Property Management in California

PREFACE

This book is organized in the following ways:

1. Wherever a subject under discussion, such as risk management, applies to a variety of property management situations, an attempt is made to cover them all (i.e., the management of residential, commercial, and industrial property, etc.).

2. The focus is primarily on the management of investment property, since that is the type of property which most often requires professional management. The management of non-investment property, such as condominiums, is also treated, but is set aside for separate discussion.

3. No attempt has been made to apply a consistent use of masculine or feminine or non-gender pronouns when referring to such entities as the property manager, or the investor. Usage has been determined mostly by which pronoun appeared to make a more readable sentence, although a concerted attempt has been made to convey the assumption that men and woman are both equally likely to be managers, investors, etc. No discrimination is intended toward either gender.

4. Since property managers may be either self-employed, employed directly by an owner, operate as a consultant, or work for a management agency, this book is not addressed to any one of these, but rather to all. A certain amount of emphasis has been placed on the manager who works for an agency, however, since it is assumed that the majority of managers are employed in that way.

The text contains fifteen written assignments, reviews which are organized as multiple choice exams to be taken as you progress through the book. Some chapters will contain more than one review because of the amount of material covered; other chapters contain no review.

Chapter 1

PROFILE: HISTORICAL BACKGROUND & JOB DESCRIPTION

THE PROPERTY MANAGER

The development of the profession of property management has been intimately connected with changes in the fluid and dynamic world of real estate over the course of the twentieth century. Originally, a property manager did little more than serve as a caretaker of investment property, performing routine maintenance and collecting rents. Technological and demographic developments, however, brought about radical and sweeping changes in the way we live and the way we use real estate, changes which in turn affected the role of the property manager. What began as a simple caretaker function has developed over the past several decades into a highly specialized, multi-skilled profession.

The development of steel construction, for example, which led to the erection of high rise multi-family dwellings, intensified the need for property management. As apartment buildings, cooperatives, and condominiums increased in size and complexity, as the tenant population grew, and as investments became more substantial, the skills required of property managers multiplied accordingly.

Another development which affected the real estate industry, and consequently the opportunities for property management, was the proliferation of private automobile transportation and the consequent move of the population from urban to suburban centers. Office buildings and regional shopping centers sprang up across the country, all requiring a steadily advancing degree of sophisticated scientific property management methods and skills.

Management of investment property has therefore become a highly specialized area of the real estate business. Arising as it has in an age of specialization in all fields of endeavor, this particular specialty would seem to be just another example of a national trend: as the demands of modern life and the application of scientific technologies and methodologies have required an ever increasing number of specialists in all fields, generalists in any endeavor have become increasingly rare.

Real estate, of course, has been no exception. People who make their livelihoods in the real estate industry respond to the increasing complexity of modern life in the same way, by recognizing special areas of need and opportunity and by filling those areas with specialists, such as property managers, who are experts in solving particular kinds of problems and providing certain services. The curious thing about property management as a specialty, however, is that it requires a very broad understanding of many other professions, crafts, and skills.

The specialist known as a property manager must be a multi-disciplined generalist capable not only of marketing and sales strategies, but also complex record keeping and accounting, budgeting and economic forecasting, effective interpersonal communications, and high levels of analytical and organizational skills — a very sophisticated Jack-of all trades operating in one small area of real estate

An effective property manager will be familiar with basic economic principles and the language and application of certain aspects of law. Those who manage shopping centers must understand the language and practices of the retail industry. Industrial property managers must learn negotiating skills in working out complex long-term leases between manufacturers and owners of industrial space. Marketing surveys have to be conducted, demographic information gathered and analyzed. Properties must be advertised and promoted. Above all, investor goals must be achieved.

It should be clear by now that a property manager manages a very particular kind of property: investment property. As such it might be more accurate to think of property management as investment management, always bearing in mind that the investment in question is real estate. Generally speaking it is either residential, commercial, or industrial real estate and that might include anything from apartments to condominiums, cooperatives, office buildings, shopping centers, or industrial property.

Since a modern day property manager manages investment property, it should be clear that in addition to such considerations as maintenance and tenant services, the overriding concern is how best to service the financial goals of the investor whom the manager represents. The investor may be an individual or a corporation or a trust, but in all cases the manager/investor relationship begins with a clear understanding of the investor’s goals.

