How to Do a Commercial Property Management Proposal

In commercial and retail real estate, it is common to be asked to do a property management proposal to manage a property that has just been sold or leased. That is usually the best time to secure a new management. The owner of the property at that time is normally quite receptive to discussing property management strategies and services. Most property landlords do not have either the experience or the expertise to manage their property comprehensively. They have not got the latest tools and the systems to correctly manage the cash flow in keeping with the tenant mix and the lease profiles. When you have a number of tenants in the building, the entire management process becomes more complex and time consuming.

Managing a property is not simply just a matter of collecting rent and negotiating leases. There are many strategies and systems to be applied across the property for the long term. In this way the rental and the tenancy mix can be structured or improved. A property management proposal should be prepared with due relevance to the property function and requirements. That says that every proposal should be based on the needs of the client and the challenges of the property. Here are some factors to build into your proposal structure:

  • The time involved in managing a property will vary substantially based on the needs of the client and the challenges of the property. When setting a new fee for a new client, it is wise to consider the number of hours required each week to perform the expected tasks of management. When you relate this time factor to your operational costs of the division, you will soon see the breakeven point in the fee structure. Far too many agents simply set a fee based on known cash flow without the regard for expected time input.
  • The tenant mix for the property will have both challenges and opportunities. The challenges will be in upcoming vacancies and the repositioning of sitting tenants. That is where lease management becomes really important to the property process. Opportunities will always exist in renegotiating leases with the sitting tenants to improve occupancy and potentially the market rental. Fees should be established in your proposal to cover the renegotiation activities with existing tenants.
  • Be quite clear when it comes to the reporting processes to be provided to the landlord. Some landlords can be overly demanding when it comes to the weekly and monthly property reports. If a higher reporting requirement exists, then the fee structure for the property management service should be appropriately set.

It is interesting to note that a quality property management service will only occur if you have good people within your division. That is managers with the experience and the maturity to negotiate leases, optimise income, and manage expenditure activity. Property managers of this type can be hard to find and usually demand a reasonable salary base. That being said, they will always produce better quality work across the portfolio for the clients and the agency principal. To establish and run a professional commercial property management division, you need good people; there are no short cuts.