded levels of service create more attractive facilities and lower costs. For owners, these programs increase tenant satisfaction and attraction. At the same time, PCS also protects their investment by ensuring that tenant improvements are made by qualified contractors.

Industrial facility needs

The impact of a service such as PCS can be especially critical for the industrial tenant. The traditional economics of the industrial marketplace are shifting. With construction costs remaining relatively unchanged over the past decade, rental rates for existing facilities on the upswing and building technology becoming more sophisticated and cost effective, today’s manufacturers are beginning to evaluate the costs related to their sites in a much different way.

As such, industries are now focusing on ways to trim overhead and streamline operations via outsourcing and other cost-saving measures. One area that has come under increased scrutiny is property maintenance. A customized building service program, such as that offered by PCS, can include everything from roof maintenance, exterior painting and landscaping to customized services such as HVAC maintenance and plumbing. The bottom line is the tenant can be

assured of a controlled and consistent business environment as a result of a seamless one-stop property management service and support program. Again, the emphasis is on keeping the tenant focused on its core business while the real estate needs are handled by a senior management team with the resources and capabilities to do so in a cost-effective manner.

Adding value to the equation

Another important factor to keep in mind is the property management company’s ability to buy in bulk. As discussed earlier, management companies oversee large commercial portfolios and, as such, they are in a unique position to obtain price discounts on supplies and contracts.

Electricity is just one example of the magnitude of bulk buying power wielded by the property management firm. As every business owner knows, electric power can be a significant operating cost. In an era of utility deregulation, understanding and evaluating the impact of the awakening stages of a competitive electric power industry can be daunting. When electricity is deregulated on January 1, the marketplace will be filled with utility companies and brokers lobbying for a share of the market. The discounts in this competitive market will be with the volume user — in many cases the property management company overseeing a large portfolio of commercial property.

The same formula applies to a number of services such as janitorial contracts or landscaping service. In each case, the property manager is uniquely positioned to negotiate the best rate possible and, in turn, pass the savings on to the tenant.

Adding value to the asset

Property managers also serve tenants and owners by continually examining the building or facility for possible upgrades as well as options for adding greater efficiency. This ongoing focus on the real estate asset can be beneficial to the tenant. In effect, the property management company at your site will play a critical role not only in your satisfaction at the moment you sign the lease, but will remain focused on your business needs even as new technologies are introduced into the marketplace. For companies who desire efficiencies at all levels of their day-to-day business, an investigation into building management prior to signing the lease can be of value.

If your business needs to stay on the cutting edge of business technology, you want to make sure that the manager not only can assist you in meeting your needs but may have already anticipated your needs. For instance, Insignia recognized that many companies need faster data transmission capabilities to operate. In response to demand,

Insignia has already begun negotiations with fiber optics companies to not only provide faster data transmission, but also local service at rates far lower than individual tenants could have received.

The management factor

Knowing what questions to ask the property manager is as close as your latest report on operating costs. For each expense related to day-to-day operations, ask the management company if and how they can reduce that cost. Take advantage of programs such as PCS that can be used as much or as little as necessity dictates. Remember, the property manager is continually evaluating the site in search of more opportunities to add value to the real estate asset. The bottom line can be significant cost savings to the tenant.

Now more than ever, it is important to utilize every competitive advantage in the market. The money you spend in dollars and employee time related to the upkeep and care of the real estate you own or lease can play a significant role in your ability to remain at the forefront of an increasingly competitive business environment.

John Combs is the president of Insignia Commercial Group’s West Division based in Irvine. Insignia Commercial Group is one of the largest managers of commercial properties in the country. The division provides manages more than 55 million square feet of office, industrial, retail and mixed-use properties located in California, Arizona, Washington and Oregon.