In many cases an owner (investor) will want cash flow; that is, he or she will be concerned with the operation of the property in order to produce profit. In other instances the owner may hold the property in question mainly for tax advantage. A shopping center owner, who profits in proportion to the success of tenant retail stores, will be concerned with promotion, tenant mix, and such intangibles as ambience and morale.

A condominium investor will not need to be concerned with rent levels, as would an apartment building owner, but will certainly place a high level of emphasis on maintenance and tenant services. The owner of an industrial space will want a property manager who can market the space effectively by qualifying a tenant who will be content to remain in the space for a very lengthy lease period and produce yearly profits sufficient to provide the owner an equitable yearly return on investment.

In summary, a property manager’s task is to maximize income or otherwise satisfy the goals of an owner of investment property — residential, commercial, or industrial — by acting on behalf of (as an agent for) the owner. The work will proceed from initial identification of the owner’s investment goals to market research and demographic studies for the purpose of establishing optimal (most favorable) rent levels, followed by the design of a management plan tailored to investor goals, budgeting and the projection of costs and profits, and finally administering the plan.

Day to day administration will involve such activities as filling vacancies, keeping records, making reports, managing personnel, purchasing, maintenance, handling leases, promotion and advertising, making astute economic decisions and forecasts, and dealing with tenant complaints. The process just described is a fairly general description of the activity called property management, and it can be applied to most properties.

Clearly, then, property management is an activity which is most effectively practiced by persons of broad interests. While it may seem too demanding to many, others will find the prospect of exercising and developing so many aspects of themselves a challenge eagerly to be engaged. It is difficult to pinpoint any one quality of personality or character which is most necessary for the practice of professional property management, but there are a few which suggest themselves because of the very nature of the work, and which are typical of successful working managers.

Probity is an old fashioned word which covers perhaps the most important characteristics of a good property manager. Probity has to do with honesty, integrity, and steadfastness of purpose. A property manager’s character will be tested frequently under a variety of trying circumstances, and if it is lacking in such positive strengths as good faith, fair play, loyalty, honesty, determination, scrupulousness, and just plain old fashioned honor, the damage to agency/employer, investor, tenant, and a myriad of vendor and service personnel can be devastating. It is something which cannot be taught, but which is absolutely essential.

In addition, the work requires constant contact with a wide variety of people. Consequently, anyone ill-at-ease socially will suffer constant stress. Easy social skills and a naturally friendly inclination towards other people are vitally important.

There are those who enjoy attention to detail, who seem just naturally inclined to attend to small matters with special care, and this too is an important personal quality in the successful property manager. Day to day duties require close observation, constant inspection, careful regard for small expenditures, subtle adjustments in procedure, and prompt response to a host of seemingly petty tenant complaints. The forest must always be kept in view, but the trees themselves require constant attention.

Since most property managers work within the context of an agency, and since such agencies are by nature and of necessity highly structured organizations, it is also vital that a property manager be a team player. There is ample room in the conduct of management for the expression of personal incentive, but the structural integrity of the agency organization itself cannot be compromised. There are simply too many clients involved with heavy investments in perhaps hundreds of properties, containing perhaps many thousands of tenants, for there to be any room in the organization for radically independent egos who have no respect for internal rules and procedures.

So, a property manager turns out to be a man or woman of integrity who is socially inclined, enjoys detail, and can function effectively in an organizational structure. This honest, friendly, attentive team player practices a specialty of wide-ranging skills in the real estate industry, employing modern, scientific planning and management techniques, as a representative agent for an owner of investment property, in order to secure for the owner his or her investment goals, whether they be profit, tax advantage, or simple pride of ownership.

From a professional point of view, a property manager is frequently, but not always, a member of the Institute of Real Estate Management (IREM), which is a subsidiary organization of the National Association of Realtors. IREM policies, as put forward in its Code of Ethics, attempt to promote a high level of professionalism and to set parameters for the conduct of business, as well as to provide a consensus of opinion regarding the ethical responsibilities of the agent/investor relationship.

