Nevada’s real estate markets continuing to rebound is great news for commercial property managers, as it translates into more and more work to go around. Property management firms generally have been getting busier over the last one to two years. Avison Young’s team in Las Vegas, for example, now manages 3.4 million square feet for 30 clients. Gaston & Wilkerson Management Group in Reno has grown, too, primarily in managing newly acquired properties for its owners. A sign of the real estate turnaround is the nearly doubling of Nevada’s real estate licensees in the past two years. The number jumped from 24,000 to 40,000, said Joseph (J.D.) Decker, administrator of the Nevada Real Estate Division.
“It’s encouraging. Portfolios can grow now,” said Debra Sinclair, director of property management services for Avison Young in Las Vegas, which opened in 2011.
What it Entails
Commercial property management is “the fiscal and physical management of real estate owned by investors, clients or institutions,” Sinclair said. Among other responsibilities, it involves screening tenants; collecting rent; paying operating expenses; reporting financials and providing operational advice to the client; maintaining the physical property; and building relationships with all property occupants to ensure their needs are met according to the terms of their landlord lease. Public policy, security, safety, risk management and problem solving are all elements that come into play. The job often involves dealing with emergencies and urgent maintenance issues, such as broken windows, malfunctioning sprinkler heads, non-working air conditioning units and the like.
“Commercial management touches on any and everything that impacts the owner and his goals for the property. Today, problems and issues are expected to be solved in hours not days,” said Don Wilkerson, president of Gaston & Wilkerson Management Group, a commercial and residential property management company that opened in 1991.
Owners are savvier, less focused on day-to-day management and more demanding than they were before the economic downturn.
“[Commercial property management] is a lot more service based. People demand a much higher level of service,” said Devon Sansone, co-manager of Sansone Real Estate Services, a Henderson-based commercial leasing, real estate sales and purchasing, and property management and marketing firm.
The primary goal of a commercial manager is to find and execute ways to increase value or maximize returns for clients, which is what they want most, particularly in an environment where costs—water, power, trash, taxes and insurance—continue to rise, said Chris Emanuel, president of and broker with Virtus Companies. By outsourcing trash removal to a company that tracks and audits it, Sinclair was able to save $1,000 a month for a small office park whose tenants pay association fees, a significant savings, she said. Demand is increasing for energy conservation and sustainability as well.
“Management is the backbone. You need it, and you want it strong,” Emanuel said. Virtus, the Las Vegas-based company that he launched in 2008 provides commercial and multi-family property services, including sales, leasing and management.
The cost of commercial management services varies dramatically from one property to the next, as it depends on numerous factors, including property type and size, number of tenants, whether full accounting is requested or not and special requirements. In Northern Nevada, the rate ranges from about 2 to 6 percent of collected rent payments, Jones said. In Southern Nevada, it ranges from 2 to 5 percent, Emanuel said.
“If the percentage goes too far down, then the quality or the frequency of inspections is less; someone is not paying as much attention to the property as often,” Sansone said. “You get what you pay for, but you don’t want to overpay.”
Anyone looking to hire a commercial property manager should, before signing a contract, have the prospective firms visit their property and then prepare a thorough quote for services, Emanuel advised. That quote should include every fee the management company plans to charge because it sometimes happens that the company will quote a low price, say 2 percent of collected rents, but then later add fees here and there, driving up the cost to as high as 8 percent.
In fulfilling the necessary duties, commercial management companies continue to benefit from ongoing technological advancements, said Ron Jones, president/CEO of Nevada Commercial Services Inc., a Reno-based commercial real estate management firm whose workload, too, has increased over the past 12 months. Founded by Jones in 2005, the company manages more than 2 million square feet of combined office, retail and industrial space, and nearly 300,000 acres in commercial associations. So many components are accomplished electronically today through software and apps, such as landlords submitting maintenance requests, tenants paying rent and managers communicating with vendors—all electronically.
“We’re continuing to see the use of technology expand, making us more efficient,” Jones added.
