By Michael Hayes
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Alexander Summer, LLC of Paramus reports strong leasing activity at 55 Madison Ave. in Morristown. Recently, four leases were signed at the Class-A office building, bringing it to approximately 87 percent occupancy. |
The Star Ledger – January 26, 2003 - A slow economy invariably brings adjustments to the commercial and industrial real estate business, especially on the property and facilities management side.
Building owners, who need to watch their expenses closely, often call in established full-service real estate companies that know how to protect the bottom line without sacrificing services and tenant expectations.
Property management covers a long list of services ranging from the traditional oversight of day-to-day necessities such as security, cleaning and mailroom functions, to lease auditing, contract management, consulting, tax review and other functions that can be outsourced.
“Today’s clients want us to help them with their real estate strategy,” says Robert B. Palestri, president of The Gale Co.’s newly named Global Facility Solutions division. “They ask us questions such as ‘Do we need this building?’ or ‘How can we get 2,000 people into an office designed for 1,800?’ We work with them to find the solutions.”
Palestri says, “The property management market is very competitive today because of the economy. Most of the deals we do are incentive based, putting us at more risk. If we stay below budget we can make more money, but we’ve learned that you can’t lower costs at the expense of maintaining the property.”
As one of the largest privately held real estate companies in the industry with a worldwide portfolio of more than 45 million square feet, when it comes to property management, The Gale Co. has some distinct advantages of scale.
“We do volume purchasing and national buying to keep costs down,” Palestri explains. “We also re-examine staffing, looking into situations such as why there are five security guards at the same door.” He says one real estate company that was managing a cluster of four office buildings discovered that each had a different cleaning company, which led to higher costs.
Palestri says one of the most significant developments in property management is the corporate trend to outsource more work, from building security to information systems management. “In 1998, about 15 percent of a typical corporate budget was earmarked for outsourcing needs.
Last year, that figure rose to 35 percent and in the near future it is expected to exceed 50 percent.”
“We always pride ourselves in serving our tenants well,” says Richard Stadtmauer, vice-chairman and managing partner of the Kushner Cos., which manage more than 7.5 million square feet of commercial properties in the tri-state area.
Stadtmauer says one of the major changes in property management in recent years is the emphasis on reliable, state-of-the-art security systems. “Understandably, everyone wants the highest grade security possible,” he says.
Kushner is currently in the process of centrally monitoring all its commercial buildings from the company’s main office in Florham Park.
“We also have centralized the oversight of our expenses and lowered our square-foot costs,” Stadtmauer explains. “And we’ve been able to do these things without hurting our tenants.”
“There’s no question that today’s tenants are more demanding, partly because of the media,” says Michael G. Simon, president of Simon Holdings in Linden. “They read in the papers that because the market is soft, tenants are getting concessions – and they want some, too.”
Simon says because of some tenants’ perception of the market, it’s not unusual for those who are renewing their leases to ask for no increase at all, “or at lease demand new carpets.”
Having noted the challenges on a competitive market, Simon stresses that his company’s main objective is “to keep our clients, and keep them happy. We are focused on client retention,” he says. “And we always will be, no matter what the economic conditions are at the time.”
Simon says his company – which manages nearly 1 million square feet of commercial and industrial property – responds to tenant requests and complaints immediately. “If you call our office about something, there will be a resolution within a day or less.”
Tenant retention also is the main goal at the Paramus-based Alexander Summer, according to Barbara Martinez, senior vice-president/asset management. “It’s our job to make certain the building is on a par or better than its competition, while keeping costs in line.” she says.
“We always try to create value for the owner of the property,” Martinez says. “Anyone can manage a building; the trick is to manage it well while keeping costs low.”
Martinez says unlike large real estate companies that view property management as an “accommodation” to their tenants, Alexander Summer always has focused on that niche of the business.
She says some of her company’s services to property owners include property strategy and positioning, marketing and leasing, budgeting and accounting, tenant retention, and debt and equity financing.
John G. Udell, president of Weichert Commercial Brokerage, says the company recently formed Weichert Commercial Services to handle its customers’ property management, asset management and construction management needs.
Udell says its property management services include rent collection, property inspection and on-time completion of tenant fit-ups, alterations and improvements. Other services include immediate response to tenant complaints and service requests, computerized property management systems and supervision of services such as janitorial, security, elevator, plumbing, snow removal, landscaping and HVAC.
“Clients are looking for one-stop shopping,” Udell explains. “And it’s part of our long-term goal to provide a single point of contact for all our customers’ commercial real estate needs.”
Udell-who recently announced the appointment of Robert Baker as vice-president property management-says he expects the new division to have “exponential growth.”
With a portfolio of more than 1.5 million square feet of office, retail and industrial space, Eastman Management considers property and facilities management a major part of its business. “As a property manager, we relieve the property owner of the day-to-day tasks necessary to maintain a Class-A building including leasing, accounting and maintenance,” says Peter E. Schofel, partner and president of the Livingston-based company.
“Our reputation in the industry and our relationships with contractors and vendors allow us to provide the most cost-effective solutions for running a building,” he adds.
According to Schofel, tenants today want “extra security and flexibility, as well as a building that is in tip-top shape.
All information furnished regarding properties for sale, rental or financing is from sources deemed reliable but no warranty or representation is made to the accuracy thereof and same is submitted subject to errors, omissions, change of price, rental or other conditions prior to sale, lease or financing or withdrawal without notice.