Individuals who meet certain educational requirements, have the requisite experience, and who successfully complete IREM-approved examinations, may be awarded membership in IREM and the designation of Certified Property Manager (CPM). Qualified member management firms receive the designation of Accredited Management Organization (AMO).

Managers wishing to work in the area of office building management may complete a program of study offered by the Building Owners and Managers Association (BOMA) and receive the designation of Real Property Administrator or RPA. Retail property managers, on the other hand, will find a training program offered for their benefit by the International Council of Shopping Centers (ICSC), and may receive the designation of Certified Shopping Center Manager (CSM).

Guidelines for the conduct of business which have been formulated by the aforementioned associations provide the general framework for most management contracts, the legal agreements which establish the working relationship between manager and investor/owner. Because management agreements are so central to the whole business of property management, it will be instructive to consider what a typical management agreement entails and how it defines the task of the property manager.

Typically, a management agreement identifies the parties and the property involved and stipulates the period of time covered by the agreement. Then follow a series of carefully explained responsibilities expected of the property manager, usually referred to as agent. These may include the rendering of monthly receipt and expense statements, together with any net proceeds, to specified parties, in specified percentages. The owner generally agrees to promptly pay expenses in excess of receipts in a responsible way, and the agent will be required to ensure that all of the employees who handle the owner’s monies be covered by a fidelity bond.

The agent function is then spelled out by carefully defining exactly what authorities the owner agrees to confer on the agent. Any area of responsibility not included is deemed to be the responsibility of the owner, and it may generally be asserted that the more authority vested in the manager, the more effectively he or she may administer a management plan.

Generally, the manager will be given the authority to advertise the premises and rent it, to investigate the references of prospective tenants, and to sign, renew, or cancel leases. Other responsibilities towards tenants, such as terminating tenancies and prosecuting eviction orders, may also be included.

As regards personnel, the management agreement will spell out the manager’s authority for hiring and firing. Authority for the maintenance and repair of the physical structure itself will also be described, including the authority to contract with repairmen and make purchases.

With respect to tax laws, the owner generally agrees to execute any powers of attorney which are necessary to provide the manager with the authority needed to comply with existing laws, codes and regulations. The owner will usually indemnify the agent against any liability suits in connection with the operation of the property, and to pay all expenses in any legal proceeding. All employees are considered those of the owner, not the manager.

The agreement will also specify monies which the owner agrees to pay to the agent on a monthly basis for such things as restoration, modernization, leasing activities, and management itself. Other than expenses directly related to the exercise of his duties, the agent will be forbidden to make any such expenditures as structural changes in the building, without prior written consent. Emergencies involving danger to life or property are, of course, excluded from this limitation.

There will probably also be a clause in the agreement which allows the agent to cancel the agreement at such time as he considers the action or position of the owner, with respect to laws, ordinances, and regulations, a likely cause of damage or liability to the agent. Terms for the cancellation of the agreement by the owner will also be explained.

That would seem to cover the relationship between the owner and the manager/agent and to explain in a general way what the manager’s duties and responsibilities consist of. The administration of these duties, however, will involve a multitude of details. For example, in order to ensure compliance with the Federal Wage and Hour Act, the Workman’s Compensation Act, and the Occupational Safety and Health Act, it will be necessary frequently to monitor the work schedules of resident managers and to see that all employment contracts are properly signed and executed.

The execution of maintenance responsibility will require the preparation of daily, weekly, and monthly checklists which must be completed by the manager or designated employee. In addition, seasonal equipment, such as swimming pools, will require routine yearly inspections, reports, and service. Generally speaking, modern property management stresses the importance of preventive maintenance, which involves an ongoing system of monitoring the physical structure and operating mechanisms of the property.

Other ongoing activities which are necessary for the proper execution of the management agreement will include all or some of the following. An aware manager will routinely shop the competition in the neighborhood or general locale of the property in order to remain aware of the market and make adjustments in rent levels. Vacancies will be inspected, and tenants who give notice of intent to vacate will be promptly interviewed to determine if there is a problem which can be solved to prevent the move. Every now and then petty cash funds must be audited. If leases are executed by resident managers, they must be spot checked for thoroughness and accuracy.

Inventory systems must be maintained and purchases carefully controlled in order to prevent redundant spending and to keep track of waste and/or pilferage. Charts need to be kept detailing monthly consumption of utilities, and proper controls and procedures must be put in place to ensure utility conservation.

