13th Jul, 2015

Administration of the Building Management Office

The function of the management office is to provide professional building services to tenants. The business of the management office, however, is to perform successfully for the benefit of the owner. These two goals are intricately related; after all, providing professional service to tenants results in tenant retention and cost containment—two of the most important factors to maximize property income.

Property Management—Leasing Relationship

In addition to providing services for existing tenants, new tenant leasing is required to maximize income. Even if leasing is performed by a separate company, division, or by brokerage personnel, those in charge of property management have an important role in acquiring new tenants. When there is rivalry or secrecy between leasing and management personnel, the results will not be as positive as when the two teams work together. The promises of lease documents drafted or amended by the leasing team must be fulfilled by the management team. Teamwork is essential to ensure the new tenant is satisfied.

Lease Conditions

Most leases have been carefully drafted by a lawyer to incorporate the legal language that protects the owner’s rights. Deal points—rent rates, lease terms, and lease concessions—are negotiated between the owner and tenant representatives and added to the lease. Even after the lease has been signed by both parties, situations occur that require amendments to the lease. If the lease conditions affect the operation of the property—the hours of operation, operating expense caps, sublease rights, special services required, excess floor weight, reserved parking, additional security, accelerated tenant improvement time, and any of a thousand negotiable items—property management must have an opportunity to review and approve the deviations from the established norms and establish any costs above normal operating costs to comply with them.

Property management must be flexible in accommodating leasing changes without compromising operational concerns. Nothing is more damaging to the relationship between leasing and property management than an arbitrary unwillingness by property management to bend to accommodate a tenant. Consider, for example, the tenant who requires that legal notices be sent via registered mail to several different addresses. The property management staff can easily accommodate this request. Or, consider the prospective tenant who wants custodial staff in their suite “only after 7:00 p.m. and never on Tuesdays.” Proper communication with the cleaning contractor will quickly accommodate this request.

On the other hand, consider the prospective tenant who is asking for free overtime air-conditioning on an as-needed basis. While the tenant may convey to the leasing team that “it won’t happen very often,” it is the responsibility of the property management team to present the costs of such a concession to the building owner(s) and the leasing team. The decision ultimately lies with the building owner(s), but the property management team has responded professionally and in the best financial interest of the owner(s).

Tenant Improvements

The property manager must be made aware of lease negotiations as soon as possible, ideally as soon as they begin. He or she should meet with the prospective tenant and the space planners, arrange for estimates, and set the construction schedule in compliance with the lease commencement date. From the first preliminary space planning through the tenant move-in, property management must manage the processes. As long as anticipated dates are met, the tenant will view the process as routine—that everything went “as planned.” However, when there are disagreements over tenant improvement costs, or the move-in date is delayed through no fault of the tenant, it is likely that the resulting negative first impression will last throughout the term of the lease.

Owner Accommodations

As part of the administration of the management office, the property management team has a duty to communicate with the owners, fully and often. This will reassure the owner(s) that their goals for the ownership of the property are being met. If acting as an asset manager, the property manager must also provide regular updates on market conditions and competition, make short- and long-term recommendations on the operation of the property, and provide accurate, timely, and complete reporting.

National Owners

Owners of multiple properties across the country have established specific standards and procedures for their property managers. They have standardized reporting forms, systems of accounting, rent col- lection, and accounts payable. They require advance authorization for certain expenditures and contracts. Some of these owners will have in-house personnel dedicated to the supervision of third-party property management firms; some will use asset management firms as intermediaries.

In many cases, national owners will use different property management firms based on geographic regions. Even if the owners use multiple firms, they will likely limit the total number of companies used to ensure efficient supervision. For many of these property management firms, ensuring that the owner(s) are satisfied means the survival of their company. If they do a poor job on one property, it is likely they will lose all of the owner’s properties. When large national owners are clients, property management executives become more involved in communication with the owners. Property managers are still required to initiate reports and carry out policies, but executives monitor the results closely and try to gauge the owner’s level of satisfaction. If they sense that the owner is unhappy with results or not confident of the capabilities of the property manager, the property management company may change property managers in the hopes that things will smooth out. To prevent this, the property manager must have good communication with the owner.

Multi-Site Administration

Property management companies can service multi-site properties where there is a management office at each site; usually, however, this is not the case. Most property management companies will contract for management of smaller properties that do not require onsite personnel, or at least not a full staff. There may be a maintenance person on-site, but service calls are made to the central, off-site property management office. Management from a central location can be successful when handled professionally. This means the property management company has in its employ a number of property managers who are assigned responsibility for several projects each. In turn, the property manager spreads his or her time among the assigned projects and arranges for the personnel and contractors needed for servicing the various buildings. By efficient use of time and personnel, property management companies can offer clients with smaller properties good management at a more competitive cost than would be incurred in an onsite management office.

Property Management Executives

Even where there is a fully staffed, on site management office, property management companies must supervise their property managers, train and counsel them, replace them when needed, and otherwise provide administration of their contract with their client.

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