Managing into the millennium

As industry jets through the era of bytes, baud rates and backslashes, commercial property management remains a solidly personal business. The cool elegance of a marble lobby and reliability of a respected property manager always will be the top qualities in selling space and keeping tenants comfortable.

Although the evolution of technology in managing real estate - building access control, Internet connectivity, telecommunications access, property reporting, HVAC systems, intranets - will not replace a personalized business rapport, it has certainly made coming to an agreement a much faster and easier task. In fact, many industry managers will say that technology, while streamlining business, has also turned tenants and owners into much more discerning groups to satisfy.

To properly address this maturing client base, industry members acknowledge that technology makes property management an easier and tougher job.

According to Steve Center, vice president and regional manager for Foster City, Calif.-based Legacy Partners Commercial Inc., the increased complexity of tenant signing has forced managers to be more connected with clients' affairs on the whole.

"Technology takes managers from being relevant only in real estate square footage to being more directly involved in a tenant's business," he says. "Technology, from communications and power requirements to HVAC needs, makes management no longer a simple, paint-and-carpet transaction. The complexity of their needs has grown and, consequently, the complexity of our job has changed."

As head of Legacy Partners' Southern California office portfolio, Center has first-hand experience with the sophisticated tenant - not only with standard business occupants, but also with new, up-and-coming technology firms.

"Tenants are coming with more requirements," he continues, adding that all companies, big and small, need a partner in contract talks.

Center emphasizes the complex nature of tenants' issues as they evaluate space - especially given today's technology needs.

It's raining data When the tenant/manager/leasing agent collaboration works well, the product is a full building and long-term leases. As many industry members note, the ability to evaluate, transmit and receive and track data has become huge in commercial real estate.

"The single greatest way technology has impacted the industry is that people's expectation of their access to information has changed," says Bob Flannery, vice president of property management for Chicago-based CMD Realty Investors. "Ten years ago, people just thought of real estate as buildings where a job is done and then you go home. People didn't look at that area as a business unit as an asset that should be performing like a stock would perform, or as much as a customer service industry.

"Today, the expectation level is much, much different," he continues. "It's on two levels: owners of real estate expect to see more charts, graphs, trending, projections and statistics, while tenants are better educated and have more needs, too. A good owner or manager will be able to respond well to those issues."

Perhaps one of the biggest expectation drivers today is Internet access, where electronic data communication has skyrocketed over the past five years. Angela Siuta, regional managing director for Beverly Hills, Calif.-based Kennedy-Wilson Properties Ltd., points to the Internet as having become essential to day-to-day operations.

"It's the single most important marketing tool and work facilitator that we could possibly have," she says, estimating that nearly every broker in Los Angeles has access to the Internet. "Having in-house networks and on-site servers and being able to have all the accounting software loaded up - it's just wonderful. We have a lot of clients that have access to our reporting system and can transfer information to us, and we to them, just by getting on e-mail."

Increasingly, property managers have more options in their buildings' access to Internet, wireless and telecommunications services. Todd Lewers, vice president of real estate for Apex Site Management Inc., represents a wide cross-section of real estate ownership - REITs, entrepreneurs, institutional and others - who are looking to expand their access to multiple carriers, as well as create revenue streams by leasing building roof space to wireless companies' antennas.

Lewers says Apex and similar companies allow real estate owners to farm out the complicated business of managing their rooftops and how best to provide access to fiber optic telecommunications carriers. He explains that real estate owners can make anywhere from $25,000 to $500,000 annually just by leasing their rooftop space. He says outsourcing rooftop management to a specialized company makes a lot of sense.

Although technology can sometimes create additional operational facets for the owner and manager, many people agree that technology is the iron that smoothes out information wrinkles.

"I don't think it's any different than the way technology has impacted other industries if it's used properly," says Ernest Johnson, executive vice president for PM Realty Advisors, Houston. "Technology allows people to do more in less time, and it affords a greater range of information available in a concise format. Thus, the owners and service companies can make better decisions because they have better information right in front of them."