In addition, a successful property manager will attend public meetings and seminars, association gatherings, and any open meetings of city councils and boards of supervisors pertaining to the business of real estate and property management.

It may be well at this point to separate the specifics of property management and set them aside for a brief discussion of management principles in general. An enormous number of books have been written on the subject, and new innovative management techniques are being designed and submitted to practice all the time, but there are certain things which can be said about management that are widely held to be valid.

A successful property manager will think above and beyond the specifics of his special enterprise, and will in addition consider how best to make use of the following principles or truisms of the discipline of management itself:

1. Short term goals, because of the prospect of early reward for effort expended, and because of a relatively smaller investment in time and money, have a tendency to displace or supersede long term goals. Frequently, short term goals will seem to be in direct conflict with long term goals. Balance must be achieved, intelligent compromise exercised, and long term goals protected.

2. It costs more in the long run to retain an unsatisfactory employee than it does to recruit and train someone new. The tendency, of course, is to make do with someone who is unsatisfactory, and the cost of so doing can be great.

3. All management objectives require resources; hence, there will be competition for resources. In this, tangible goals will tend to win support over intangible goals; easily quantifiable goals will take precedence over less easily quantifiable goals; financial goals will often supersede personnel goals. It is important to seek the optimal result, bearing these tendencies in mind, assuring that different categories of goals are mutually supportive, and that traditionally neglected areas get their due allocation of resources.

4. Goals which are unattainable are a waste of time and resources and produce nothing but frustration; goals which are too easy, even if only slightly, can be very costly. An example of the latter: Insufficient market research may result in establishing rent levels (a type of goal) below what is possible to achieve. To illustrate the point, consider for example a 100 unit apartment building where each unit rents for S300 per month in an area which might realistically be expected to support 5% more than that (based on data that could be produced by a good market research plan). A five percent increase would raise the monthly rent per unit to $315 per month, amounting to a monthly increase in rents for the whole building of $1500. At $300 per month, under these circumstances, the owner is losing $18,000 per year. Of course, if the optimal rent is $315, and if the manager sets the rent level at $320, the result might very well be a high vacancy rate and a failure to achieve goals. If goals are too easy, success in achieving them may still result in a net loss; if goals are too difficult, nothing but frustration results.

5. Time is a resource and must be managed very carefully. The very nature of the business of property management is such that every expenditure of time is costly and every opportunity for wasted time is present every day. Careful thought must be given to the allocation of time to various tasks. Opportunities for the unproductive use of time abound. Interactions with clients, employers, employees, service people, colleagues in the office, tradesmen, etc., provide avenues for waste and may eat into time needed for budget preparation, travel, handling daily mail, analyzing market research, or preparing leases. The following suggestions are offered as a means of gaining control over the uses of time:

a. Avoid casual conversation with colleagues and employees which is not in some way related to the work at hand.

b. Learn to delegate authority.

c. Don’t let the telephone become your taskmaster; know when to be unavailable for calls.

d. Keep a record of time spent on various routine activities.

e. Don’t vacillate on important decisions; gather the necessary information and act. An unpleasant prospect doesn’t get any pleasanter the longer it’s avoided, and no amount of information will ever produce an absolute certainty about the outcome of an action. Risk is inherent in all decision making, and avoidance is merely a waste of time.

f. Don’t waste time wrestling with priorities. Make a simple task list every day and divide the tasks into rough categories from urgent to least pressing. Then maximize the use of your time by simply doing what is there before you to do, with an eye on the priorities.

SUMMARY

Investment property management, a specialty in the real estate business, has developed in the twentieth century from its beginnings as a simple caretaker function to a complex multi-disciplined activity which has as its main goal the accomplishment of investors’ financial aims. Properties which may come under the purview of the property manager may be classified as residential, commercial, or industrial, and under these categories may be listed apartments, condominiums, cooperatives, office buildings, shopping centers, and industrial property.

Techniques of good management as practiced in other disciplines are equally applicable in property management. Balance must be achieved between short term and long term goals. Resources must be allocated intelligently among the various competing management objectives, taking care that quantity considerations do not eliminate quality considerations, and seeing to it that financial goals and personnel goals are in harmony. Time management must be given as much serious attention as other types of resource management, and careful thought should be given to maximize the time at one’s disposal.

