Industry FocusProperty Management

 

No industry is more involved in the daily running of a building than property management. From dealing with a homeless population to municipalities and tenant renewals, property managers are experts at handling a variety of issues that can arise. Recently, industry leaders met at the Las Vegas offices of City National Bank to discuss commercial real estate and the changes they’re seeing.

Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. The magazine’s monthly roundtables bring together industry leaders to discuss relevant issues and solutions.

What is Happening in your Industry?

Chris Jackson: [There’s] skepticism in the market. I’m seeing that people are [cautious] in residential, they think that rates are gonna go up. They think the stock market’s been on a run and [another recession] is coming. There’s fear from a bad recession and if we are going to have another crash. I’m seeing that integrate it’s way into decisions and into property management as well.

Christopher McGarey: One interesting fact I learned when I was president of the IREM (Institute of Real Estate) chapter here is, on the national average, for most people in property management, that’s not what they thought they were going to be when they grew up. We’ve done a lot of stuff at the college level to try and get people interested [in the industry]. I didn’t go to college to be in property management, yet I’ve done it for 30 years.

Darbie Adams: [In regards] to staffing, it is an aging group for the most part. Trying to pull in a younger generation of property managers or prospective property managers [is a challenge].

What’s the Biggest Challenge with Staffing?

Jennifer Henderson: One of our biggest challenges is intellectual capital, just on the people side. Once you do have a great group of people it’s also [a challenge] keeping them motivated and on track, moving up in their careers. And, it doesn’t happen as quickly as some people might expect it to happen. The biggest thing is finding and retaining talent within the industry because there has been a lot of moving parts in the last couple years.

Adams: When I’m hiring someone, I’m more concerned about their personality and their willingness to put forth the effort. Ninety percent of what they’re going to do, you’re going to have to train them to do.

Meghan Levy: Having been in this industry for a while, I’ve worked with some great people that were technically skilled, but working with that person day in and day out was not a pleasant experience. Those people don’t belong in this industry. They should work in a field where they don’t have to deal with the public. Property management isn’t necessarily a job that people train for. A lot of people just fall into it. It takes a very special person to be successful in the property management world.

What Kind of Training and Education is Available?

Adams: In terms of commercial property management and commercial real estate as a whole, there’s not a lot of great education and oversight in our industry. It’s almost like you just kind of jump in and do it. If you take any education classes they tend to be focused on more of a residential basis, unless you can get a few of the industry groups to actually offer education classes. Most of them don’t apply to us so you figure it out as you go along.

Levy: There are several [programs] that are really excellent education, like certified property manager certification through IREM, the Institute of Real Estate Management.

Adams: But usually those (training programs) come in later in a career. They’re not cheap, and if a company is going to provide some assistance to pay for it, they want to see someone who’s had some longevity that’s gonna bring a benefit. It’s not necessarily an industry standard the way things are done. If I was to hire someone that used to work for [another firm], it’s almost like you’re training them over, everyone does everything so differently.

Jackson: From a new property manager’s standpoint, it takes time [for them to get up and running]. Three to five years is very normal. There’s so many variances with different product types, different portfolios and then you have the market changing, every year it changes. As professionals, we’ve got to keep the fundamentals intact. Then you’ve got to keep up with the changes. [It can take] three to five years just for very general proficiency. Everyone here, we learn every single day, even at this point. When you’re a 20 year vet you’re going to continue to learn. You will change, you will deal with change. Change is part of our profession.

How Does the Homeless Population Affect Property Management?

McGarey: The homeless has definitely been a huge issue. We spend a lot more time on property maintenance and property management issues now because of the extreme amount of homelessness.

Henderson: We’re seeing it across the valley. It’s becoming pretty cost in-effective for our owners because we’re having to build fenced areas around industrial parks and office buildings. The retail centers are open game and we’re seeing a lot of [homeless people there].

Levy: We’ve used remotely monitored video surveillance, which can be somewhat expensive to install and there’s usually a monthly monitoring cost. But, it has a feature where a guard can speak to somebody and say, “Hey you in the blue shirt, state your business.” That works. We can also go back to roving patrols. In any case, it just makes it more expensive to operate your commercial property.

Sharon Sevigny: Some of the properties that I manage are closer to the 15 that’s under construction and a lot of the homeless lived under the old overpasses in different areas. They were forced out so they have no place to go. At three of our properties we’ve hired security guards, for 16 to 20 hours a day, to keep the homeless away. Customers are afraid so tenants are losing business and they call us to fix it.

Henderson: You see it less in office. In my experience, retail and industrial is where we’re seeing the majority of it.

Patricia Beyer: I’ve experienced it in office at Lake Mead and Boulder Hwy. They get in through the riser room during open hours. They hide in the bathrooms and elevators. You almost have to put the buildings on lock down now.

McGarey: It’s not specific to any one area. It is more prevalent where there’s food. It is more prevalent where there’s higher traffic so if they’re panhandling they can do that at intersections. We’ve seen probably three times the number of calls per week, if not more, of tenants calling and saying, “They’re not moving. You need to come by here and have them move on.” It’s definitely increased over the last couple of years.

Do Clients Understand your Fee Structure?

