- What is considered a commercial property?
- Job Functions in Commercial Property Management
- How do you find commercial property for lease in Houston?
- What are the typical commercial property management fees?
- What are the types of services you can expect?
- Areas of focus in commercial property management
- Marketing strategies to attract good quality tenants
- A Good Manager Will Always Keep the Owner in the Loop
- Other Resources
Commercial property management is a full-time job that encompasses the day-to-day responsibilities of operating an income producing property. But when it comes to the management of commercial properties specifically, the job can be rather challenging and complex. The manager of a commercial property, whether it is an office complex, retail center, industrial building or medical office building, is responsible for looking after its accounting, cleaning, maintenance and day-to-day operations. Additionally, property management companies are tasked with collection of rents from the tenants, as well as negotiation of lease agreements.
As the largest city in Texas, Houston has an abundance of all types of commercial properties. From the many office buildings located in the Houston Downtown CBD, River Oaks, Galleria-Uptown and Katy area, to the Texas Medical Center, to the many retail developments in the outer suburbs and the many industrial areas scattered around the city, there is no doubt that there will always be a growing demand for commercial property managers in Houston’s diverse market. In the office market alone, Downtown Houston has over 43 million square feet of office space, and uptown Houston has more than 23 million square feet of office space.
What is considered a commercial property?
There are many different types of commercial properties including office buildings, retail centers and shopping malls, medical buildings, industrial buildings and warehouses, and self-storage facilities. Even though residential buildings such as apartment complexes and condominiums are also income producing, they are generally not included in the field of commercial property management as they are managed and leased in a different manner.
Office buildings are primarily intended to hold office space and are typically occupied by a variety of companies and professional organizations. These commercial buildings come in all shapes and sizes and they may contain many different tenants or serve as the office building of a single tenant.
A retail building typically contains tenants that offer shopping, dining or recreation to consumers. There are several different types of retail properties including a retail strip center or shopping center, a retail park or a shopping mall. These commercial buildings can be difficult to manage due to the extra attention needed to cleaning and maintenance.
Medical Office Buildings
Houston is home to more medical office buildings than any other major city in the United States. This is largely due to the fact that Houston is home to the Texas Medical Center, an internationally acclaimed medical district famous for its 49-member institutions. These non-profit organizations provide healthcare and research facilities to a large section of the population. Medical offices in Houston are the backbone of these services. There are many healthcare centers and medical schools in these medical offices throughout all of Houston.
Industrial buildings are meant for clients in industries that involve production of goods. These properties differ from ordinary commercial properties in the sense that they have a clear height of at least 14-16 feet from floor to the ceiling. This clear height can go up to more than 40 feet in the case of very large properties. These high ceilings are needed for the type of work being performed in the buildings.
Self-storage facilities and distribution warehouses are a type of industrial property that have been prevalent in Houston for a long time. Whether it is the healthcare industry, oil and gas, or technology, every industry needs large warehouses for the storage and transportation of its equipment and goods. Large properties in Houston are serving the requirements of these industries by providing warehouses and storage facilities. These facilities typically contain loading docks and large doors for the purpose of moving goods efficiently.
Job Functions in Commercial Property Management
While a lot of people assume that the management of a commercial property is usually the responsibility of an individual who carries the title of Property Manager, it is not true and not possible for a single person considering how much has to be done. There are many professionals involved in the process of the crucial task of managing a commercial property.
Office Leasing Agent
As the name implies, a leasing agent is entrusted with the task of finding good quality tenants for his or her property. These agents closely examine the applications of businesses and professionals and determine their economic feasibility before matching their requirements with available space inside the building. They handle lease agreements with tenants, safeguarding the financial interests of the owner. Many tenants never actually interact with the property owners as these leasing agents perform all of the responsibilities on behalf of the landlord. The average base salary of leasing agents in the United States is around $29,500.
A leasing agent is a very important cog in the wheel of property management and makes the work of a property manager quite easy. They may not be highly visible, but it is because of their skills and experience that the owner of the building is able to earn profits. Much of the success of a commercial building rests on the leasing agent’s shoulders as they work to increase occupancy and ensure that only good, reliable tenants occupy space inside the building. A strong leasing agent always keeps the financial interests of the owner first when drawing up lease agreements with the tenants.