Characteristics of good property managers include: a broad range of skills and knowledge; social ease; integrity and honesty; attention to detail; willingness to work within an organizational structure.

The technological and demographic developments in the twentieth century of such things as the automobile, the high rise multi-family dwelling, suburban shopping centers and office buildings, all had an impact on the real estate business, creating a greater need for property management at an increasingly high level of sophistication.

Some areas of concern to the property manager include: economics, statistical analysis, marketing, accounting, interpersonal communications, sales, law, contracts and leases, and promotion.

Individual property managers may be awarded the designation of CPM by satisfying certain educational and experience requirements and completing a course of study approved by the Institute of Real Estate Management. Agencies receive the designation of Accredited Management Organizations (AMO).

The document known as the management agreement is the basis for the business relationship between manager/agents and owner/investors. It provides the legal foundation for property management and sets the parameters of rights and responsibilities for both parties. It is also a reflection of the Code of Ethics of the Institute of Real Estate Management.

Property managers may be employed as agents for corporate, trust, or private individual owners, either on assignment through a property management agency, or as an in house employee (as for example in a single purpose property such as a theater), or on a consultancy basis (as when advising on renovation projects.)

Chapter 2

APPLICATIONS: CATEGORIES OF MANAGED PROPERTY

APPLICATIONS: CATEGORIES OF MANAGED PROPERTY

A manager of real property, as real property is generally understood, might properly manage anything from a space station in the ionosphere, to a floating casino on the high seas or a spa in the desert, all the way down to a subterranean military housing complex. That’s how all-inclusive real property is: from the center of the earth outward, including the surface and everything on it or attached to it, and extending into the heavens themselves.

As the profession continues to grow, perhaps such exotic assignments may be possible. Currently, however, properties which fall under the purview of the professional property manager can usually be placed under the general headings of: multi-family residence, retail property, industrial property, and such single-purpose properties as churches, resorts, and theaters. In addition, property managers are sometimes employed as consultants on renovation and renewal projects.

Multi-family residences — apartment buildings, cooperatives, and condominiums — comprise a significant and rapidly growing segment of the real estate market owing in large measure to the obvious advantages in land usage and the savings in construction costs. A relatively recent development in the residential real estate industry is the high-rise building containing apartments or condominiums. In addition to the high-rise building, multi-family residences may be found in two and three story walkup buildings and in single-story garden style buildings.

Generally speaking, high-rise buildings require the most in the way of professional management, and they are frequently held in some form of group ownership. The smaller multi-family residences, however, may also require the services of a property manager, and very often the employer is an individual owner who may or may not reside on the property.

Of the three types of multi-family residences, apartments must be treated separately from cooperatives and condominiums in several respects. Arising historically as a response to the fear of high rents, and as an economically attractive alternative to single family housing, cooperatives and condominiums differ from apartments in that their residents have some vested interest in the land and building itself.

Cooperatives have a longer history than condominiums, dating back to the 1880s. Residents in cooperatives share a common ownership of the building through either a trust or a corporation. In the case of trust ownership, the trust issues the participants a proprietary lease. In the case of cooperative ownership, individuals acquire the right to occupy the building by purchasing stock. In both cases a property manager may be employed to manage resident services and see to the maintenance of the physical structure. In neither case does a property manager concern himself with occupancy levels, as he would be expected to do in an apartment building.

Occupancy levels are not a concern in managing condominiums either, as this is another, and newer, form of resident ownership. Unlike cooperative ownership, which entails the use of trusts and corporations, and in which the residents do not own individual units, condominium ownership is fee simple, individual unit ownership, with joint title to land and common areas. Management of condominiums, like cooperatives, is concerned primarily with upkeep, services, and reports.

If property managers are multi-talented one-man-bands, then apartment buildings seem to have been designed in order to challenge every skill in their repertoire. Unlike condos and coops, apartment buildings are for profit enterprises, except in the few instances when an owner is more concerned with tax advantages than cash flow. This simple fact brings into play research and analytical skills, the many considerations of budgeting and planning and reporting, complex record keeping, and added dimensions of owner/manager and manager/tenant relations.

