Commercial Property Managers – What Skills Do They Need and Why?

In commercial real estate agency, the property management division is a key part of the agency performance. In real terms the successful division can bring in significant and stable income to the agency on a regular monthly basis. That being said, a good commercial or retail property manager is highly skilled and should be selected for the property management role based on key performance criteria and hands on experience.

Far too many real estate agencies have average or poor performing property managers. In real terms this is a real threat to the stability of the division income, and the quality of the service provided to the landlords. Unskilled property managers do not last in commercial or retail property; it’s that simple.

Cadets and Training Processes

There is a place for ‘cadets’ that learn the roles and the skills of complex property management. The process itself takes a couple of years during which time the person should be exposed to all property types and situations under the guidance of an experienced manager.

So what does a good commercial or retail property manager look like and what skills will they have? To a large degree they will need to bring to you as agency principal, the skills needed for the managed property type and local area.

If the property manager does not know much about managing the required property type, then do not let them manage it; the errors made can destroy your relationship with the landlord and ultimately the management appointment.

Different Skill Sets

There is a large difference in management style and skill required between retail, office, and industrial property; industrial property being the easiest to manage and retail being the most intense and difficult. The skills required in a retail property manager is diverse and deep; they are the best in the industry.

Generally speaking, retail shopping centre managers today are also the busiest in the industry. The role is very hands on and unrelenting in intensity. Here are some core skills of a well skilled and placed property manager:

The ability to read and understand leases and occupancy documentation for all property types.

The marketing of the property to the local community and customers will be a factor that is critical to retail property. It this way sales are encouraged for the tenants; this underpins the rental for the landlord.

Sound skills in financial analysis and reconciliation so a property performance tracking process can be set up for all managed properties.

Good communication skills are essential. Property managers must be accurate, confident, and decisive, in keeping with laws, legislation, and the instructions of the clients that they act for.

Attention to detail is required in all property negotiations and tenancy matters. Without good records and accurate information, the ‘wheels fall off’ the division and its services. Landlords soon see through mistakes and inaccuracy.

Marketing of vacancies happens all the time in larger properties; importantly the frequency of vacant space is minimised and the times without a tenant are lessened.

Income optimisation and expenditure controls are at the centre of property financial performance. The manager must know what is happening and why in all managed properties, when it comes to the cash flow and reporting to the landlord.

All reporting processes and communications to the landlords we act for today must be detailed and accurate. Property compliance and maintenance, energy consumption, lease and vacancy matters, tenant and landlord lease covenants, outgoings performance, and environmental matters are just some of the factors that are controlled and reported on each month.

Computer technology needs are increasing in the available property performance and management systems today. The property manager must be familiar with, and comfortable learning more about all the software and computer based technology that is used in the industry.

Work hard and with focus each and every day. The hours that a manager will put in the job are long and intense; however they are the experts and should recognise the value that they bring to the job.

Maintenance decisions and controls are made daily and should encompass the instructions of the client and the laws of property ownership and function. The manager needs to know what is required and should competently handle the decisions and communications with contractors, tenants, landlords, and fellow employees.
So how do you find one of these highly skilled people? They are out there and should be carefully sourced. They will be an asset to your agency function and performance.

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Advanced Thinking Concepts for Investing in a Property Management Firm in Uganda

As the Ugandan economy continues developing, the property market will grow. Many of the property sector investors however will probably not have time to manage the properties themselves on a day to day basis. They will increasingly rely on property management firms.

Before considering property management in Uganda as an investment option, the investor needs to however be aware of the following:

THE CONS

1. Legal hurdles.

You should be aware that in Uganda, owing to the poor land tenure system, combined with administrative inefficiencies and corruption, property purchase and construction is often fraught with legal difficulties. It is not uncommon for individuals to obtain illegal planning permits for construction of properties in say gazetted zones like wetlands and forest reserves. Subsequently rectifying this irregularity has often resulted in long drawn out legal processes and the owner and thus the property manager often lose revenues during the non occupancy of the disputed property.

2. Reputation.

Property management firms like any other businesses need to exhibit a high degree of integrity for potential clients to handover the properties. In Uganda there have been some high-profile court cases involving property managers, including one of a leading property management firm whose managing director conned a potential purchaser of advance monies paid. There was a significant reputation loss. If you are considering investing in this sector, you should therefore ensure you maintain the high standards of professional ethics such as separating client and office monies as well as maintaining good accounting records, otherwise your reputation can easily be dented.