Office Property Manager
When one thinks of a commercial property manager, the images of the professional overseeing the day-to-day operations of the building probably comes to mind. These operations ensure that the building remains neat and clean and maintained in top condition for the tenants and the visitors. An office property manager is also required to collect rents from tenants and negotiate leases with them. However, this task is handed over to the leasing agent if the owner finds the job demanding and complex.
The property manager is the go-to person for all problems faced by the tenants inside a building. The property manager is expected to be number one in the chain of command and it is their responsibility to make sure that all issues get resolved without bothering the property owner. From marketing the property, to attracting high quality tenants, to negotiating lease agreements, to looking after day-to-day operations of the property, a property manager is involved in every step of commercial property management.
When most people think of a building engineer, they likely think of someone who takes part in the design or construction of the basic structure of a building. However, there is also a need for a building engineer to service the building once it is complete and operational. This engineer is an integral part of the management of the building and usually helps in the daily maintenance of air conditioning systems, lighting, plumbing and telecommunications inside the building.
A large commercial building simply cannot operate smoothly without the supervision of at least one building engineer. There is so much to monitor and inspect to make sure that everything runs smoothly on a 24/7 basis. Any interruption in communication links or water supply can easily create mayhem inside a commercial building. It takes years of experience and expertise for a building engineer and his team of electricians, plumbers, and other vendors to ensure smooth and hassle-free amenities inside the building. Without the presence of a building engineer, it can become difficult for a property manager to solve issues on the spot. Building engineers are constantly in high demand in the Houston area to help property managers in managing the affairs of a commercial property.
How do you find commercial property for lease in Houston?
Finding commercial property for lease in Houston is not an easy job if you try to do it on your own. Even though there are always commercial properties available for lease, it is difficult to find the ideal property that matches your requirements perfectly. There are many factors to consider when trying to identify a commercial property for lease in Houston. You must make sure the location is suitable and you also need to make sure the property provides all amenities and facilities needed for your business. Finally, you want the property to be inside your budget to run your business. (Tip: Reading the Houston Business Journal’s commercial property articles will help.)
One way to start your hunt for commercial properties is to look on real estate websites dedicated to commercial properties. There are two real estate sites that are very popular among industrialists and businessmen for acquiring commercial properties. They are LoopNet and Commgate respectively. No matter what the location and the size of the commercial property you need, LoopNet is a one stop solution for all your property needs. You can easily search commercial properties available for sale and lease by using various filters on this website.
Look for a reliable and experienced broker
Another way of finding a perfect commercial property for sale or lease in Houston is to contact a reliable and experienced broker. There are many brokers in Houston specializing in commercial properties. One name that you can completely rely upon is CXRE Group. CXRE Group has years of experience in the brokerage and sales of commercial properties in the Houston area. You can save a lot of your time and effort by hiring the services of CXRE Group. If you just reach out and explain your requirements (location, features needed, budget), they have a team of highly experienced commercial brokers who are seasoned in the Houston market.
Case Study: How we saved a Houston client $3 Million
The Problem: LEED Lease Violations by Property Manager
In early 2008, Panatonni contacted CXRE because they suspected their property management company (the largest property manager in the USA and publicly traded) and its facility maintenance (also the largest in the USA and publicly traded) were not meeting sustainability requirements within the lease provisions. The tenants of the 90% occupied facilities were preparing a clawback process over LEED lease provisions which were not followed by the property management company. CXRE conducted an audit of the 300,000 square feet of LEED facilities and presented our reports to the asset owner. Within 30 days, the original property manager and their facility vendor were removed from the property assignment by the asset owner.
The Solution: Structured Process to LEED Lease Compliance
Once again, the asset owner tapped CXRE’s portfolio of services to bring the facility back within expectations and to interface with the tenants. CXRE began a 6 month process to bring the building back into compliance with LEED and basic EnergyStar standards while working with the tenants to assure them of LEED lease compliance. CXRE provided LEED-compliant facility management services for the owner from 2008-2011 when the asset was disposed to another owner. During this period, we saved the asset owner approximately $450,000 in lease clawbacks by reducing the LEED lease claims of the tenants. In addition, we created an additional $3,000,000 in asset value protection by maintaining tenant satisfaction levels for renewals and increased EnergyStar performance.
