Commercial Property Management Fee

10 Replies

Hey guys I'm fairly new to BP so I apologize in advance if this question is to blunt or invasive. Anyways, I study real estate management and it's something I would like to pursue in the near future. I want to specialize in Commercial Property Management because I feel that a lot of firms neglect Commercial properties and it's a problem I want to solve. My question is:

Is a $1,000 flat fee for managing a a Commercial property (Retail, Anchor, or Office building) an absurd amount or fair based on your establishments?

(No finder/leasing fees involved)

Thanks Guys and I look forward to learning from you all.

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Property size would be about 22,000 SF and yes I would do the leasing.

I'm currently getting some help from some firms in my area, appreciate your help man, thanks a bunch!

I think you haven't thought of built in costs to do commercial property management.

That 1,000 is nothing compared to operating costs for your PM business. PM business is better in commercial than residential because rents are most always higher.

@JoelOwens Hey thanks for the info. By "built in costs" do you mean Operating Expenses for the Commercial Property Management business or the Propery Owner's costs?

And from what I have observed from speaking to REMs, they also belive that Commercial Property Management is much more lucrative compared to Residential property. Thanks

To fill a space, I pay $2 per sq foot if our realtor is representing both parties. If the tenant has a realtor then I have to pay $2 per sq ft for each so a total of $4 per sq ft. I think that's where your money is made along with any purchases. For me, the management is much easier than a residential so I'm only willing to pay 5% of the monthly lease if I use a management company at all (I don't live in the same area as my investments). The 5% only covers collecting checks and dealing with fixes I'm on the hook for like the roof and HVAC. You may want to think about a tiered structure. 5% for check collecting. 7% for check collecting, and paying other recurring bills like landscaping, or any taxes or utilities the owner pays. 10% may be the "gold" level of service and may include yearly tax assessment evaluation and fighting with the assessor to bring down the assessment if needed. That may also include some other services I can't think of here. This isn't something that I've seen in the industry but I think it may make sense.

To fill a space, I pay $2 per sq foot if our realtor is representing both parties. If the tenant has a realtor then I have to pay $2 per sq ft for each so a total of $4 per sq ft. I think that's where your money is made along with any purchases. For me, the management is much easier than a residential so I'm only willing to pay 5% of the monthly lease if I use a management company at all (I don't live in the same area as my investments). The 5% only covers collecting checks and dealing with fixes I'm on the hook for like the roof and HVAC. You may want to think about a tiered structure. 5% for check collecting. 7% for check collecting, and paying other recurring bills like landscaping, or any taxes or utilities the owner pays. 10% may be the "gold" level of service and may include yearly tax assessment evaluation and fighting with the assessor to bring down the assessment if needed. That may also include some other services I can't think of here. This isn't something that I've seen in the industry but I think it may make sense. I should also add that I'm in a suburb area that is getting $10 per sq ft in rent. Depending on the area, you may scale the fees I've listed.

@Greg V. .... How much tenant allowance (free rent) do you typically give to your tenants? 

I wrap free rent into the entire package of lease rate, buildout paid by me, etc based on the business so it depends but generally though, in the depths of the recession, I was at 5-6 months free rent. It was rough. I'm filling spaces now and am starting out with no free rent but may go up to 3 months. The market has definitely turned.

@Greg V. I'm unfamiliar to the concept of "free rent". Is it necessary to include it to acquire commercial tenants?

It's not so necessary now but I still like to use it for newer businesses. I can pull them in because it softens those first few months when they are just starting out. I then increase the base rent to cover. I also don't sign leases for less than 3 years but almost always they are 5-10 years. This is for 1000 sq ft up to 5000 sq ft tenant.

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