Henderson: There’s something that never really made sense to me, and it’s an education to the ownership in a lot of ways. Unless there’s something within the lease agreements that say a certain amount of money is not recoverable, those fees are all recoverable. When we’re increasing our fees, the impact on an annual basis could be one cent to the overall impact. My goal is to educate owners and say, “We can do it for less, but if we do it for less you’re not going to get the same quality service. If we increase that fee by ‘X’ amount, it’s going to add one penny to the recoverable, which you’ll get back at the end of the year. There’s no money out of pocket.” It’s a shift in saying, there are going to be caps on certain things that they’re not going to recover 100 percent on some properties. It’s important to educate owners that it really isn’t money out of their pocket because, for the most part, it is all going to be recoverable at some point.

Adams: That depends on how occupied a building is.

Levy: If it’s 50 percent occupied, then the owners pick up half that cost. For our management fee, we really have three buckets. We have how much we pay our people, how much we have to pay for accounting, because that’s a cost, and then how much profit we want to make. That’s why it can be more expensive to manage a vacant building. You have to tour the property more. You have to be there more to make sure it doesn’t have a sprinkler leak that ends up destroying the whole building. That’s why it might cost more. You can put something in place, like video surveillance around the building, but it’s hard to convince a client with a higher percent vacant building to spend more money.

McGarey: Vacant units don’t pay rent and they certainly don’t contribute towards the operating expenses of the property. The owner is losing rent and they’re losing a portion now. In theory, is the trash cheaper when it’s only a half full shopping center? Not really. You still need to cut down on the number of services and so forth. With vacant spaces, the owner has to, obviously, cover the cost of the operations. You still need to sweep the parking lot, clean the windows and do landscap – ing. Vacant units puts a lot of pressure on the owner, financially, to cover the oper – ating cost.

Levy: And the top expenses in any commercial building are your property taxes, insurance and utilities. There’s not a lot you can do. Whether a building is 20 per – cent occupied or 80 percent, your prop – erty taxes are usually gonna be about the same. We try to work in the small area that we can control, which is maybe 40 percent of the total expense load.

What’s the Difference Between Resident and Commercial Property Management?

Beyer: We just took on two commercial properties from a residential property manager, and our clients don’t understand why it was done so differently and it’s very challenging to educate them on how different residential and commercial is.

McGarey: Commercial is at more of a bottom line, it’s a black and white number. There’s a lot less emotions. Certain product types have a little bit more emotion involved, typically office where there’s people in place 10 to 15 hours a day. If the lights are out, it’s an issue. If there’s a homeless person in the bathroom, that’s even more of an issue. Typically on residential, you’re dealing with where people sleep, live, eat and have their downtime. So, when there’s a management issue, it’s a big issue.

Is Working with Different Municipalities an Issue?

Sevigny: Sometimes working with the city and other municipalities [is a challenge]. They don’t always make it easy for the little guy to do business. Each time you go [to talk to a municipality], you get a different person at the window, you’re going to get a whole different situation. And you have to start over again with what you’re doing. Even your connections these days, they don’t help either.

Adams: We’ll have someone come out and do a fire inspection and then someone else will come out and do the final inspection, but now they want it all different because the way that they interpret the fire requirements are gonna be completely different. So you kind of say, “Can I pick and choose who I have come out because this person is very stringent but this person is a lot more common sense.”

Levy: And you get someone that has their interpretation, they will keep coming back to you and eventually it will wear you down. [It may be] $10,000 to put in a drain, we shouldn’t have to do it, but we will just to make it stop because it eats up your time. They have nothing but time because that’s what they do. They have a certain area, they drive it, it takes no time at all to write a little citation.

How Has Technology Impacted your Business?

Adams: Technology is interesting. In some regards we do the same things we’ve always done. But then you have owners who come in and they have different technology. There’s a lot of technology out there, but the cost to implement it across the board is not always the best. You’ll have different owners that come in with different technology that they want you to use. They have app work order systems where the tenants put a work order in an app and then your maintenance guys need to now be taught and be savvy enough to do all their paperwork on this app. Whereas before, our maintenance guys would just write up their work orders and give it to someone in the office who would take care of all the paperwork associated with that. There’s definitely some great movement in technology, I don’t know that it changes the overall bottom line of what we do and how we do it, it’s just maybe a process of change.

Levy: You know, I feel like it might change a little bit because, instead of just writing out an inspection report, you can take photos to document, which helps. It is a lot more convincing [when you have a photo] Our clients have been successful in winning lawsuits because we were able to provide photo documentation. The technology is great. We don’t see as much time savings because you still have to move those pictures over.

McGarey: I’m old school a little bit, I love paper and I realize that’s not where we’re at anymore. The challenge that we have is everybody’s emailing, faxing or texting invoices these days. So our team has to take the time to either go pick up a fax or print it out. That’s a cost on our copier. And, I find that we’re spending more time looking for the things than we ordinarily would’ve done if you dropped it in the mail and let it go through the system of us opening it.

Henderson: The other challenge too is, you could have ten owners with ten different platforms. So your manager is having to learn every platform. It is challenging to keep up with all that and it becomes a juggling act. That’s a big stressor for managers, the amount of crossover. It’s not like you go in and we have this platform we use and everybody learns it and is an expert.

Beyer: It’s challenging when we come into the office every morning, trying to accomplish everything we need to accomplish. But, I feel that at the end of the day we do make an impact on our community and those are some of the items we really need to focus on.