Commercial Property Management and Agency Survival
Updated: Feb 8
What we learned from the challenges of the COVID-19 pandemic in 2020
As CPMs experiencing the stress of dealing with urgent rent relief requests and trying to reassure clients, while simultaneously striving to maintain a strong and viable agency business, we probably asked ourselves many times, ‘are we there yet?’ and ‘what is our future going to look like?’ To answer these questions, we have to identify the key takeaways from 2020 and what they might contribute to agency viability and the future of the commercial property industry in general.
For me, the key takeaways come from meeting the challenge of a changed working environment. This changed working environment imposed many limits on how we dealt with our landlord, tenant and contractor clients, the working environments we manage as part of our commercial rent rolls, and of course, our own office working environment.
If anything, 2020 has also taught us the importance of a ‘well-balanced’ commercial rent roll. So, what might a well-balanced commercial rent roll look like and why should we make it a feature of our agency?
Identifying and establishing a well-balanced commercial rent roll
One example of an ideal well-balanced commercial rent roll is one that features a range of diverse property types across a variety of locations. My research indicates those agencies experiencing a substantial reduction in income and portfolio asset value during the pandemic were either specialising in one type of property only, or managing a range of property types – such as offices and retail and/or hospitality – but only in one location, for example the Melbourne CBD. To achieve balance, a CPM needs to identify two things:
the exact percentage each property type contributes to agency income
any situation that might expose a property to risk, resulting in lost income or a reduced portfolio asset value for the agency
Measuring & understanding the income each property delivers to the agency
Understanding management income can be difficult. Not all software packages accurately report true income levels, so developing your own customised income reporting system is vital. It can be done easily, using a simple Excel spreadsheet (passworded for asset security) as a master portfolio document. The document should preferably be stored separate to your property management software system. It should be created using only information from lease documentation and updated to reflect rental reviews and changes in property status. This document can provide a snapshot of the percentage of income from all property types in their respective locations, making it a handy comparison tool for easier calculation of income and rent roll asset value. Amounts can also be compared with actual income recorded against management and business accounting systems. A property not pulling its weight in returns for the agency is quickly identified. Additionally, if an agency decides to sell its rent roll, it is very easy to extract the information required to make a sale agreement.
Managing a commercial rent roll means managing people too
A well-balanced rent roll is not exclusively about properties: it is also about people. Unfortunately, both Victorian lockdowns prompted unethical behaviour by some landlords. Rather than tolerate behaviour that was incompatible with my business ethics, our agency used the opportunity presented by the pandemic to move some of these landlords on. While this is a hard call to make because of the substantial income involved, it can be a very worthwhile exercise. Our courage was rewarded with a better class of client, quality properties and a higher volume of management fees, delivering solid benefits to our agency’s bottom line.
The pandemic also forced many CPMs to expand their roles and with that came a dramatically increased workload and level of responsibility. Stable client relationships with landlords, tenants and contractors have been key to helping CPMs adapt to these new roles and responsibilities, helping smoother management, particularly given the constraints of restrictions, which included curfews and travel distance limits.
Perhaps most importantly, it was critical that CPMs learned to manage the expectations of others. In extraordinary situations, like the pandemic, ‘scope creep’ can easily happen and many CPMs were suddenly and unreasonably expected to be legal practitioners, accountants, counsellors, psychiatrists, tax agents and experts in everything possible, (which of course we are not). We needed to remain very clear and steadfast about the scope of our role and the limits of our expertise and direct clients on to the appropriate experts as necessary. Making clients understand that it is illegal for us to offer any advice other than that directly relating to the management of their property should always be a CPM’s first response.
Agency life during a pandemic
But managing the expectations of others also includes the rest of the agency team. I heard horror stories of the treatment of some CPMs and agents by their managers and principals. Lack of respect, lack of valuing, and a disregard for the challenges of an unprecedented working environment were reported. In some areas there was very little support from the usual points of contact for commercial property industry representation and advice, leaving each agency to fend for itself and if successful, to share the knowledge – if you had time to do so that is! As a result, many CPMs have since left the industry. Of those who remain, some have lost the passion they once had – a passion that is vital to enabling success in the commercial property sector.
The challenges of COVID-19 also highlighted deficiencies in many agency property management systems and how imperative it is to have the agency ‘house in order’. Ensuring that information is regularly updated and recorded on all systems is a simple starting point. A system out of date is a system out of control. In an environment as dynamic as the pandemic, being able to control what you can and monitor what you cannot is crucial if you are to ensure the terms of leases continue to be met. When you have some downtime, consider running an audit on all files on all your systems to check the accuracy and consistency of the information available.
In a nutshell …
We have learned from 2020 that a strategic approach to developing a versatile and well-balanced rent roll supported by solid office systems and a confident team dedicated to both clients and agency, is critical to business success and building the resilience essential to helping secure the future of the industry. If your agency has all these in place, yes, you ‘are there’ and if your agency continues to follow these guidelines, the future for the commercial property industry is in good shape.
For training and consultancy for commercial property management and agency management please contact Wendy Thomson – WendyWho? Upskilling for Property People.
Mobile: 0413 134 662
© Wendy Thomson 2021