Leases have to be negotiated, serviced, and either renewed or terminated, except in cases where rapid turnover is the norm and rents are handled week to week or month to month. Fair housing laws and ethics must be learned and applied. Resident managers must be hired and trained and supervised. Vacancies must be filled, tenants, needs serviced, rents set, collected, and raised when necessary and appropriate. Preventive, corrective, and routine maintenance must be carried out with a view toward improving the owner’s chances of a profit. Vendors and service people have to be dealt with, bills paid, reports made. Successful management of a large apartment property requires high levels of organizational skill and the design and implementation of a thorough management plan.

Non-residential property, that is retail centers, office buildings, and industrial property, share the profit motive with apartment buildings, and like apartment buildings these places of manufacture, sales and service require management of maintenance and ongoing services. However, they differ from apartment buildings in almost every other management consideration.

The tenants, instead of being residents, occupy space in these properties in order to either manufacture goods, sell goods, or provide services. Consequently, their needs are vastly different in many respects. A manufacturing concern will be interested in the demographics, the vital social statistics, of the region or neighborhood of the industrial property. They will place a high value on the availability of a labor pool, for example.

Frequently, property managers are engaged by owners of industrial space to market the space that is to find an appropriate tenant. Although marketing surveys should be performed in the management of all types of property, it is especially important in the marketing of industrial space, where prospective tenants will be concerned with such statistical data as local transportation services, the neighborhood’s economic base, average family size, mean income, local tax rates, and zoning.

Industrial properties may include not only manufacturing facilities, but storage and distribution facilities as well, all of which require major investment capital. Because of the heavy investment and the relatively long-term leases necessitated by the expense of moving industrial goods and equipment, the property manager is especially concerned with joining the right tenant with the right owner.

The industrial property manager’s responsibilities to the owner of the property differ in some respects to those of, for instance, a residential property manager or an office property manager. For example, industrial property tenants frequently assume responsibility for much of the maintenance and upkeep of the property. The owner’s profits are determined by what percentage of the tenant’s gross profits the owner agrees to accept for rent. The figure is usually determined by what sort of gross return the owner wants on his investment. In other words, a fifteen percent gross return on a $200,000 investment would equal a tenant’s rental responsibility of $30,000. That figure is translated into cost-per-square foot as a basis for bargaining, and depending on a variety of negotiating factors a final yearly sum is arrived at, and then methods and intervals of payment are negotiated. The process is lengthy and complex, and is another reason why the industrial property manager must carefully qualify a prospective tenant, matching the complex needs of an industrial operator with an appropriate property.

Although a shopping center may be managed by a staff manager hired directly by the owner or the owner’s company, most managers are agents, members of a property management agency. Another alternative for shopping center management is a consultative arrangement, whereby the management work is largely advisory and concerned with maintenance. As mentioned in the previous chapter, agency management is management by contract, and is an arrangement which has applications for all types of property management. Since this is by far the more prevalent style of management, agency management will be discussed in some detail.

As in all other types of property management, shopping center management is concerned with the basic activities of market research, maintenance, collecting rents, maximizing income, budgeting, and leasing. However, an owner of a shopping center will be especially interested in promotion, publicity, and marketing. The tenants here are retail business people, and if the center is to be successful they must be able to sell their goods to customers. Good marketing, promotion, and publicity will help them flourish.

Depending on the fee arrangement, the system designed to reimburse the management agency, the agent may have a direct interest in the prosperity of the center. It is frequently the case that in addition to a minimum fee the agency may share in a percentage of gross or net profits. Sometimes, however, as in the case of distressed properties, the reimbursement is in the form of a simple minimum fee.

Office building management, as indicated, differs from retail building management (shopping centers) chiefly in terms of the activities of the respective tenants: retail centers sell goods; office centers deal in services. The tenants here are not residents, and they are not merchants (unless, of course, the building also contains such retail shops as tobacco emporiums or coffee shops).

The management of office buildings will be dealt with in detail later. For now, office building management can be summarized as a process by which the property is put to the best possible use and the owner is provided the highest possible return on investment. Generally this is accomplished by careful analysis of the neighborhood, the market, and the building, followed by recommendations for ways in which the building should be used and any feasible modernization or rehabilitation that should be undertaken.

