Add Value to Your Commercial Investment Property

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Sara Townsley

Add Value to Your Commercial Investment Property

How does Increased Occupancy, Increased Revenue, and quality Proactive Maintenance Management sound?

I’m sure the response is, Sounds Great! But, how can I get all that and keep my sanity at the same time? Bottom line is – it’s hard to achieve without a little help.

I’d like to share a story with you; we’ll call it a Case Study in Commercial Property Management. In this case study, I’ll show you how Sterling Commercial Management Group took on the management of a 31,000 square foot building in Missoula and with careful and thoughtful planning, we were able to directly impact the overall value of the property by focusing on the three goals I mentioned above. Here is how we did it.

So, to begin… in November of last year Sterling CMG was hired to manage a 31,000 square foot commercial office building in Missoula. The building came with a 9.3% vacancy rate (based on vacant leasable square footage) and a long list of deferred maintenance projects. The organization that owned the building had an individual “managing” the building who spent a significant portion of their time overseeing rent collections and maintenance projects in addition to filling vacancies and preparing lease paperwork. This individual did not have a background in property management or leasing and lacked the resources typically available to property management companies. It was at this time that they retained Sterling CMG to take over daily operations of their building. To be successful, Sterling CMG focused on three things: Increase Occupancy, Increase Revenue, and Manage Maintenance more effectively.

Increase Occupancy

First off, Sterling CMG provided an on-site employee two days per week due to the size of the building, the number of tenants (24 different tenants at the time), and the amount of maintenance work needed. This frequency of on-site presence allowed Sterling CMG to fully understand the building’s and the tenants’ needs. Tenants knew that a member of our property management team was always readily available to them and because there was a weekly in-person contact, relationships became stronger between us. Knowing and understanding each company’s short- and long-term goals helped seven different companies expand within the building. Those seven companies outgrew their space but because we were aware of their needs, we were able to help them expand on-site instead of having them move elsewhere. In turn, we were then able to secure new tenants quicker for the vacancies that occurred. Although leases for this building are typically 12 months, Sterling CMG has facilitated renewals for 16 of the 24 original tenants by being on-site and available. In the past 11 months, occupancy has increased to 100%. The building now hosts 28 Missoula-based companies.

Increase Revenue

In 2018, the building’s market values were reassessed for the first time in years. This re-evaluation of rents exposed that almost every tenant was paying far less than fair market value. As tenants have renewed their leases, rents have been increased to close the gap between market rent and actual rent. Because there is now an on-site member of the management team, tenants are seeing the value of staying and rent increases are being perceived with positivity. Increasing rents isn’t the only way this building has seen increased revenue. Sterling CMG noticed that office space was in high demand and in low supply; and, that one tenant was using office space as storage simply because there was no storage available. Upon further inspection, the on-site manager found multiple cluttered and disorganized storage rooms within the building that were historically used as storage for the building but had never been available to tenants to lease. After spending just half a day reorganizing, a rentable storage room was cleared out and made available for the tenant in need. The office space that was used for storage was turned back into an office and rented that same day. Currently, plans are in place to change another larger, unused space into rentable office space in order to generate additional revenue. In twelve months, this property has seen an 18% increase in monthly revenue.

Proactive Maintenance Management

As mentioned earlier, there were many maintenance issues in this building that had been overlooked for years. Sterling CMG’s Facilities Director was able to quickly identify and prioritize maintenance concerns and implement a preventative maintenance plan to help prolong the life of all the building systems. For example, the existing building systems have been automated so that when issues arise, a member of management becomes aware and is often already working towards a solution before a tenant notifies the property manager something is wrong. Response times and resolutions are faster now that building systems can be monitored remotely, and alerts are automated. With negotiated pricing from vendors, CMG can also provide quality work for less than expected. The additional revenue this building is experiencing has also made it possible to get the overdue maintenance completed. Repairs are no longer being postponed because of lack of funding. Longer term tenants have expressed their satisfaction with the promptness and professionalism of these maintenance issues. Tenant improvement projects are also being managed by CMG’s Facilities Director and the on-site Property Manager. These projects have strict oversight with long-term building benefits in mind.

The result? Success!

While self-managing a property is possible, a commercial property management team has the knowledge and resources available to effectively manage tenants and increase revenue. They offer a well-thought-out marketing plan for your property and build relationships with tenants that lead to higher renewal rates and decreased vacancy. A commercial property management company also has experience with commercial tenant improvements and more complicated building systems unlike most residential property management companies. Well maintained properties appear more professional and increase tenant satisfaction. By hiring Sterling CMG to manage this property, the owner not only saved on payroll (think: salary, benefits, payroll taxes), but also increased rents and occupancy resulting in an 18% increase in revenue in just twelve months. The increased revenue also led to the completion of multiple maintenance projects. Tenants are happy, and the building is full!

So, when it comes to managing commercial property, not only must you formulate a plan of action to increase efficiency and efficacy of the day-to-day, but management must also include the ‘big-picture’ goal of increasing the value of the property. This can only equate to one thing… higher return on investment – to you. The owner.

Jessica Morina

Contact Jessica Morina with Sterling Commercial Property Group (Sterling CMG) for more information about the services offered to manage your commercial investment property.

By working with our sister company, Sterling CRE Advisors, we offer our clients a collaborative advantage like no other. While our management company provides your asset with the highest quality care, both financially and physically, our brokerage firm works diligently to lease each space. With our knowledge of real estate, our commitment to customer service, and our innovative marketing plans, the Sterling CMG team continues to redefine excellence.

Matt Mellott
Matt Mellott, CCIM/SIOR

Add Value to Your Commercial Investment Property