The reality is that commercial real estate properties and portfolios that are actively managed not only perform better on an operating basis, but in most cases, they yield more on disposition as well. That said, my question is this: Why is it that so many commercial real estate principals still attempt to manage their own portfolio? While the answers clearly vary on a case-by-case basis, the most common reason usually boils down to the perception that money can be saved by not paying third party management fees. Indeed, the age old dispute between “do it yourself” and “do it for you” business models is alive and well in the commercial real estate industry. In the text that follows I’ll make the case for professional management as a value added service that is accretive to overall property returns.

Let’s begin our discussion with discussing the difference between property management and asset management. It was not too long ago that there were very distinct differences between these two disciplines. Property managers were deemed to be tactical in nature, focusing on day-to-day operating issues such as routine maintenance, minimizing vacancy, collection of rent/lease payments, and first tier communication with tenants. Asset Managers on the other hand were strategic in nature focusing on adding value to the property by making positioning decisions that would increase net operating income (NOI) and valuation. While these distinctions still exist among some firms, the increased sophistication of professional management firms over the past few years have caused the lines to be blurred to the extent that many firms now provide both disciplines in an integrated service offering.
—continue reading

share