Strong Management is Vital in a Weak Economy

The value of having a strong property management team responsible for your property is greater than ever in a difficult market. Our property managers are charged to increase their diligence in monitoring the following areas to best serve our clients and their tenants.

The financial health of your tenant. Our property managers normally closely monitor receivables to address any delinquencies immediately, this is even more important today. In addition they are monitoring the actual occupancy of the space. If they find that a tenant is not using a large portion of their space, it is a usually a warning signal about their current or rapidly encroaching financial health. It is always better to address problems early in the game and keep an open line of communication with your tenants. If the tenant is having legitimate financial problems we believe that both sides are best served by negotiation. In a case where we believe that the tenant is viable on a long term basis, we will look at re structuring their lease to provide a temporary rent reduction. These early renewals can often be done with minimal expense for tenant improvements. If the tenant isn’t viable it is best to look at options to assist with an effort to sublease all or part of their space to reduce potential downtime in receiving rent. If you wait until they declare bankruptcy there are legal expenses and a delay in recapturing the space. We keep our clients informed on these problems and make recommendations on finding a workable solution. It has been our experience that there is value in keeping existing tenants, even if there is a reduction in rental rate or SF leased, as there are few tenants to replace them with in the current market. When the economy improves and the tenants demand for space increases you have an opportunity to expand and extend their lease.

Cost Control. In the current environment we believe that it is critical to control expenses. When we create a budget we are searching for ways reduce all of the costs that we control, using the zero based budgeting approach where examine every component of the expenses in each category. We have told our vendors that this isn’t business as usual and we want to work in partnership with them to look for ways to reduce operating expenses. Two of the primary methods are by modifying our contract specifications and group bidding to capture the buying power of our entire portfolio. This benefit is passed on to our property owners and their tenants. We want to prove to our tenants that their property manager is not on “cruise control” and blindly budgeting 3% increases across the board. We believe that we can realize significant savings in 2009 by being proactive. This sends a positive message to the tenants that their landlord is carefully managing the CAM or escalations in their building.