FEATURE ARTICLE, JULY 2006

THE EVOLUTION OF RETAIL PROPERTY MANAGEMENT
Retail property management companies continue to evolve and change along with its thriving industry.
Robert Carson

If you ask people in the retail real estate industry what property managers do (and we do get asked), you’ll get a wide range of answers.

Some see property managers as leasing companies that offer management as a sideline to their main business, which frequently has been the case. Many others think of property managers as glorified maintenance companies, whose role is to keep properties clean, well paved, well lit and free of leaks. While we certainly include these  services in our list of responsibilities, and while property operations of all types are highly important aspects of what a retail property manager does, the image of a property manager going center to center with a broom is highly inaccurate. Property managers hire, coordinate and supervise the work of sweepers, lighting companies and paving contractors, but, more importantly, they provide many other services. The successful ones offer every service a retail property needs to thrive; a basic service list that is long and growing. Undertaking property management as a sideline just doesn’t work anymore (if it ever did).

The Effects of Consolidation

We are currently in a time of consolidation throughout the retail real estate industry. Ownership of properties is in fewer and fewer hands, and many of the new owners are institutional investors, who usually are represented by asset management firms. In addition, there continues to be consolidation among retailers, and a new trend seems to be emerging — retailers being bought by investment groups that have a very different set of financial goals than the typical store operator.

To top it all off, the asset managers and multi-property portfolio owners have created another kind of consolidation. In order to be as efficient as possible, many have reduced the number of service providers — including property managers — which they use. One portfolio owner, for instance, went from 125 property managers to nine. Most of the companies consolidating are large national firms who turn around and hire local providers in many markets. 

To be responsive to this change, and to avoid being thought of as a small local provider, property managers must offer a wider and deeper range of services while emphasizing their local expertise.

In the area of financial management and reporting alone, today’s property manager must be able to utilize several reporting packages, such as IBS, Yardi Enterprise, Yardi Voyager, CTI and MRI. Tracking every penny to be spent is becoming increasingly important, as cap rate compression combined with increasing demand forces buyers to pay more than they really want to for properties. Budgets are critically important and watched very carefully.

Local Expertise

In-depth local knowledge, years of experience and intimate knowledge of each market is the key to keeping a center leased fully and effectively. Our leasing people constantly canvas their markets by knowing who is in the market, and more importantly, who isn’t. And though mom and pop businesses are a declining factor in creating a healthy tenant mix, we make it our business to know all of those businesses as well.

Finding a Property’s Upside Potential

A good property manager is a retail real estate expert, someone who can take an educated look at a property and see where more money can be made. Frequently, it’s in streamlining operations, and getting the most out of each supplier. A good retail property manager is also an expert at upgrading a center’s tenancy or figuring out how to squeeze one more pad onto a site plan. 

For the Future  

Retail property management is going to continue to evolve to meet the ever-changing demands from owners and asset managers. More and more, client reporting will be done online, which reduces the time to transmit a report and the cost of doing so. Controlling costs will grow in importance, and upgrading a tenancy will continue to be the best way to squeeze the upside out of a property. There is also going to be consolidation among the ranks of property management companies, as those that modernize and add services will continue to grow.

Robert Carson is the vice president of Operations for the Levin Management Corporation in North Plainfield, New Jersey.

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.