By Matt Valley

Property managers hoping to catch their breath in this slowing economy may be in need of a second wind. Yes, there is a noticeable drop in the churning of management assignments compared with the go-go days of the late 1990s as buyers and sellers exercise caution and transactions slow. But the demands to grow revenues, cut expenses and maintain customer service promise to keep the property manager on a treadmill.

"They are a very diverse group," said Mike Nalley, principal and vice president of national accounts for Dallas-based Trammell Crow Co., which ranked No. 2 on this year's survey with 511 million sq. ft. under management. "Property managers have to do everything from worrying about financial performance to customer relations to coordinating with construction and leasing people. In these tougher times, there are a lot of pressures on them. They seem to pick up more responsibility without getting a lot of resources to assist them."

In this soft economy, property managers devote a substantial amount of time to analyzing the creditworthiness of tenants and the effects of corporate downsizing on space needs, according to Combs. They also have to address energy issues. "Preparations in case the building has a blackout are at a much higher level today than in the past because it's a real risk. It's not just a West Coast dilemma. It's something we study everywhere now," Combs said.

Whereas the asset manager's focus is on the bigger picture, or the long-term value of a property or portfolio, the property manager is charged with a more tactical role, according to Nalley. Day-to-day operational issues such as overseeing third-party vendor contracts, maintaining the properties and retaining tenants are all part of the job. The goal is to increase net operating income and the overall property value.

If Trammell Crow's mandate sounds a lot like a blue-chip company, that's by design. A publicly traded company (NYSE: TCC), Trammell Crow share prices were listed at $10.05 at the close of trading July 13, considerably under its 52-week high of $15.31. In February, the company announced an internal reorganization of its business designed to consolidate all of the property and facility management, brokerage and project management services delivered to both corporate and institutional customers under a single leadership infrastructure. The company's leadership believes the stock is undervalued and points to consistent growth in earnings per share to back up its point.

Trammell Crow is not alone in its frustration. Other heavyweights in the commercial real estate services sector such as Chicago-based Jones Lang LaSalle (NYSE: JLL) and Northbrook, Ill.-based Grubb & Ellis (NYSE: GBE) also have endured Wall Street's cold shoulder. Grubb & Ellis shares closed July 13 at $4.95 per share, lower than its 52-week high of $6.50. Meanwhile, Jones Lang LaSalle shares closed the same day at $12.90, substantially below its 52-week high of $16.24. Insignia/ESG, too, has ties to the public markets. It is a subsidiary of Insignia Financial Group (NYSE: IFS). Shares of IFS closed at $11.51 on July 13, lower than its 52-week high of $13.60.

Both Trammell Crow and Insignia/ESG have landed some newsworthy assignments. Lend Lease Real Estate Investments, based in Atlanta and New York, selected Trammell Crow as one of seven national real estate service providers for its approximately 105 million sq. ft. of office and industrial product. Through the end of 2000, Trammell Crow managed more than 8 million sq. ft. of office, industrial and retail product in 16 markets for Lend Lease.

In February of this year, Boston-based Leggat McCall Properties selected Insignia/ESG to manage and lease a portfolio of Class-A office properties in the Northeast and the District of Columbia, encompassing 4.5 million sq. ft.

Summing up his company's performance, Combs said, "Insignia is having a banner year in property management. Our growth this year is double what it was last year."

One emerging trend is for large institutional clients such as PM Realty Advisors, Lend Lease Real Estate Investments and INVESCO Realty Advisors to consolidate their service providers nationally, according to John Combs, president of U.S. property services for New York-based Insignia/ESG. Such a move forces property managers to adapt to more uniform standards that cut across geographic lines. Insignia/ESG finished No. 7 on this year's survey with 230 million sq. ft. under management.

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