Manager Requirements Numbers
In the Silver State, individuals who manage property for a fee are required to have both a real estate license and a property management permit, Decker said. The state’s Real Estate Division is the regulatory agency that has jurisdiction over all of the sectors of the real estate marketplace and qualifies and regulates all real estate licensees.
Qualifying for the permit requires 24 hours of education, a passing score on the property manager exam that is dated within the previous year and a $40 fee. With that single permit, an individual may manage residential property, commercial property or commercial associations. The latter may apply to, say, a commercial park that contains multiple owners who band together and form an association similar to home owners.
“One owner might use property management firm X to manage their tenants, and another owner might use property management firm Y to manage their tenants, but someone needs to manage the association,” Decker explained of commercial associations.
Property management permits are due for renewal at the same time as the real estate license to which they’re linked. Permit renewal requires at least three hours of continuing education in each two-year period, in addition to the required continuing education hours for the license.
Some talk and momentum are behind the idea of creating a property management permit specifically for commercial management, as the job requirements differ and tend to be more complex than those for residential management. For instance, a commercial lease can be up to 40 pages long where the typical residential one is significantly shorter, Sansone said. Further, managing commercial property also differs from managing commercial associations, the latter requiring board meetings, notices and common interest issues.
“There’s a lot of recognition that there’s a different set of skills, education and experience needed on the commercial side than on the residential side,” Decker said.
Nevada has about 3,200 permitted property managers (commercial and residential), and the number is up from last year, Decker said. Five years ago, there were 2,500. Because there’s only one permit for commercial and residential, it’s impossible to know how many commercial-specific, permitted managers there are in the state.
During the economic downturn, the number of permitted property managers jumped because brokers and realtors turned to property management to supplement their income, Decker said. The trend continues to reverse, however, as real estate activity, particularly sales, has picked up.
“Those firms that added management as a side business seem to be moving away and back toward brokerage,” Wilkerson said. “Those that made it a priority seem to be doing well.”
Decker also attributes the rise to the dramatic increase in the number of people licensed in all of the real estate sectors.
In Southern Nevada, a shortage of qualified, experienced commercial property managers doesn’t exist, said Emanuel.
“We are in hiring mode, and it has been great,” he added.
The opposite is true, however, Jones said, for its northern counterpart, where the labor pool is “shallow” and hiring is a struggle.
“The requirement that managers have a permit limits the people we can hire that can hit the ground running,” Wilkerson said. “We tend to find talented people and help them through the permitting process.”
Today’s Challenges
It’s difficult for Nevada companies to lose market share to out-of-state management firms, which happens, Emanuel said. Also trying is that managers are available around the clock for calls concerning security, fire, safety and tenant issues along with other emergencies, Emanuel said.
Coming out of an economic downturn, it’s not unusual for properties to have been vacant for a while. It’s challenging when a manager initially takes those on, as they often have problems, such as dry piping, insufficient lighting, inadequate landscaping and more, which must be tackled, Sansone said.
Managers must address new and developing issues that relate to property, such as medical marijuana, use of drones and transgendered bathrooms, ensuring safety and security and complying with legislation related to those, experts said.
The trend of declining brick-and-mortar retail due to increased online purchasing is another factor that will impact commercial managers down the line, if not already, Wilkerson said. Changes to office space design—more open areas and smaller private areas, elimination of large computer server rooms—affect property and, thereby, managers. The revisions allow for fitting in more people per square foot, which impacts property components, such as the number of parking spaces and elevator capacity.
“Managers are dealing with a broader range of issues than ever before,” Wilkerson added.
Executives from the firms interviewed all said they expect their industry to stay relatively the same for the next 12 months. They plan, however, to continue to enhance their internal systems, grow their client base and hire additional property managers as needed.
“I expect a very active period of time,” Jones said. “I don’t see any real dramatic changes, just the opportunities for new growth and new people coming to the area. It’s exciting.”
