Commercial property management presents unique challenges and complexities compared to typical residential rentals. Due to the diverse nature of properties, leases, tenants and regulations, it requires extra attention and meticulousness. Navigating these intricacies can be overwhelming, and that’s why we’re here to help.

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In this article, we’ll delve into key factors that contribute to successful commercial property management and explore the role of property management software in streamlining operations and enhancing efficiency. We’ll also help you determine if you should outsource management services or do it yourself. Are you ready to unlock the potential of your properties? Let’s get started.

Article Roadmap

• What Is Commercial Property Management?
• Best Practices
• Popular Solutions
• Services
• Next Steps

What Is Commercial Property Management?

Commercial property management is the process of marketing, leasing, renting and maintaining commercial real estate properties such as office buildings, shopping malls, retail spaces and industrial complexes. Managing commercial properties involves complicated lease structures, multiple tenant relations and handling financial aspects such as utility allocation, common area maintenance (CAM), vendor management, budgeting and reporting.

Additionally, it requires proactive maintenance and adherence to industry regulations, which are vital for preserving your property’s value and appeal. This approach combines expertise, innovation and attention to detail to unleash the potential of commercial real estate, ensuring a safe business environment and sustained profitability.

Here are common tasks and duties it helps property managers perform efficiently:

Property Marketing and Tenant Acquisition

As a property manager, one of your key roles is attracting and securing tenants. To achieve this, you need effective advertising and promotion strategies across online listing platforms and social media and targeted campaigns to reach specific customer segments.

You also play a vital role in tenant screening and selection. Conducting thorough background and credit checks ensures that selected candidates meet lease requirements and have a reliable financial history. Moreover, you handle lease negotiations and drafting, ensuring lease agreements are comprehensive, legally sound and can protect owner’s and tenant’s interests.

Lease Agreements Management

Commercial leases are more complicated than their residential counterparts as they are more rigid and cover a longer lease tenure. They are agreements between a landlord (lessee) and a company (lessor) outlining terms that allow them to conduct business in that location. Some of the common types include:

• Net Leases: In this arrangement, renters pay a base rent amount along with additional expenses for utility, taxes and maintenance. It splits property management costs between landlords and renters, resulting in lower base rent structures.
• Gross Leases: Renters pay a fixed rate monthly, and landlords take care of maintenance, utilities and repairs. It’s useful for renting office spaces that don’t require modifications or installments, and landlords can estimate average maintenance costs easily to include them in the monthly rent.
• Modified Gross Lease: In this structure, the renter pays a gross monthly rent, but landlords can charge extra for sudden spikes in operating expenses. For example, landlords can adjust rent structures when there are fluctuations in property taxes or utility costs.
• Percentage Leases: These lease types contain specialized clauses that allow landlords to charge a commission based on a business’s total sales or revenue on top of the base rent. They are popular in shopping malls where landlords and renters work in tandem to increase business profits.

Make sure to research and identify your property type and requirements to estimate its value, decide rent structures and design sound lease agreements.

Tenant Relationship Management

Another important responsibility is fostering positive tenant relationships. Effective communication and conflict resolution skills are crucial in maintaining a harmonious landlord-tenant relationship.

You need to promptly address concerns or issues, ensuring tenant satisfaction and facilitating a conducive business environment. Conducting surveys is a good strategy to collect feedback and make improvements based on tenants’ needs and preferences. You must develop renewal strategies to retain existing tenants and secure long-term occupancy.

Property Maintenance and Repairs

Maintaining the property and addressing repairs are essential roles of a property manager. Proactive maintenance planning helps identify and address potential issues before they become major problems. Regular inspections, preventive maintenance and efficient repairs contribute to the property’s overall upkeep and attractiveness.

Vendor management and contract negotiations are also part of the role, ensuring that reliable and cost-effective service providers are always available. The goal is to handle emergency repairs and tenant requests promptly, minimize disruptions to tenant businesses, and maintain a safe and functional environment.

Billing and Accounting

You must determine the rent structure based on renters’ sales and market conditions, ensuring it aligns with the property’s value. Beyond that, it’s important to define a procedure to collect rent, identify late payments and charge penalties.

