We can all agree on one thing: Increasing asset value is the universal goal of commercial real estate. From an operations perspective, that means optimizing occupancy and rental rate.
But is there really anything a property management team can do to impact those metrics? Or is asset value driven entirely by other factors, like a building’s location or external market conditions?
To put the question another way: Does property management really matter to asset value?
Building Engines recently conducted a comprehensive benchmarking study of over 500 management teams to answer this question, and the answer is a resounding “Yes!”
There are marked differences in how teams at high-performing commercial buildings—those with market-leading occupancy and rental rates—operate.
The State of CRE Operations 2017 report analyzes commercial real estate assets according to their performance in the marketplace. Properties identified as “Leaders” in the report are exceeding the market in both rent and occupancy. “Competitors” are properties with either above-market rent or occupancy. Together, Leaders and Competitors comprise “High Performers,” a group representing just under half the market. The remaining properties—the majority—are characterized as “Laggards.”
It turns out that the teams managing High Performers really do operate differently than their peers. The report identifies many specific operational practices that set these best-in-class operations teams apart. Here are the top five things they do differently:
1) They manage the physical plant with an eye toward the bigger picture
Clean, attractive premises and well-maintained equipment are not enough to differentiate a commercial property, but they are certainly prerequisites. CRE technology that offers pre-scheduled task notification and supports mobile tracking are all but essential to this.
But high-performing management teams look out ahead of these day-to-day challenges to the impact they will have on customers and on asset value. They’re far more proactive than their under-performing peers.
Staff at High Performers are more proactive than their competitors: 63% for Leaders, 55% for Competitors, 39% for Laggards.
They also keep their ear to the ground to make sure they are aware of new technology—like the Internet of Things and machine learning—that can streamline basic maintenance even further.
2) They serve tenants well and document their successes
High-performing management teams are not afraid of demanding tenants because they already hold themselves to exacting standards and have the data to prove they meet those standards.
High Performers are 1.6x more likely than Laggards to track performance against lease (SLAs).
They give tenants access to self-service tools, allow them to track the progress of service requests, and keep the feedback loop open.
They are customer-centric, but also prepared to bring hard data to the lease negotiation table when a tenant broker questions their performance, or to a quarterly meeting with an asset manager. For these teams, confidence comes from an awareness of their performance, proof in the form of data, and trust in the processes they have developed.
3) They communicate well with customers—and the communication flows in both directions
The highest-performing property management teams in our study are those who communicate the most with tenants.
They know that information—from basic property facts, to important messages, to engaging content—is central to delivering a positive workplace experience. This is why they are more likely to use almost every form of tenant communication available to them, from traditional handbooks and newsletters to tenant mobile apps and social media sites.
They also know that hearing back from tenants is vital to successful customer relationship management.
This is all the more important today, with a generation of workers not shy about expressing themselves. Thus, market-leading teams will measure tenant sentiment with every means at their disposal; performance ratings, flash opinion polls, instant surveys, and more.
4) They run efficiently, but focus on impact
Well-run CRE assets deploy resources wisely, investing in technology to automate administrative processes and keeping abreast of operating budgets relative to internal and external benchmarks.
Most critically, they staff with the understanding that effective management teams are driven not by X and O, but by Jenny and Joe—in other words, the roles matter less than the individuals who fill them. Our study found that having a larger team did not necessarily equate to higher performance.
There is essentially no difference between High Performers and Laggards in staffing of general management staff.
As the skillset required of on-site staff continues to expand into technological proficiency, financial acumen, and customer relationship management, talent will be an increasingly high-leverage proposition to impact performance. Learn what 18 traits define the modern CRE property manager.
5) They leverage technology – the right way
One trait that every high-performing team had in our study is reliance on a solid technology platform.
Over 70% of commercial property management teams use an online maintenance schedule notification system and a mobile app for task tracking; over 60% use a mobile app for inspections.
As lean as management teams run today, it would not be possible to measure performance, capture tenant feedback, and report success without a capable service request system. Nor would it be possible to perform class-leading service and preventative maintenance without mobile-enabled technology for engineers and maintenance techs.
Yet, as some of the results of this study show quite clearly, merely using these tools is not enough to be differentiating. To realize true value from technology, property management teams must use them well—by aligning their processes and training to the capabilities these tools provide.
Measurably Better Operations
CRE is in the midst of an operations revolution, with market forces like mobility, densification, and co-working adding new pressures to building management teams to do more with less resourcing. Market-leading teams are defining what “best-in-class” looks like while navigating this revolution, demonstrating that operations matters more than ever. Every property can drive more value from operations by understanding and emulating these practices.