Think about how you would answer this question :
In the broadest and most fundamental sense, what is the over-riding constant objective of a Property Manager ?
The suggested answer is as follows : To perpetually strive to improve the financial performance of an investment property on behalf of the owner.
The important words here are underlined : 'financial performance', and 'on behalf of the owner'. This, in essence, is what Commercial Property Management (or any form of property management, for that matter) is all about, in the most fundamental of terms.

Now - another question : How is the above-mentioned goal achieved ?
The Suggested Answer is as follows :

• By maximising income and capital value growth in the asset.
• exercising control and minimisation of building operating costs (i.e. outgoings), and also the level of tenant vacancies.
• closely monitoring, engaging in forward planning, and budgeting ahead - for all of the above factors (income, capital growth, costs, vacancies) - plus attending to the physical maintenance of the property investment asset and associated future life-cycle costing / added value issues.
• maintaining a healthy relationship with both the property owner (the client) and the tenants (i.e. the customers).
• conducting all of the above functions in accordance with the Owner's Instructions, and ALSO in accordance with all relevant legal / legislative requirements.

These functions, in essence, describe the fundamental roles of the Commercial Property Manager.

The Property Management Process - First Principles.
In an introductory context, it is appropriate at this point in your initial studies to make the following basic points about the Property Management process :

• In its time-honoured traditional sense, Property Management normally implies an AGENCY relationship between a property owner and a property manager, and the provision of a service by the manager, to the owner, for a fee. This relationship is established via a Management Agency Agreement (which is a form of legally-binding CONTRACT). You will learn more about the binding aspects of the law of real estate agency and Property Management over the next few weeks.
• At law, the Property Manager is granted authority to act on behalf of the owner. In an agency relationship, the owner usually adopts a largely handsoff role. The Property Manager's role in respect to the subject property is entirely hands-on.
• Property Management is primarily concerned with income-producing property. This can consist of residential uses / classes, commercial uses / classes, or a combination of both in the one building. The source of income is primarily derived from the leasing out of the available NLA (net lettable area) of floor space in the building to tenants. Other, less directly noticeable ways of generating income in a commercial building DO exist, and are available to the Property Manager.
• It is very important to realise that different owners will frequently have different INVESTMENT GOALS. The Property Manager must liaise very closely with the owner from the outset of the managing agency agreement (and indeed, well before the signing of the agreement) to identify the owner's exact range of investment goals, and be guided by them always, in the particular mode of management applied to a subject commercial building. Moreover, the Property Manager is legally obliged to report back to the owner, on a regular basis (often, in fact usually, this is done monthly), on various aspects pertaining to the performance of the subject property - investment asset.
• Commercial Property Managers should think - constantly - in Property Investment terms. The Commercial Property Manager's approach should actually be very similar to that of the commercial valuer. The asset being managed is, after all, nothing more or less than a vehicle for providing cash-flow for the owner (who is also the investor). The element of RISK MANAGEMENT is therefore inherent in the Property Management function. You should seek to identify the various avenues where Investment and Management Risk can occur in Real Estate as a capital asset class - particularly commercial classes of property.
• The Property Manager has a professional duty and occupational obligation to three (3) parties : the client (i.e. the property owner), the customer (i.e. the tenant who provides the income for the investment), and the real estate company which EMPLOYS him / her on its payroll (the chief obligation here, apart from competently performing all ordinary duties, is to generate business and income for the company who employs you, and to foster clients).
• In a modern-day, contemporary, sophisticated context, the Property Manager's role should be a PRO-ACTIVE one, as opposed to a reactive one.

The Importance of a Property Management
Department in a Real Estate Agency Firm.
Within the Australian property industry, the traditional major avenues of employment opportunities in Commercial Property Management have historically tended to occur within the orthodox-type major CBD-based real estate agency firms. These agency firms characteristically contain numerous Departments or Divisions - for example, Sales, Leasing, Professional Services / Valuation, Research, Project Management, Corporate Advisory and so on. Invariably, a Property Management Department (usually specialising in commercial property management in these big CBD-based agency firms) is included within such a multi-disciplinary spectrum of agency-based property services.
In addition, nowadays much smaller, more specifically-dedicated set-piece commercial property management firms also exist (e.g. Byvan, specialising in retail property management). Moreover, large institutional-level investment organisations have, over the last decade or more, made major inroads into the industry’s demand-levels for Commercial Property Managers, in terms of employment / recruitment - but on a purely in-house, non-agency basis.
However, the major CBD-based multi-purpose agency firm still fits the industry ‘norm’, rather than the ‘exception’, when it comes to the provision of property
management services within the industry - particularly from the legal perspective of an agency-based relationship between the client and the service-provider.
Therefore, it is relevant at this early stage of your studies to briefly examine the importance of the role of a Property Management Department in a multi-purpose agency-based property-services organisation. The presence of a Property

Management arm is important to such large agency firms for the following reasons :