3. The property market bubble.

Whilst the global credit crisis continues depressing property values in places such as the USA and the UK, In Uganda this is not particularly being felt for a myriad of reasons. In the commercial sector, malls and shopping centres continue to spring up in the capital city Kampala and its suburbs to cater for the growing middle class and increasing population as a result of rural- urban migration which is currently estimated at 3%-5% per annum.

In the residential sector owing to a general shortage of housing there is always demand for property and as such the property values continue to rise. The shortage of housing is primarily because just like many cities across sub Saharan Africa, rural-urban migration to Kampala has resulted in significant population growth not matched by construction and thus causing a shortage of housing, particularly for the low and middle level income earners.

The main risk of the property bubble in Uganda would arise from political instability which would lead to collapse of the sector.

4. Competition

The competition for property management in this sector is as follows:

At the top end of the market are international property management firm affiliates like Knight Frank. In addition there are ISO certified companies like Amalgamated Property Consultants (APS) as well as large and reputable property management companies such as Crane Management services which is under the Ruparelia Group of companies.

At the lower end of the market are property brokers who also double as property managers for their clients. These typically cater for low-income earners’ housing.

In my model, I advocate that the property management investor will need to develop their niche as follows:

1) A firm that is an affiliate or franchise holder of an international property management firm. In Uganda, as far as I know, international property management firms like CBRE and Colliers have no local representation except for Knight Frank. There is therefore an opportunity for the investor to ensure that their firm gets affiliation to these international firms. This will give them instant brand recognition and the perceived quality and reputation already associated with the international firms. In addition they will benefit from the referrals if clients of the international firm seek a local representative in Uganda. I can expect that this affiliation has contributed to the success of Knight Frank Uganda.

2) A firm that has some brokers on its payroll. Brokers in Uganda tend to act independent of any firm, are semi illiterate and lack sufficient working capital to deal with potential clients.If the firm therefore guarantees them a daily allowance say of shs. 10,000 to cater for meals, transport and communication for their activities, they are likely to refer future business to the firm, particularly if they are unable to handle it themselves.

THE PROS

Excellent return on capital

In my model I expect that the investment will be returned in about 6 months. The reason for this is manifold:

a) The property manager’s advertising will emphasise property management as their core business. This is such that the firm can develop inside knowledge of the sector as well as establish itself as a reputable leader in the sector. When they have developed a good reputation, clients can then entrust them with property sales, which tend to be more lucrative than property management.The property management side is therefore in business terms called the “loss leader”.

b) A significant part of the marketing budget will go to the brokers rather than traditional avenues of marketing like TV and newspaper advertisements. This is because the Ugandan real estate sector is highly informal and as such a significant portion of the illiterate/semi illiterate but wealthy persons will usually revert to the brokers who just like them are often illiterate/semi illiterate. It therefore becomes critical to have these brokers as a linkage to such clientele.

In my model, I expect returns will be as below:

Capital Investment(A): Shs 35, 149, 155

Profit per year (B): Shs. 58,803,380

Return on Investment/Capital (years to get capital back) (A/B): 0.6 years

FINAL WORD

The basics you must get right before investing:

1. Property management software. You must invest in good software to provide you with real-time client accounts and reporting. This will give the client the assurance as to your integrity. I cannot recommend a particular software but a Google search should yield one.

2. Maintain a good contact data base. Property management requires liaison with several bodies including city council authorities, land authorities, utility suppliers, repairs and maintenance personnel, lawyers and brokers. I expect that a good property management software system will have a robust Database Management System at its heart. I will reiterate, include a good lawyer and accountant on this contact database.

3. Become an affiliate of an international property management firm. If you cannot afford one with an international firm such as CBRE or Colliers then go for a locally reputable firm like APS.

For over 8 years I have worked with several clients providing audit, accounts, tax and advisory in sectors ranging from agriculture, mining, entertainment, financial services and technology. My client portfolio in Uganda, The Bahamas and The Channel Islands, United Kingdom has equally been diverse and this experience has given me a “well rounded” view of business including several clients in the Real Estate/Property market.

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