Property manager can cut landlord expenses

September 25, 2011
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Activity in the property management field has generally picked up since the nearly disastrous year of 2009, at least in some parts of the commercial real estate sectors. But one facet of the market — owners of smaller properties in the metro area — is still waiting for better days. And because of the severe economic crunch those property owners have felt the past two years, they have chosen, by and large, not to use a third party to provide managerial services and are going it alone.

Anne Ficeli, who directs the property management section at Colliers International/Grand Rapids, acknowledged the financial stress these owners have been under but felt they made an unfortunate choice.

“I think now is the time when landlords need to think about how well their properties are being managed, how well their tenants are being taken care of and all of that. And they often don’t think about the impact of not having a professional management firm managing their properties,” said Ficeli, who currently manages about 800,000 square feet of space in the region.

By not using a property manager, which oversees all the landlord’s expenses, one potential impact could negatively affect a building’s bottom line. For instance, Ficeli said her department can provide Colliers’ smaller clients with substantial discounts on just about every expense involved with managing a building because of the number of properties the commercial real estate firm has under contract.

“We get preferred pricing from our vendors because of the volume of services we provide and the volume of properties that we have. So by using us — or probably other third-party managers, as well — we can provide discounts on insurance policies, as we have a master policy that gives anywhere from 30 to 40 percent discounts on their premiums,” she said of liability and property damage coverage, which offers riders for environmental cleanup, damaged equipment and other coverage. The liability policy offered by Colliers has a $15 million umbrella.

“We get discounts on elevator contracts, HVAC, maintenance contracts and snow plowing. We’ve got good discounts because, again, of that volume. There are definitely savings to be had by having a company with a little more buying power,” she added.

Another benefit Ficeli mentioned, which can’t be as easily measured as an insurance discount but could be rated as priceless, is the relationship a property manager can create with an owner’s tenants. “We have 24/7 maintenance services that we provide. We’re on site and making sure that everything is taken care of, doing preventive maintenance and trying to take care of issues before these become issues,” she said.

“Tenants notice those things — tenants notice when a property is being well maintained, and now is the time that landlords need to be focused on tenant retention. It’s not only difficult to replace a tenant; it’s also more expensive to replace one than to retain one. If you’re looking at turning over a space, there is a potential for tenant improvement dollars, other incentives and concessions that landlords are having to give right now.”

Most landlords, regardless of the commercial sector, have been giving tenants concessions for quite a few years. Ficeli, though, said that situation is beginning to stabilize for building owners in the office market, most notably in downtown. She said her firm, which represented 45 Ionia Associates LLC in its purchase of the former Tall House space near the arena earlier this month, was seeing a good amount of leasing and sales activity in the district. She said much of the same was also going on in the metro area’s industrial market.

“Prime industrial space is at a premium right now. So that’s another segment of the market that is doing quite well,” she said.

Ficeli, who served as president of the Building Owners and Managers Association of West Michigan for a few years, said the retail market is a mixed bag. Activity in the well-located retail sectors has picked up some much-needed steam, but the fringe areas aren’t doing quite as well.

“The landlords are starting to see some of those concessions subside a bit. Again, it depends on your property and where it’s located.”

Even though the commercial market hasn’t fully rebounded to its pre-2009 status, the consensus is that most of the sectors are generally doing better now than they were in 2009, and Ficeli would agree.

“Absolutely, the market is better. 2009 was when it hit the commercial side of real estate and that was a very tough year. We saw a significant drop in our sales at the beginning of 2009. In 2011, things are definitely looking up. We’re seeing a lot more activity on both leasing and sales. Banks are lending again, so investors are able to either refinance or purchase new property,” she said.

“The trend is definitely up. I can’t say that we’re necessarily out of the woods, but we’re headed in the right direction. There’s no question about that.”

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