• The Property Management function maintains a secure source of fixed and regular business income for the real estate firm - particularly when ‘times are tough’ during periods of economic and property-market recession, when sales / leasing turnover volumes and income levels fall away.
• Property Management is not as affected, in relative terms, by negative economic cycles and recessions, compared to sales and leasing. The company’s income from property management services (and by inference, job security for staff on the property management division’s payroll) is more recession-resistant.
• A well-run Property Management Department enhances and ‘rounds out’ the professional business image and reputation of a top-end major-player real estate agency firm, by giving the firm a wellrounded holistic industry profile.
• The value of the Rent Roll held and maintained by the Property Management Department constitutes a clear, tangible, measurable element of capital value for the business. In other words, it comprises a saleable tangible asset, in a business context, with additional potential saleable goodwill value flowing out of this arm of the real estate firm.
• A firm’s Property Management Department can frequently generate business for the real estate agency firm via lead-ins and flow-ons to other departments in the same firm (e.g. sales / leasing, valuation / professional consultancy, research or corporate advisory services) arising out of an initial client / property management contact.
• Similarly, in reverse, the Property Management Department can frequently receive client referrals which emanate from an initial client contact in other property-services domains provided by the same company (e.g. sales, leasing, valuation).
• The Property Management Department serves as a potential in-house research and data-source (market information and personal expertise) which other departments within the firm can use for their own business-related and income-earning purposes.
• In this regard, the sales and leasing departments, and especially the Valuation Division within the real estate agency firm, will invariably find the Property Management staff very useful people to have around, when a job in their domain is urgent, and essential data / market evidence is lacking.

Commercial Property Management - Knowing Your Client’s Investment Objectives.
One of the most important elements of the Commercial Property Manager’s wide range of professional duties and obligations is having a sound understanding of the client’s (i.e. the property owner’s) particular investment objectives. The process begins with an understanding of the owner’s background. The range of possible different types of investors is wide, and may include the following categories :

• Listed or unlisted Property Trusts.
• Other top-end, so-called ‘institutional grade investors - e.g. superannuation and life insurance companies, and various investment trust and share-listed growth funds.
• Private and share-listed companies.
• Syndicates of large or smaller-grade investors.
• Government and semi-government authorities.
• Single owners - the smallest scale of investors.

Having identified where the client fits into the commercial property investment market spectrum, it is then necessary to identify the client’s (i.e. the property owner’s) particular investment objectives. In this regard, the following important elements require identification by the Commercial Property Manager :

• the owner’s required return from investing in the subject property asset.
• the acceptable risk exposure from the owner’s perspective.
• the required holding period of the property investment asset.
• the required mix of income and capital growth.
• the owner’s preferred market class and sub-sector.
• the taxation and leverage positions pertaining to both the owner’s
• business position, and the property investment asset which is the subject of the property management agreement.
• whether the owner wishes to adopt a more distant ‘hands-off ‘ or a more direct ‘hands-on’ role in their approach to the subject property investment asset, and in their relationship with the property manager and the management of the property.
• the owner’s reporting requirements - i.e. how frequently should the Property Manager report back to the owner in respect to the subject property’s investment performance, and what information should be contained within such reports.
• the level of freedom which the owner will allow the Property Manager to enjoy, and the extent of the authority granted by the owner for the Property Manager to act on the owner’s behalf.

Moreover, the Commercial Property Manager must be perpetually mindful of the owner’s permanent background (i.e. underlying) expectations and perspectives. A checklist in this regard might well include the following considerations :

• the subject commercial property is viewed as an income-producing asset.
• income maximisation is therefore paramount from the owner’s AND the property manager’s perspective. However, remarkably often, owners (sometimes only ‘semi-educated’, so to speak, in Property Market matters) will possess excessive levels of greed, resulting in quite unrealistic income expectations from the property, as well as for capital growth in market terms. One of the key frequent functions of the Commercial Property Manager, therefore, is to help
• put the owner’s greed levels or over-optimistic mindset into a more worldly, realistic perspective, when it comes to realisable marketbased levels of income and / or capital growth obtainable from the property (which, of course, are subject to very finite levels only).
• Allied to the above, the certainty and regularity of income obtainable from the property is a key consideration for the Commercial Property Manager.
• Both the owner and property manager need to be constantly mindful of the LAW pertaining to real estate management, and the manner in which the law recognises the owner / agency agreement (i.e. the Managing Agency Agreement). The legally-binding nature of the relationship between the parties, and the legal enforceability of the Managing Agency Agreement (i.e. the contract between the parties) is an ever-present consideration, as is the ability for each party to SUE the other for damages in worst-case scenarios (arising out of breach of contract and subsequent financial loss).
• It is in the interests of both parties (owner and manager) to seek to minimise the level of outgoings and operating costs of running the subject building.
• Similarly, it is in the interests of both parties to seek to maximise cash-flow by minimising tenant vacancies and arrears (delayed nonpayment by tenants of rental due under the lease).
• Both parties generally wish to see efforts made to maximise the asset value of the property, and to keep the asset physically wellmaintained.
• Both parties generally seek to achieve risk avoidance and riskminimisation strategies employed in the management of the asset.
• Generally speaking, the owner (i.e. the investor) will tend to seek and adopt more of a ‘hands-off’, low-profile approach in relation to the operation, functioning and efficient financial performance of the investment asset. After all, most investors take the view that they pay the property manager a considerable fee to do just that for them, on their behalf.