Also, you’re responsible for accurate bookkeeping, maintaining financial records and preparing reports. Handling utility billing and ensuring proper expense allocation among tenants are part of your accounting responsibilities.

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Best Practices

Here are some additional tips for successful commercial property management:

• Take time to create detailed leases with tenants at the beginning of a commercial relationship to avoid misunderstandings and problems in the future. Standardize rent increase clauses, notice periods, late payment charges, renewal clauses and state-specific compliance requirements.
• Commercial properties need spatial optimization to fit different types of businesses. Understanding what your space offers is crucial to identify the right businesses that can maximize its potential. It also helps maintain compliance with property-specific regulations, such as increased safety measures in restaurants or fire safety regulations for workplaces and offices.
• Communication is key to a successful relationship. Master the art to understand your tenant’s needs and clearly explain tasks to service providers. It pays to be efficient and quick while resolving issues and misunderstandings.
• Keeping your property’s equipment up-to-date is a great way to keep tenants happy. Consider upgrading to energy-efficient and automatic HVAC systems, lights, fans and thermostats that adjust their output based on the environment and the number of people present.
• Preventive maintenance is the name of the game in the commercial real estate industry. The goal is simple — pay a small amount now to avoid large expenditures in the future. For example, hiring a dedicated technician to regularly check HVAC systems can improve the machine’s longevity and help you avoid paying big amounts for potential damages and repairs.
• Are you tired of managing multiple tenants and leases? Consider hiring commercial property management companies to standardize workflows, avoid errors and maximize revenue potential across your portfolio.
• Work smarter, not harder. Use commercial property management software to manage rent collection, leasing, marketing, local and federal compliance tracking, maintenance, and work orders from a single screen.

Popular Solutions

Using property management software is useful irrespective of whether you’re managing properties yourself or hiring a professional to do it for you. But picking the right one that fits your operational needs is where it gets tricky.

There are various options in the market for different business types and sizes. You must know your needs before starting the software selection process; otherwise, you can end up with a misfit solution that complicates matters.

Start by gathering your business’s executives to discuss and prioritize property management software features your needs the most. Compare potential software with your requirements checklist to determine which fits the bill the best. To streamline your journey, here are overviews of some of the popular software you can consider for your business:

AppFolio

AppFolio is an all-in-one cloud-based property management solution that can handle every real estate type, including commercial properties. You can manage multi-channel marketing, rent collection, maintenance, accounting and reporting. It offers individual owner and renter portals to chat, pay rent, request maintenance, and track property financials and performance.

You can also onboard your entire team and embed training manuals in the interface to educate and empower staff. Its standout feature is the native AI that lets you automate administrative tasks, analyze market trends and gain insights to improve business processes.

Yardi Voyager

Yardi is one of the first property management software companies. Voyager is one of its most robust platforms that offers a cloud-based modular architecture — meaning you can pick and choose the features to compile the ideal software for your needs.

It offers a wide range of capabilities, including marketing, leasing, revenue management, staff training, virtual inspections, CAM tracking and more. You can centralize all your business data under one roof and use intuitive search tools to locate important documents quickly. It also offers a robust accounting module that supports multiple books, accounting trees, general ledgers and intercompany accounting.

MRI Software

MRI Software is a specialized property management platform designed to handle commercial and multi-family properties. It offers an advanced leasing module that designs leases, automatically identifies important clauses, sends reminders for upcoming events and streamlines renewal processes. You can also define rules to automate complex lease accounting, calculations and late penalty charges.

You can use the retail management module to onboard maintenance service providers, assign tasks and automate invoicing. It also scans, validates and tracks visitors and allows you to manage additional non-residential units such as warehouses or storage spaces.

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Services

Commercial property management services aim to relieve property owners of the day-to-day responsibilities and complexities associated with managing commercial real estate. Here are some common types of services offered by commercial property management companies:

Tenant acquisition and management:

• Marketing and advertising vacant spaces.
• Conducting tenant screenings, including background and credit checks.
• Managing lease agreements, renewals and terminations.
• Facilitating communications and addressing tenant concerns.

