Property managers provide catalyst for growth
Whether you are buying commercial or residential property to rent to a third party, you will have one main objective. This is to maximise the return on the investment you made.
The return on investment derived from a property consists of two parts: the net income that can be maximised via your income strategy; and the capital growth of the property that can be optimised via your capital appreciation strategy.
Net income growth is directly within your control because you can manage your income and expenses. However, capital appreciation is both in and out of your control. You have direct control over the additional capital improvements you make to the property to improve its value, but you don’t have control over the impact of the macro economic property climate which can work to your advantage or disadvantage, depending on the current market.
According to Steve Rennie, director at Rennie Properties, one of South Africa’s leading commercial property management companies, the best way to achieve this growth, as a property owner, is to be a property expert yourself or to appoint a property expert in the form of a property manager.
“A property manager’s expertise is geared up to and focussed on achieving these income and capital growth goals for a property owner, leaving the owner to carry on with their day-to-day activities,” said Rennie.
Rennie Property currently has a multibillion Rand portfolio under management, including Johannesburg’s Melrose Arch and the ABSA Centre in Cape Town.
A property manager is tasked with increasing the gross income generated from a property in a number of ways. Firstly, any property manager worth their salt should have an extensive broker and tenant network to keep properties occupied with the right tenants. They should also maximise income by ensuring they are recovering all the expenses the owner is entitled to collect from tenants, in accordance with the lease agreements.
It is important to attract the right profile of tenants to suit the “personality” of a property – for instance, professional organisations are more likely to be attracted to an office block with a similar profile of companies, while creative agencies may prefer co-habiting with other creatives that they could potentially collaborate with.
It goes without saying that a well-maintained property is more easily let than one where standards are allowed to slide. A property manager will work to increase the potential rental income of a building by keeping it safe, attractive and clean, and thus making it more attractive to tenants that will pay a higher rent for a better standard of space.
At the same time, says Rennie, a good property manager will ensure that the expenses associated with owning a property are market-related, and also that you are getting what you pay for. In other words, they will ensure that your suppliers are charging you fairly and that they are delivering what you signed up for.
Capital growth strategy
A property manager plays a key role in the building’s capital growth strategy. This means advising the owner on the correct level of direct capital investment to make in order to receive the best rentals for the correlating property product, which thereby increases the value of the property. Besides the immediate visual improvement, investors look more favourably on the property which also has a positive impact on the capitalisation rate of the property.
For instance, Rennie Property is currently involved a large capital improvement project at the ABSA Centre, on behalf of its owners, the Patrick Partnership, which is making a multimillion Rand investment in the property. The owners chose to inject capital to improve the property aesthetically in order to attract premium tenants who are prepared to pay higher rentals. The first stage of this project was released to the property broker community last week.
In summary, a property manager will maximise the income generated by the building by ensuring the building is optimally let, all income is collected, the facility is well-maintained and the necessary capital expenditure is spent.
In addition to the above, a property manager is an invaluable source of local knowledge and advice, particularly if the property owner is based in another city or country. A property manager should be up to date on local real estate trends, rentals charged by equivalent buildings in the area and which improvements need to be made to keep the property in line with or ahead of its competition.
The property manager is a vital interface between the tenants in a property and the owner. Happy tenants stay in a building for longer, pay their rent on time, better maintain the building and its facilities, and attract tenants with a similar profile.
How to choose a property manager
When choosing a property manager, it is best to choose an organisation that has experience managing your type and grade of property. For instance, the manager of a shopping centre will require different management skills to that of an office block. Then again, a mixed use facility such as Melrose Arch, with shops, offices, residential units, property owners’ associations and body corporates will require a property manager with skills spanning all of these and an understanding how these property uses merge with each other.
Finally, there are some minimum requirements that South African property managers need: fidelity fund certificates that are renewed annually and issued by an estate agents’ board, to operate a trust account, and submit auditors’ reports of trust account to the board annually.
For a property owner and a tenant, it is clear that a good property manager is the vital ingredient in creating a win-win situation for both parties.Released on behalf of Rennie Property by:
Vanessa ClarkTwokats Communications
Ph: +27 82 335 1117