In addition to the management of existing office buildings, property managers may be employed to advise in the planning and building of new office buildings. The manager’s input would involve such matters as efficient operations and the types of tenants best suited for the projected building. Additionally, projections may be made concerning likely costs of cleaning operations, an important factor in office building management, as well as security services, trash removal, and the operation and maintenance of mechanical systems such as boilers, fire control systems, and air conditioning.

As has been mentioned, certain technological advances have contributed to the development of the property management profession. As automobiles made the population more mobile and permitted suburban development, regional shopping centers proliferated. Office building development offers an even more striking example of the effects of technology on real estate in general and property management in particular. Steel framing has permitted the construction of high rise buildings perfectly suited to the needs of office buildings. In such buildings partitioning may be arranged and rearranged to adjust to the needs of new tenants. When the elevator was developed and wed to steel framed high rise construction, solving an age old problem of vertical transportation, the age of the modern office building came fully into being.

Managing an office building is much like managing a small city. The taller the building, the higher the population of the building, the more complex the management. A manager’s responsibilities extend beyond an office building into the community, bearing in mind the fact that high concentrations of people put serious strains on public transportation systems and heavy demands on public utilities. The World Trade Center in New York, for example, which operates ninety five elevators and consumes enough electricity to service a major city, contains a population of 50,000 people. Not everyone will manage a building of that size, but the concerns of any office building manager, on whatever scale, are essentially the same.

SUMMARY

We have discussed the basic categories of property managed by professional property managers — residential, commercial, and industrial. Of residential property it may be said that apartment buildings place the greater demands on the manager, requiring more marketing skills, tenant management skills, and concerns with vacancy levels and rent levels. Condominium and cooperative building management (multi-family residences in which residents have a vested interest in the property and land) involves a more concentrated emphasis on tenant services and building maintenance.

Managers of industrial property frequently are relieved of the necessity of building maintenance (the owner may assume it), but must be concerned with detailed marketing surveys, negotiating difficult long-term leases, and joining the appropriate manufacturer to the appropriate invest or owned property. He must be familiar with a wide variety of special needs peculiar to the business of manufacturing, and he must be able to provide prospective tenants with a thoroughly detailed analysis of the relevant social statistics of the area surrounding the physical plant.

Office building management is in a sense city management in miniature, concerned as it is with large populations, transportation needs, utility consumption, safety and security, and such services as building maintenance, janitorial services, and trash collection. Major concerns in office building management are how best to utilize the facility and how to maximize investor profit. Frequently, a manager will be contracted to assist in the design and building of new office complexes, providing projections favoring certain uses to which the building may be put, suggesting appropriate tenants, and offering cost projections on vital building services.

In addition to office building management, another form of commercial building management is in the area of retail, where tenants, instead of providing services or information (as in offices), sell goods. Shopping centers of all sizes, and under all forms of ownership, employ property managers, not only in existing centers, but also as consultants in the development of new centers.

Shopping center managers are concerned with the usual property manager objectives, but place a high degree of emphasis on promotion and publicity, working to help tenant retailers achieve a profitable level of business. A retail property manager will understand the language and special needs of the retail business, and the management agency may have a direct interest in the success of the center through profit participation in the form of a percentage of gross or net profits.

WRITTENASSIGNMENT1

Chapter 1 & 2

1. Name a function of property management in the earliest days of the profession.

a. routine maintenance

b. risk management

c. asset management

d. bookkeeping

2. The development of steel construction led to the erection of:

a. the Golden Gate Bridge

b. load bearing masonry walls

c. high rise buildings

d. shopping centers

3. Property managers mostly manage:

a. government property

b. investment property

c. condominium

d. recreational property

4. The overriding concern of the property manager is:

a. how to best serve the tenants of a property

b. how to best serve the agency for which he or she works

c. how to best service the financial goals of the investor

d. how to best promote his or her career

5. Probity means:

a. carelessness

b. dishonesty

c. shrewdness

d. honesty

6. The IREM is:

a. an association of building owners

b. an association of real estate managers

c. an association of shopping centers

d. an association of realtors

7. Employees who work at a given property are considered to be:

a. employees of the managing agency

b. employees of the manager