Commercial Property Management: what to expect in 2015

These are challenging yet exciting times for the Commercial Property Management (CPM)

industry. Increased globalization, high-speed innovations and the exponential expansion of

technology are changing the way people think and act, bringing both new opportunities and

uncertainty to the real estate market. What then are the property industry trends for 2015 and what

factors will affect the future of Commercial Property Management companies? Are there any tools

and techniques that could help property managers overcome future challenges?

CPM industry market realities and trends

The global economy and the real estate market. Financial issues in Europe, wars in the East,

Russia’s foreign policy, and the economic slowdown in China all have an impact on international

companies, companies working at the global level and on real estate investors; this situation leads

to more uncertainty when making real estate decisions and thus directly affects the climate of the

property management sector. Still, the real estate market has been one of the fastest growing

segments during the last 15 years1, and this is reflected by the fact that CPM investment in Europe

grew by 16% in the first nine months of 2014.2 According to the experts, commercial building

construction industry revenue should increase by 8.1% in 2015.3

1 Financial Post, “Real Estate Investing Comes of Age”, November 18, 2014 2 BNP Paribas Real Estate, “Investment markets continue to grow towards the end of 2014 – November 2014”, November 26, 2014 3 Statista, “U.S. commercial building construction industry revenue growth outlook from 2014 to 2017”

Changing trends in demand for office space. Office demand has always been considered as closely

related to unemployment, meaning that a low unemployment rate corresponded to a higher demand

for office space and vice versa; however, the XXI century has brought some new rules. Working

patterns have fundamentally changed. Increasing competition, more companies going global,

many startups, advanced mobile technologies and new technological opportunities to work

remotely – all these factors are radically changing the demand for office space despite the

increasing employment rate. Technology and human resources are very important elements in

office size and location decisions. The option of having the same high quality manpower not

necessarily present in the office leads to businesses shifting to smaller office spaces or even to

virtual offices. During the last 10 years, office space per employee has decreased by 25% in the

USA4 and 35% in the UK5. Companies are looking towards increasing efficiency and driving down

operating costs; they are still compressing the size of their standards, and that affects the bottom

line.

In order to satisfy the demand, office-building owners will need to re-organize existing closed

office spaces into smaller ones, sharing common areas between a larger numbers of tenants and

investing more in office amenities, such as open cafes and meeting spaces.

Changing trends in the demand for retail space. Online buying has grown exponentially and is

taking a bigger market share than ever before. According to IBIS World, research forecasts indicate

that online revenues will increase 8.6% per year over the next five years in Australia6 and 5.9% in

the USA.7 Online buyers have changed the traditional shopping experience; therefore, more

retailers plan to reorganize their brick-and-mortar stores and move at least part of their sales online.

According to Cushman & Wakefield, by 2020, approximately 25% of all retail sales in the USA

and the United Kingdom will be done online.8 This creates some growing challenges for shopping

centers worldwide. The concerns and confusion of shopping center operators were clearly

4 Atlanta Business Chronicle, “As companies pack more employees in smaller offices, we need more answers for parking”, December 17, 2014 5 The Economist, “Pressed Suits”, April 5, 2014 6 Power Retail, “IBIS World: Australian E-Commerce Revenue to Reach $10 Billion”, October 17, 2014 7 IBIS World, “Online Insurance Brokers in the US: Market Research Report”, July 2014 8 World Property Journal, “Big Demand Forecast for Industrial, Logistics Space”, June 24, 2013

expressed during the MAPIC 2014 conference in Cannes, France – the leading event for the

international retail property market.

On the other hand, studies show that 79% of shoppers still want to see, touch and try, to feel the

in-store experience.9 Brick-and-mortar stores will therefore remain of high importance; however,

retailers might need smaller store spaces in shopping malls. Meanwhile shopping-center operators

will need to pay more attention to the entertainment experience of the visitors rather than to the

shopping itself.

Changing trends in the demand for industrial space. Since it is easier, faster and less expensive to

have a store online, the number of new online stores has been growing rapidly. The Retail Research

Centre forecasted that online retailing should grow by 18,1% in Europe in 2014 and online

spending should increase by 14,5% in the USA during 2014.10 According to Internet Retailer, USA

online sales will grow by 57% by 2018!11 As a result of these trends, there is also a growing

demand for more industrial and warehouse space.

How these trends will affect the Property Manager’s job

“Changes” – a word we hear every day. “Changes” usually mean something challenging,

something one needs to adapt to. The new trends that the commercial real estate industry is facing

right now are a big challenge for property managers.

Increased demand for smaller offices results in property managers having to deal with more tenants

in the same building. Workload is increasing: there are more contracts, terms, billing, planning,

forecasting and accounting… In order to maximize occupancy, property managers need to track

more information, follow more data in order to make forecasts, deal with the lease plans, and

manage more potential and current clients – a difficult job to do when one has only two hands.

And this is only when talking about office space… In addition, despite the fact that online retail is

growing and stores are moving to online business, some more successful online stores are also

moving part of their sales back to brick-and-mortar stores, and, as current conventional stores need

9 Malls.com, “79% of international shoppers want an in-store experience”, November 19,2014 10 Centre for Retail Research, Online Retailing: Britain, Europe and the US 2014 11 Internet Retailer, “U.S. online retail sales will grow 57% by 2018”, May 12, 2014

less space, more of them can fit within one building, a situation that needs to be managed; the

demand for industrial space is also increasing.

How to adapt to the trends and stay competitive

Data literally surrounds us. With such vast databases, managing them all becomes a challenging

task. In such a rapidly changing and growing environment, simple technological tools for tracking,

planning and accounting such as Excel, probably still the most popular ERP (Enterprise Resource

Planning) software, or even pen and paper, can no longer provide an efficient solution. In order to

optimize their task of managing a number of properties and hundreds or even thousands of tenants,

property management companies need more realistic forecasts, faster and more efficient planning

and accounting, and visual tracking and management of vacant/occupied spaces.

Companies should direct their minds and efforts to dealing with the competitive landscape in the

industry, instead of spending large amounts of time trying to solve operational problems. Now

change has brought real innovations that can help property managers do their job more efficiently

– dedicated property management software systems. With systems such as SOFT4RealEstate12,

one can maximize occupancy levels and manage tenants effectively, increase administrative

productivity, reduce operational costs, improve budget forecasts and simply enjoy the benefits of

a single unified software solution that is completely integrated with accounting, document

management, and reporting tools. Cloud or on-site options are available for clients’ convenience.

Giedrius Zaronskis, IT Manager of AKROPOLIS Group – the group of leading shopping malls in

Lithuania, shares his pleasant experience of moving from Excel to Soft4RealEstate: “Before we

started using Soft4RealEstate, we kept everything in Excel spreadsheets. It was really time

consuming. Now when we’re using Soft4RealEstate, things like calculating management fees are

a snap. Now I can’t imagine running our property management division without it.”

It is always easier to meet what tomorrow brings when one has the right attitude and tools in hand.

Technology is one of many tools that organizations use to help solve problems. Moreover, the right

software can help property management companies gain real insights and resolve issues even

before they occur. There is not always enough time to go deeply into every area, especially in such

a fast-changing technological environment, and it is not necessary – everyone should do what they

12 Soft4 software solution for Commercial Property Management, www.soft4realestate.com

know best, so why not trust experienced software providers? Mobile phones, social media, cloud

computing, and data analytics – particularly when combined in unprecedented ways – are opening

up a host of new business models. 2015 is a good year to start improving and growing a property

management business, benefiting from all the opportunities offered by the brightest minds from

the world of technology.