CXRE® focuses client resources on providing operationally efficient services. Efficiency is doing only the right things.
CXRE® has been the leader in doing things right through innovative business modeling, reporting and asset maximization.
CXRE® sends our property managers to be trained in remarkable client service at AAA Five Star Resorts.
What are the typical commercial property management fees?
Buying a commercial property to run your business and managing the property are two different but related things. You can find the perfect commercial property in the most ideal location to set up your business and serve your customers, but if you choose to bypass on getting it managed professionally, you will face a lot of difficulties in your day-to-day operations and your investment will suffer greatly. It is essential to hire a property management company to look after the upkeep and maintenance of the property. The success of the property depends on it.
Obviously, the services of a commercial property management company do not come free. Although different companies will charge different fees for their services, the fees of a commercial property management company in Houston normally vary from 2-20% of the gross income. There are no standard or set fees. There are many factors affecting the fee charged by a management company.
- Location of the property
- Type and scope of services provided
- Condition of the property
- Nature of industry
- Experience and reputation of the management company
On paper, spending 2-20% of your income for the management of a commercial property looks ridiculous, but when you take a step back and look at the types of services provided by property management companies, you will realize that you are still benefiting from such a partnership. By hiring the services of a reliable and experienced property management company, you can be free from all worries of the cleaning, maintenance and tenant-related issues of the building, depending on what you want from the company. It is always a good idea to have everything written in black and white in the contract with the commercial property management company. You will want to be able to refer to that contract if a service is not being provided by the company.
What are the types of services you can expect?
Unlike residential properties, commercial property management is not all about the upkeep and maintenance of your property. In almost all cases, you are buying commercial property to earn profits. A commercial property management company understands this and aims to maximize your income from your property. Cleaning and maintenance are the by-products that you get as a bonus when you tie up with a commercial property management company in Houston. What is more, the property manager will also negotiate leases with your tenants to make sure that you keep getting higher rents from your property.
To be able to provide high quality services, commercial property manager requires the right kind of supplies. There are some management companies that arrange the supplies themselves, but you should be ready to provide the supplies as and when demanded by your property manager. These supplies include the following things.
Supplies of maintenance tools
Tools at different locations inside and outside the property are a basic requirement of property management companies. These tools pertain to maintenance of different systems such as landscaping, plumbing, electrical work, carpentry work, and other works depending upon the nature of the industry and property.
Supplies of signs
Signs are one of the the primary requirements of any commercial property management company. Large “For Lease” signs are often required to advertise available space in the building. Other signage is needed to regulate parking, ensure safety of visitors, prohibit smoking inside the property, guide waste disposal, and inform about office hours.
Supplies for leasing
Leasing is a tough task that often requires a lot of paperwork. A commercial property management company needs not only normal office supplies but also all legal forms to formally carry out leasing agreement with the tenants. They also need renewal forms, check-in and check-out lists, printouts to welcome new tenants, and the key organizer.
It is important for the property manager and the owner of the building to discuss who is responsible for the supply of these items. Typically, the owner will be asked to pay for these supplies. Most property management companies add up all of the expenses incurred on supplies in their monthly list of expenses.
Areas of focus in commercial property management
For those who are unfamiliar with commercial property management, here is a brief introduction to the key areas of focus for the benefit of those interested in hiring the services of a professional property management company.
Brilliant property marketing
For investors who own a property for the purpose of earning an income, marketing is a key factor in improving the value of the investment. Houston is a hub of diverse economic activities in Texas which means there are constantly many different businesses looking for space in the market, whether it be office, retail, medical or industrial. So no matter what type of property you own in Houston, there will always be businesses to market to. That said, you must market your property in an aggressive manner to catch the attention of these companies. A good commercial property management company will quickly and easily market your property for you. They will advertise and promote your property in a creative manner and find quality tenants to lease space in your property. Successful commercial property managers have connections in all industries to see that units of their owners are rented easily. They have many online and offline marketing strategies to help you in your objective of high occupancy through quality tenants.
