How much to charge for commercial property management?

Question

I have been a residential property manager for 9 years and not until recently do I have an opportunity to write a proposal for a commercial management in San Francisco Bay area.

It's a office+flex mixed use building with a total of 6 tenants and 40k sqft. One NNN lease and 5 leases are full service. I estimate the gross rent should be between $50k to $80k.

There is some common area janitorial, landscaping, signage i need to manage. Responsibilities include collecting rent, paying operating expenses, be the first point of contact of any issue.

What do you think other commercial management companies will charge for some thing like this?

Peter Tverdov · Answer

IMO it depends on what type of  tenant is in the property and the type of Lease in place. Is it one tenant, multiple tenants? Unless it's NNN where it's really hands off, I think 4% is fair. Again, we offer the service of GCing work, so if they want you to GC TIC then I would add a 10-20% fee on top of that (we do 10%).

I hope to add management of smaller commercial space soon, so good luck to you!

Joel Owens · Answer

I can't say for the state but that size of building typically 4% management fee of gross rents including cam. Now it should be extra if you are watching over build outs and being the GC etc. I have seen management charge more for those type services above the regular management.

Since it is mixed use and not straight retail maybe could get 5%.

Peter Tverdov · Answer

Ironically I am advertising for commercial property management in Central NJ as my company is looking to grow from the residential we have been doing the past 5 years. We have been advertising 3-4% to small commercial properties. NNN Leases probably closer to 3%. If you're going to GC tenant improvements I would charge a separate fee for that, we do. Managing the residential part of a MXU building should be a separate percentage.

Lex Shan · Answer

Thanks guys. I just confirmed the gross rent. It's closer to $80k/mo.

What's a good leasing fee for 3500 sqft $2/sqft/mo space?

Tim McClary · Answer

I tend to agree with @Joel Owens in that it depends on the scope of your responsibilities.  If you have to make sure the janitors show up, the drywallers do good work and are negotiating leases with national tenants you may be selling yourself short if you charge a flat fee based solely on rent and NNN charges.  I'd come up with a few different options that work for you and the owner and see what they say.

Ronald Rohde · Answer

Just put various conditions in the agreement to reflect additional work. Repairs, invoices, trips, showings, etc.

Repairs and evictions will consume most of your time for older/lower quality buildings, while turnover or vacancy has its own time needs. I've seen NOI annual bonuses for PM too, can align interests in the long term.

Lex Shan · Answer

Thanks Joel for pointing it out. I meant monthly gross rent, not annual gross rent. Does it make more sense?

Joel Owens · Answer

40k sq ft building and 50,000 gross rents sounds way off.

If rents were 20 a foot and 40k building was full that is 800,000 gross expected before other costs. Even at 10 bucks a foot 400,000.

Typically with retail the larger the building size the lower management fee. I see on small strip center under 5,000 maybe 5%. Over 10,000 about 4%. Over 30,000 and up about 3.5%. The big centers 100k plus or larger maybe 3% is as low as it goes that I have seen.

Lex Shan · Answer

Thanks Michael. Any other data point out there? Especially for California?

Michael Mills · Answer

@Lex Shan recently I have been seeing between 7-10% of gross revenue.

How much to charge for commercial property management?

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