Property maintenance and repairs:

• Property inspections and proactive maintenance planning.
• Coordinating CAM, repairs, renovations and vendor management.
• Handling emergency maintenance requests.
• Managing landscaping and exterior maintenance.

Financial and accounting management:

• Setting rent levels based on market conditions.
• Collecting rent and other bills.
• Preparing financial reports and budgets.

Legal and compliance support:

• Staying up-to-date with local laws and regulations.
• Ensuring compliance with safety, environmental and accessibility standards.
• Handling lease and contract negotiations.
• Managing legal disputes and evictions, if necessary.

Administrative and operational support:

• Handling administrative tasks such as lease documentation and tenant communications.
• Overseeing property-related administrative processes and paperwork.
• Coordinating with insurance providers and managing insurance claims.
• Providing regular property performance reports to property owners.

Primary Benefits

Here are the main advantages you can achieve from commercial property management services over managing your properties on your own:

• Save Time and Effort: You can focus on other aspects or invest in additional properties without the burden of day-to-day property management tasks.
• Bring Expertise and Experience: These services are offered by professionals with extensive industry knowledge, including market trends, tenant acquisition strategies and legal requirements.
• Improve Tenant Retention and Satisfaction: Skilled managers can enhance tenant experiences, address concerns promptly and implement retention strategies, leading to higher tenant satisfaction and lower vacancy rates.
• Streamline Maintenance and Repairs: These services ensure regular maintenance, timely repairs and access to trusted vendors, minimizing property downtime and preserving its value.
• Increase ROI: Professional financial management, including accurate rent collection, expense tracking and financial reporting, helps maximize profitability and optimize investment returns.

These services offer single landlords and property owners professional expertise, streamlined operations and improved property performance while freeing up their own time and resources. But the question remains, do you need to hire a commercial property manager?

When To Hire Services

You must analyze the costs and benefits of hiring a manager to determine if it’s worth a shot for your business. Consider commercial property management services if you are:

• Overextended: If you find it challenging to manage all your workflows effectively, a property manager can help alleviate the workload and ensure proper management across properties.
• Managing a large portfolio: Managing multiple properties can become overwhelming due to their complexities. A property manager can handle the demands of multiple properties efficiently and give each unit the attention it needs.
• Managing day-to-day operations: Property management involves administrative tasks such as lease management, record-keeping, maintenance, vendor management and rent collection. If you prefer to focus on other aspects of your business or simply dislike day-to-day tasks, hiring a professional allows you to delegate those responsibilities.
• Equipped with the budget to outsource these services: Hiring a property manager may be more cost-effective than trying to handle everything yourself. A property manager’s expertise can help maximize your property’s value and income, offsetting the cost of their services.

Costs and Fees

A commercial property management company’s fee generally ranges between 4-12% of a property’s overall monthly rent. In the case of large multi-tenant properties, the property management company may charge a flat rate combined with a percentage of your property’s rental income. The main factors impacting the costs of commercial property management services are:

• Location and size of your property
• Number and types of tenants
• Local property management rates
• Types of services you require

Most companies include rent collection, daily tasks and tenant communications within the basic plan but may charge extra for:

• Marketing
• Lease management
• Lease accounting
• Utility billing
• Invoicing and accounting
• Maintenance and vendor management

It’s crucial to understand the total cost before choosing a property management company. Identify your requirements and clearly understand the vendor’s pricing to see if it serves your purpose and is within your budget.

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Next Steps

Successful commercial property management demands meticulousness, attention to detail, strong communication skills, and a keen understanding of local and federal laws. Depending on your budget and resources, decide if hiring commercial property management companies can boost your revenue or managing operations in-house with software is a better option.

There are various types of commercial property management software that can suit both single landlords and large chains operating across states and countries. To choose the perfect fit for your business, check out our free comparison report that lets you compare the industry’s best software based on custom criteria. So don’t wait, streamline your operations today!

What are some effective strategies you use in your day-to-day business? Are there any specific challenges you faced or overcame? Share your insights and experiences below. We’d love to hear from you!