Compliance with regulations
Compliance is a very important aspect of commercial properties. The city of Houston and its surrounding cities have their own local rules and building codes for commercial properties that need to be followed by owners. Whether it is a single-tenant or multi-tenant building, a building owner can face serious consequences if there is any violation of these rules and codes. Most of the time a building owner can breathe easy if they have a professional property management company in place, as it is their job to keep an eye on all recent changes in regulations. They make sure there is no violation of rules and codes by any of your tenants. If you try to manage a building yourself, you might get too busy with other things and it is easy to overlook violations of codes and rules. Your property management company prevents these violations that can cost you a hefty penny in fines.
Budgeting and payment of property taxes
Too often owners of commercial properties in Houston are paying more in property taxes than they should to the authorities. This usually happens because of ignorance and little knowledge about exemptions and abatements. Commercial property management companies have experts that know about all rules and regulations regarding taxation and exemptions. They help the owners save some of their hard-earned money by making use of exemptions available to him. Being local in Houston, they will also likely have a relationship with tax assessors. Your property manager will not only file your taxes but also appeal if they find any errors in your assessments.
A good quality of an effective property manager is their shrewdness with expenses. They know how to keep day-to-day and monthly expenses down to a minimum to help increase the owner’s profits from the property. They will continuously keep a close eye on the owner’s income and expenses and work hard to reduce these expenses.
Keeping tenants happy
As an owner, you might be surprised at the ability of your property manager to keep your tenants happy and satisfied. You wonder at times how they manage this considering they charge higher rents and place many restrictions on tenants. But the secret often lies in their training and experience in handling tenants of all types. They will find good tenants and negotiate lease agreements with them, keeping your financial interests in mind. They will collect rents from tenants regularly and see to it that rents are paid on time.
Property managers also know how to deal with erring tenants. They know how to communicate displeasure as well as send notices to them when required. They know how to evict a tenant if he is violating the terms of the lease or not paying rent on time.
Building Safety inspections
One important aspect of property management in commercial properties is the safety of your property. Property managers never forget to carry out routine safety inspections to make sure your property is safe and not being damaged by any of your tenants. As an owner, you are able to save a lot of money on undue repairs with the help of these safety inspections.
Skillful negotiations of lease agreements
As an owner, having a commercial property manager by your side is like having a partner or right hand man who handles many responsibilities for you. Your property manager will prioritize tasks and then execute them on your behalf. From marketing and selecting tenants to negotiating lease agreements with them, a property manager makes life easy for you. One thing to keep in mind is that leases with tenants in a commercial property are typically for much longer time periods than leases in residential properties. Often there are built in renewals in these lease agreements, as well as automatic rent increases. You need the experience and negotiation skills of a professional property manager to work with your office leasing agent handle lease negotiations with your tenants.
Marketing strategies to attract good quality tenants
The real work of a property manager starts far before negotiations for lease agreements are carried out. To reach that stage, your property needs creative and aggressive marketing and promotion. A professional property management company in Houston will greatly help you in this endeavor. Your property manager will see to it that your property is advertised through various offline and online channels. Truth be known, commercial property managers spend more time and energy during the initial stages of preparing the property than when after tenants have settled in your property.
One responsibility that is easy to overlook is that of keeping financial records. Budgeting is an integral part of the duties of a commercial property manager as they are responsible to earn you profits. They will maintain accurate and updated financial records to keep you apprised of all the income and expenses. They will ensure that all taxes and insurance premiums are paid on time, and also see to it that your mortgage payments are deposited in the bank account before the due date.
A Good Manager Will Always Keep the Owner in the Loop
Property managers are required to send regular reports to the owner of the property about occupancy, rent collection, and all the expenses that are incurred for the upkeep and maintenance of the property. In their regular meetings with the landlord, they not only give all the important records but also discuss the performance of the property and ways of improving it.
No matter what angle you look at it, a reliable and experienced property manager is an asset for you as the owner of a commercial property. Yes, they charge a fee for their services, but they deliver so much to you that you can consider them as a priceless partner for your business or investment.
If you are an investor too busy to look after your commercial property in Houston, it is time you hired the services of one of your local, experienced property management companies.