2022 has been a year of reckoning when it comes to macroeconomics and the sheer cost of everything. From gas, to groceries, to manufactured goods, day-to-day life has become extremely expensive for just about every individual, family, and institution. According to the Bureau of Labor Statistics’ Consumer Price Index, the all-items index increased by 8.5% for the 12-month period ending in July 2022.
The commercial real estate industry is no exception to feeling the weight of heightened costs for borrowing and general operations, and labor and material shortages add to these challenges. Property Managers are tasked with being trusted advisors to our clients and finding creative solutions to keep operating expenses low while ensuring a high level of service. So, we have to ask ourselves, “What can commercial property owners do to mitigate ever-increasing maintenance and labor costs?”
Here are three tactics to consider for regulating the cost of managing commercial property:
- Consider creating a building maintenance prioritization list where essential items are addressed immediately, and other projects are defined as deferred maintenance. Supply chain delays and increased materials and labor costs will quickly increase the cost of repairs and enhancements beyond the budget. Are there non-critical projects that can be deferred until costs normalize?
- If vendor service agreements are close to expiring, explore whether an extension of services can be negotiated. In some cases, recompetes may be necessary to comply with corporate policies but in the current economic climate, it is common to see pricing increase upwards of 20% during rebidding. Property owners may see some cost relief by leveraging existing relationships and negotiating a service extension with a current vendor vs. going to competitive bid.
- Focus on team building and ensuring property management staff feel impactful, heard, and satisfied in their roles. As labor shortages and pay increases keep employers scrambling for the right talent, it is of utmost importance that retention is prioritized. Veteran employees not only have know-how, but their retention can also help control cost increases associated with finding new talent.
While we all continue to whether the changing economy and associated impacts, property owners can rely on property management experts to help them cultivate cost-savings initiatives that will keep buildings operating well and providing the home base that tenants need.
Brett Williams is a senior managing director, asset services, with Cushman & Wakefield.
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