Much of commercial property management focuses on saving money, avoiding expenses by properly maintaining large assets, and creating economic value. When the financial value of a property is in the millions or tens of millions of dollars, the importance of professional and effective property management cannot be overstated.
The procurement of virtually every service, repair, and replacement at a commercial property is an opportunity to save money. An owner with a single property will overpay in almost every instance as compared to the price that could have been achieved by a property management company with buying power from managing many properties. The cumulative difference in costs is significant even in the short term.
Most commercial buildings contain over one hundred building components, internal systems, and pieces of equipment. Each of those has a finite useful life. In order to maximize the useful life of each, ongoing preventive and predictive maintenance is crucial. Otherwise, building systems and equipment can malfunction or fail prematurely, increasing the number and cost of repairs and replacements. Those direct costs are usually in the tens of thousands of dollars. There are also indirect costs associated with loss of goodwill with occupants of the building.
A superior property management company saves property owners money in other ways, too through its existing business relationships with tried-and-true contractors and service providers that can readily identify the proper scope of work, complete the work properly and on time, and prevent additional future costs for corrective work.
The financial stakes associated with not having a competent property management company rise even further when the economic value of a commercial property is derived from rent-paying tenants. Commercial property tenants expect seamless operations of systems and equipment, as well as the consistent delivery of services. A superior property management company can meet or exceed these expectations. Moreover, tenants that pay operating expense or common area maintenance (CAM) pass-through charges expect a building’s operation and services to be delivered in a cost-effective manner. Otherwise, disputes arise.
A vital function of the property management company is to properly bill and collect rent and other charges from building tenants in a timely manner. These charges include:
- Base Rent
- Annual Rent Escalations
- Net Charges for Utilities
- Operating Expense or CAM Pass-Through Charges
- Late Charges
- Other Income Items
In summary, competent and effective property management for commercial properties is a crucial service that should be performed by skilled professionals who rely on extensive experience,
knowledge, and keen judgment to minimize expenses while preserving and enhancing economic value.