Engaging the wrong commercial property manager can have significant financial and compliance impacts for investors.
Some private investors take a DIY approach to the management of their assets in an attempt to save money. Some others enlist the manager of their residential portfolio to look after their strip retail shopfront, warehouse or office buildings for the sake of convenience.
Realistically, not engaging an experienced commercial property manager can cost investors far more than a professional fee. The stakes are higher, the compliance obligations are stricter, and the financial consequences of getting it wrong can be severe.
In many instances, the wrong property manager exposes commercial property investors to tens of thousands of dollars every year.
Ensuring leases offer protection
Commercial leases are bespoke contracts and should strike a balance between the needs of the owner and tenant.
At Bromley Real Estate, our leasing agents and commercial property managers work closely together in the formulation of a lease’s particulars. Collaboration sets in place a sustainable, ongoing leasing arrangement.
Leases should dictate everything from outgoings and fit-out responsibilities to make-good clauses and rent reviews.
Commercial leases typically allow landlords to recover certain expenses – such as council rates, insurance, maintenance costs – from tenants. Inexperienced managers and DIY investors often miscalculate or underclaim outgoings, leaving money on the table or triggering disputes.
Mitigating risks for investors
An experienced commercial property manager is abreast of property and sector-specific legislation and how it evolves. Whether it is updates to essential safety measures, fire compliance, or building code obligations, a professional will mitigate all risks for their investor.
Relying on a generalist or residential manager to navigate this terrain is a gamble; one that could expose you to regulatory fines, insurance complications or even legal disputes. There is a lot more involved in managing a freestanding warehouse in Richlands compared to managing a townhouse in Morningside.
With commercial properties, the property manager oversees a place of work. As such, the Workplace Health and Safety Act comes into play. Liabilities and knowledge of this Act are a far cry and unrelated to managing assets under The Residential Tenancy Act.
Commercial assets are income-generating investments. Having an asset sit vacant for an extended period or allowing the tenant to break the lease because of a poorly-negotiated contract will negatively impact returns.
An experienced commercial manager proactively builds networks, works closely with their local leasing agents to understand suburb and regional demand drivers, and can provide expert guidance on whether repositioning an asset could attract the right tenants at the right time.
Experience also enables specialists to factor in market rent escalations, options for renewal and appropriate security.
Conversely, inexperience leads to ad hoc negotiations, missed rental uplift opportunities and unreliable tenants.
Understanding maintenance schedules
Commercial and residential properties are chalk and cheese when it comes to maintenance schedules.
Commercial properties have different wear-and-tear patterns and service obligations.
What would happen if an air conditioning unit broke down in a Murrarie takeaway shop at the height of summer, or a malfunctioning roller door exposed a factory floor in Yatala over the Easter long weekend? The tenants would be understandably angry and could explore ways to find the owner in breach of their lease obligations.
A professional commercial manager works with trusted contractors, ensures preventative maintenance schedules are in place, and oversees capital works in a way that preserves asset value while maintaining tenant satisfaction.
Failure to enforce tenant insurance obligations, update building valuations, or meet compliance standards can invalidate landlord insurance, exposing the owner to large out-of-pocket expenses in the event of damage or liability claims.
Peace of mind in managing your asset
Commercial property investors are commonly business owners or high net worth investors who have multiple commitments. They’re time poor.
Having a specialist commercial property manager offers investors peace of mind so the owner can focus on their other interests.
A specialist – not a generalist property manager – will also ensure investors are maximising their returns without fear of being caught out with legal issues.