Burlington Woods Office Park is one of the properties managed by Finard & Co.
If variety truly is the spice of life, property management must be one tasty career.
While other areas of commercial real estate offer their own intricacies, property management today mandates a seemingly unending smorgasbord of expertise, from providing basic building services up to tracking the complex financial operations of an asset. Environmental laws, utility deregulation and other modern challenges, such as security in the wake of Sept. 11, 2001, ensure that property managers consistently have some new issue to keep the industry challenging.
“It is a profession that continues to grow,” acknowledged Insignia/ESG Senior Managing Director Dennis Callahan, who has provided property management services locally for a quarter century. “You really need to stay abreast of what is happening and be ready to respond.”
The terrorist attacks changed the way building security is handled overnight, said Callahan, who oversees Insignia/ESG’s regional property management group. Not only did property managers by the thousands mobilize right after the crisis to assist tenants in evacuation and short-term contingency, they have worked since to update security policies and to even anticipate unforeseen threats for the future.
“Emergency procedures have taken on a totally different light now,” said Callahan. “We’re asking ourselves the ‘What If’s,’ every day.” On the plus side, he said, tenants are much more responsive to life safety drills and emergency announcements.
Even without the terrorism factor, the business has evolved dramatically in the past decade, said Callahan, noting that property managers are looked upon to not only tend to a tenant’s daily needs, but also to produce detailed capital maintenance evaluations and due diligence services on a given property, as well as in-depth reporting on rents and net operating income projections.
“Before, property managers came up through the engine room,” said Michael Quinn, 2002 president of the Building Owners and Managers Association’s Boston division. Today, he said, a property manager is just as likely to have a finance or accounting background. Whereas reporting once amounted to little more than a single-page analysis delivered quarterly, “now it’s as thick as a dictionary,” Quinn said, a trend fomented by the rise of public companies into real estate and available financial software applications.
Callahan said such rapid change requires property managers to keep adapting. Leases and other documents are all becoming electronic, for example, further bringing technology into the day-to-day operation of a building. Insignia/ESG’s national platform has been of particular assistance in that regard, said Callahan, allowing constant best practices and other training to help employees understand the new systems and trends.
Insignia/ESG has been part of a more fundamental shift in the Hub’s property management business, with the arrival of national firms in recent years putting the squeeze on local companies when pursuing opportunities. That movement has become even more acute given the advent of self-management philosophies among real estate investment trusts and other owners of Class A office towers. Locally, Equity Office Properties and Boston Properties are among several REITs that now manage millions of square feet of office space in-house that previously had been the domain of such venerable homegrown managers as R.M. Bradley, Spaulding & Slye Colliers and Meredith & Grew.
“There has definitely been a change in the landscape,” agreed Quinn. “It is completely different now than it was 10 years ago.”
The shrinking of Class A tower assignments creates significant competition whenever an opportunity does arise, as witnessed by the recent effort by several firms to handle management of One Boston Place for Teachers Insurance and Annuity Association. Both Insignia/ESG and CB Richard Ellis/Whittier Partners were finalists for the prize, with sources reporting that CB Richard Ellis has emerged as the victor. It is unclear what local firms might have bid on the building, but Callahan maintained that certain owners feel more comfortable with a national company.
“They like that one-stop, single point of contact,” he said, with leasing, appraisal and construction services available for any conceivable task. A solid leasing team with national connections helps in landing big tenants, he said, adding that is of particular import in the current depressed environment.
Codman Co. President Stephen Prozinski agreed that the advent of national companies such as Insignia/ESG, Trammell Crow and Cushman & Wakefield has altered Boston’s management arena. Also on the wane is a tradition of awarding a management contract to whatever company brokered the sale of a building. To address those changes, Prozinski said Codman has been diligent in servicing its existing clients and working to add value at the properties they manage.
Codman has been able to grow its management portfolio to more than five million square feet of commercial space by targeting smaller property owners and using its local knowledge, said Prozinski, even in the face of a “stagnant” office market. “It’s the people you have working with you who really make the difference,” he said. Even with the national aspect, he said. “it’s still a local business.”
Other firms such as Finard & Co. and Spaulding & Slye have continued to grab their share of business as well. Meredith & Grew has “held its own” in the lingering downturn, said Quinn, who directs the firm’s property management group. The company has recently secured such new management listings as the A.P. Levin portfolio in downtown Boston and three buildings for WP Commercial, including 3 Post Office Square and 24 Federal St. in the city’s Financial District.
A major theme in the current recession has been on keeping costs down, said Quinn, with landlords nervous that escalating operating expenses will drive tenants to cheaper alternatives. While required maintenance continues to be performed, Quinn said landlords are relying on property managers to assess what projects can be put off until later, or to see whether greater efficiencies in building systems can help to keep expenses down.
“When the rent goes down and the vacancies are going up, where do you get your income from? By reducing operating expenses,” Quinn said. The pressure is on even more, he said, with cleaning and security bills on the rise. Callahan agreed that landlords are crying out for property managers to lower costs, an effort he said is aided by a national supply buying program offered by Insignia/ESG to its clients. But while property managers are constantly on the lookout for cutting costs, Callahan advised there is only so much that can be done, especially on the capital maintenance side.
A more proactive approach, according to Callahan, is for the property manager to ensure the building is kept in such shape that existing tenants will recommend the property, and to enthuse prospective tenants who visit the building. “The building has to be operated impeccably,” he said. “There are so many options for tenants today, they can turn on a dime, so we must keep the building looking great and operating well at all times.”
