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FEATURE ARTICLE, JULY 2006
FROM INNKEEPER TO ASSET MANAGER
The evolving role of today’s property manager.
Kimberly Brown
As the role of today’s property manager evolves from number-cruncher and “innkeeper” to mini-asset manager, the trend is moving toward implementing innovative operational philosophies and technological tools at Class A properties. In the Northeast market, building owners — from institutional and corporate entities to private consortiums — have high expectations for their expensive urban office towers and suburban park-like campus acquisitions. Tenants also have become much more sophisticated in terms of their infrastructure and floor layout demands.
In the past, property management had a single focus — operations. Today, this focus has shifted toward a financial emphasis and an acknowledgement that high-rise office towers and suburban business campuses are what they always have been — an asset for corporate, private and institutional building owners that want the building leveraged to yield the greatest net operating income. For JRT Realty’s pension fund clients, such as TIAA-CREF, performance expectations are measured against the NCREIF index, and return is key.
During the past decade, the greatest challenge has been how to be a Class A landlord while achieving profitable financial results. As a result, building owners’ expectations for enhanced financial reporting and analysis have prompted commercial real estate service firms to develop innovative software solutions that help cut costs, increase operating efficiencies and improve services while enhancing value for clients in key urban and suburban markets.
Through a strategic alliance with Cushman & Wakefield, JRT Realty manages client assets utilizing Yardi, a proprietary portfolio management software application that enables clients to analyze financial performance of its real estate portfolio across states, continents and property types. It also facilitates identification of cost-containment strategies throughout the portfolio in one summary report.
In addition to satisfying reporting expectations, tenants’ needs have become far more sophisticated in their quest to create a “virtual office environment.” From information technology and infrastructure requirements to floor layout demands, property managers must gain an overall understanding of those needs, as well as the short- and long-term impact they will have on the building.
For example, a 50-story, 570-foot high-rise tower at 780 Third Avenue in Manhattan’s Grand Central business district has column-free floor plates, which allows its tenants to have customized work environments that are virtually limitless. The property management team includes a building manager with an extensive background in operations, an assistant building manager with an emphasis on financial performance, a concierge, a dedicated attorney and a whole host of administrative and maintenance personnel.
Regardless of building size or the number of tenants, it is imperative that property management professionals establish a working relationship during the earliest stages by becoming involved in fit-ups and maintaining a continuous dialogue. This practice also contributes positively toward tenant retention rates. For this reason, smaller buildings must have a dedicated property manager, and office towers usually require an entire on-site team of professionals to serve as liaison between tenants and corporate asset managers.
Choosing the Best to Gain the Most Value
Building owners should select commercial real estate providers based on their capability to offer well-rounded, exemplary services. Property management is much more than financial management and reporting and tenant relations. It includes procuring goods and services; preventive and recurring maintenance; energy management; capital improvements; legal compliance programming; developing, implementing and monitoring emergency procedures; payroll services; and security.
Furthermore, immediate access to comprehensive asset services through a single point of contact is vital because it offers building owners greater flexibility to grow their investments and portfolio. Should the need arise, property management services can be expanded to encompass leasing services, research, investment sales, and valuation.
Today, there is also a new pressure to identify highly qualified vendors in the specialty area of project management with the talent, resources and experience required to achieve aggressive supplier diversity spending goals on behalf of corporate owners. Typical goals associated with supplier diversity programs include collaborating with suppliers who reflect an organization’s own consumer and employee population and expanding the merchant/service provider base to include minorities and women.
While the property management landscape is expected to remain a balancing act between operations, financial reporting and sophisticated tenant requirements, the newly evolved, unofficial role of “mini-asset manager” is a welcome one that challenges the creativity and efficiency of these professionals.
Kimberly Brown serves as director of Asset Services for JRT Realty Group, Inc.
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