Staying Ahead of the Curve in Property Management
America West Properties’ Eric Strauss on meeting the changing needs of tenants in a wide range of categories.
Commercial real estate tenants’ preferences and needs have been constantly changing over the past few years, urging property managers to stay flexible and regularly adapt. Going forward, the potential economic headwinds that the CRE industry will likely need to face in 2024, along with the rise of generative AI in CRE, are also going to impact the way property managers handle operations.
America West Properties is overseeing roughly 4.5 million square feet of retail, office, medical office and industrial space across California, ranging from single-tenant to large multi-tenant assets. Commercial Property Executive asked Principal Eric Strauss to expand on the strategies that work best for property management companies in the current economic climate.
How has this year been for AWP and its property management portfolio? What were the biggest challenges you encountered?
Strauss: Our property portfolio grew at a fantastic rate and maintained an excellent occupancy ratio throughout the year. We were able to engage several new Yardi platforms and utilized new Yardi consultants. Working with the Yardi tech staff, we have been able to streamline and expedite our weekly internal company systems, and better serve our 1,500 tenants and 1,500 vendors each month, allowing our managers to have more tools and time to work on their portfolios.
Our 2023 goal was to reposition the company internally to be prepared for growth with new management contracts but to also be ready for large expense increases that could affect the bottom line due to the cost of living in California with the inflationary times that we are now experiencing.
By far, the biggest challenge has been dealing with the time it has taken to find qualified employees for a range of positions including accounting, assistant managers and property managers. Due to the delays in finding the right personnel and the time to train them, we have had to limit bringing on new clients until we could achieve the quality of new property managers and accountants that are required to best serve our clients and their properties.
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Tell us more about the impact of remote work on AWP’s operations.
Strauss: We operated in the office throughout the pandemic with little interruption and never had to close the office. We have a staff of 18 employees and having an in-office team style approach to property management is a requirement of the company for managers. Because of our investment since 1996 in Yardi, we have a successful remote accounting staff for several of our employees and it is a seamless operation. We strive to have excellent communication with our staff, and found the importance of meeting weekly as a group on Zoom to discuss company objectives, property issues, and upcoming management requirements. The feedback and participation have been a real driving force in our success these past few years.
Considering the tough economic climate, how have tenant collections evolved across your portfolio this year?
Strauss: We maintain a strong focus on tenant receivables at the company. Our internal policies require diligent communication and follow up with not only the tenants but also the property owners. We are selective in what properties we manage to avoid having a property with collection issues taking up too much of managers’ time and affect the remaining other properties in the portfolio.
CBDs nationwide continue to record high office vacancies. Besides implementing hybrid or non-remote work policies, is there anything else that tenants can do? How can property managers help?
Strauss: The office market sector is going to present many challenges for all parties involved in real estate in 2024. I think the office properties that have the right team approach with marketing, leasing and management, and that can effectively communicate with the tenants and property ownership will see the most benefit.
The value of keeping an existing tenant is focal in my opinion and managers will be needed to be able to effectively manage costs to create or save as much value for the building as possible. The last thing an owner wants to hear is that the tenant left the building due to ineffective property management.
What about the retail portfolio you manage? How have trends in retail evolved over these past few years, and what is the key to successfully manage these assets?
Strauss: Our portfolio consists of grocery-anchored and strip retail centers. We are finding that many tenants are utilizing their social media campaigns to drive their customers to their brick-and-mortar locations. These creative smaller tenants often will reach out to conduct local fund raisers for philanthropies, schools, or clubs on a smaller scale. Also, the food truck culture has been a great amenity for smaller properties to drive foot traffic to the centers.
Since the pandemic, our clients have been driven to really understand retail tenants over the past few years. The rise of social media had many owners concerned about their tenant base a few years ago. As things have evolved, landlords understanding their tenants’ businesses better has created a better relationship between the two, and also created a stronger ability to strengthen the tenant mix. The result is increased tenant sales, increased traffic to the centers and increased rents for the property owners.
Once again, property managers must evolve and understand their tenants and retail mix to be able to create a strong retail dynamic for everyone involved. Strong communication, frequent visits and understanding tenant sales volumes are a key to success at the properties under management.
America West Properties also manages a sizeable industrial portfolio. What can you share about these properties in terms of current demands from your clients?
Strauss: Industrial property management has been relatively on auto pilot for many years due to the shift to e-commerce warehousing needs and the strong demand for relatively nonexistent warehouse space that occurred in California. With changing economic factors, it’s going to be critical to effectively manage costs, including skyrocketing insurance premiums to maintain the high rents tenants have been paying.
While industrial vacancies are increasing in the California marketplace—albeit not in comparison to the office sector—property managers must have a continued focus on strong collections and communication with their tenants. In the past, it was maybe a matter of days before the vacant space was leased again, whereas now it could be several months before a new tenant occupies the space.
What is your take on implementing new technologies, such as AI, into property management strategies?
Strauss: Our feeling is that if you are not embracing technology for property management you will get left behind by not only your clients, but also your employees. People want to utilize the best technology to make their jobs and lives easier, and owners want to enhance their properties’ functionality and performance through technology. We are looking into several AI options right now to see how they could fit into the way we need to do business in the future both from a management, accounting, and property value-add performance perspective.
How do property management services need to evolve in 2024, and how is AWP prepared to deal with upcoming challenges?
Strauss: Along with others in the industry, we are preparing for the challenges that appear to be on the horizon in 2024. The AWP team utilized 2023 to solidify and expand our internal management and accounting operations and add efficiencies by expanding our Yardi footprint in many ways. Working toward the owners’ goals and objectives, our team of dedicated personnel will provide streamlined operations and expertise to add value and quality property management service in 2024.