Y2-OK As problem-solving abilities go, industry members acknowledge that clients want to know how owners and managers are handling the millennium computer bug. Although the uncertainty and mystery surrounding Y2K is undeniable, managers assert that the problem is well in hand and is not unlike major industry hurdles of years past.

Many just simply play down Y2K's impact on the property management function as a whole. "The concern is justified, and the fear is not because it's a very solvable issue," says Center. "When you look at most office buildings and their basic systems, exposure is not all that great. For example, many elevator systems in our portfolio are old-fashioned systems that aren't PC-based. We've gone through and done a complete audit of our office portfolio in Southern California, and what we've found is that the exposure concern is not all that great."

Siuta believes that Y2K preparedness will separate the sophisticated firms from the weaker players. "In every industry you will see that the professional firms will be prepared, and the unsophisticated will not," she says.

"There's apprehension with the millennium because there are just some things that we can't control," says Flannery, adding that managers can only control the mechanisms and controls inside the building. "We can't say for sure that the utility companies are fully Y2K compliant, or if water will flow to the building, or if the telephone service is going to work. Our main concerns are air conditioning systems, card access, a fire alarm panel and elevators. That's about it."

Johnson emphasizes how the industry has already dedicated the necessary resources to the issue - he notes that PM Realty started its formal Y2K initiative approximately three years ago.

"To be honest, I think we've spent too much time talking about it and not enough time doing something," he asserts. "In some ways Y2K has been a blessing because it's forced us to examine our technology choices.

Flannery says Y2K is not unlike other big issues of years past, where property managers found a way to succeed through challenging circumstances.

"Five years ago, property managers dealt with the Americans with Disabilities Act (ADA), and that was supposed to be this big catastrophic issue for us," he says. "We studied up on it, we put our plans in place and we executed. Some years later, the issue of the moment was recycling - every property manager read up on it and put a plan in place. Two years after that they stopped making the refrigerant, R-11 and R-12, and people thought no one was going to be able to run air conditioning in their buildings. As property managers, we take problems and we solve them by creating processes and checklists," he says.

Expanding needs, practical solutions

Although the Y2K problem seems well in hand, technology in general is likely to continue making property management a more challenging business. According to Siuta, the shift to technology-dependent business has been slow and steady.

"If you walked around offices 10 years ago, you saw computers that were really more of word-processing equipment," she says, adding that the infiltration of technology alters planning and building operation. "Now you see Pentium processors and Internet access at everyone's desk, which affects heat loads as well as the suites' architectural layout. So you now have to re-analyze workspace to account for the increased heat load, therefore more cooling and air conditioning and more electrical consumption."

According to Johnson, property managers should expect a centralized information database that can be accessed from numerous areas. "We're working with a system right now where we can input information on a portfolio or a single property into a database management system. We can then load it into the accounting system automatically and from there load it into an evaluation program so that our owners can get almost real-time information on property values, lease signings and other areas.

"With a couple of keystrokes, information can easily flow into other systems," he adds. "This allows the property manager and the accounting group to fully integrate with the advisor or asset manager owner, where someone in New York can pull information on a property in Orlando and see how it's running today. That's where we're all going to be in a couple of years."

Although technology is likely to help property managers provide more focused and educated services, industry pundits always will emphasize the need for personal attention in property management. According to Flannery, managers should use technology to support that interaction.

"The challenge for real estate companies is going to be how they take the technology they use internally and get it out to the tenants," he says. "The flip side of it is that real estate is still a relationship business, and sometimes you just have to pick up the phone and talk to people. All the e-mails in the world aren't going to explain the crack in the wall. The property manager has got to be able to go down and shake the tenants' hands.

Center predicts that information will become even more readily available as a commodity, freeing up time to spend with tenants. "Good managers must be out there in the field with tenants," he adds. "And I'm not just talking about the on-site property manager, I'm talking about the executives in the real estate companies - they've got to be out there talking to tenants and staying in touch with their needs. Technology will give us more freedom to do that, because we won't have to be stuck in an office chained to a file drawer."

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