Demand for industrial properties continues to rise in both Cincinnati and Columbus. And as developers build new warehouse, distribution and manufacturing space, more industrial property owners are turning to property management firms to better manage these facilities.
Why? Property management firms can identity problems with an industrial property quickly and resolve them before they require more expensive fixes. The property management team is available 24/7 to respond to late-night water leaks or schedule emergency snow-plowing services. These teams can help building owners meet new safety and environmental standards. The best teams forge relationships with the tenants in an industrial property, making sure that they are both happy and treating the property well.
And a professional property management team can help owners attract and retain the best tenants to their industrial properties.
Midwest Real Estate News spoke with Carrie Szarzynski, senior vice president of the Midwest region at Hiffman National, about the growing need for industrial space in the Cincinnati and Columbus markets. Szarzynski spoke, too, about the benefits that property management teams can bring to these industrial properties.
Here is what she had to say.
How much demand are you seeing for industrial space in the Columbus and Cincinnati markets?
Carrie Szarzynski: Demand is growing in both markets tremendously. A lot of our clients from Chicago are looking to invest in both of those markets, and in Indianapolis, too, another of the markets we cover. That’s why we have done so much hiring in all three of those cities. We need to support the clients we have.
Industrial users are looking for locations that provide quick access to different areas of the country. These locations – Columbus, Cincinnati and Indianapolis – make it easier for industrial tenants to get their products out to other cities. That’s one of the main reasons why we are seeing more demand for industrial space in those cities: They are hubs.
Have higher interest rates slowed the demand for this industrial space?
Szarzynski: Not in industrial. A couple of our clients said at the end of 2022 that they would pause their activity at the end of the first quarter and wait to see what happened with interest rates. But it didn’t end up being the first full quarter of the year. We saw clients picking their activity back up after just a few weeks.
Most of our clients are not pausing right now. The consensus was that many would start 2023 with a pause. That didn’t last long. When you have money that needs to be spent, you can’t just stand still. They are more willing to spend than they are to keep their money sitting in the bank. They’re about getting that money reinvested, keeping it moving.
We are hearing more about industrial property owners hiring property managers for their industrial space. Why is this?
Szarzynski: A lot of it is the push for ESG, the environmental, social and governance aspects of sustainability. Property owners want to work with property management teams that have an understanding of the environmental improvements they need to put in place at their facilities. It could be something as simple as changing the lighting so that their buildings consume less electricity. It could be about supervising the type of plants and landscaping that are being installed at their properties. It all makes a difference when it comes to sustainability.
This used to be something that was just important for office clients. But we are seeing more of our industrial clients looking for green certifications, too. We have clients who are gathering information for their industrial tenants on how to reduce utility bills in industrial spaces. They need property management teams to help collect and organize that information.
Does professional property management help industrial owners retain their tenants?
Szarzynski: Having a large property management team or professional property management company improves the tenant experience. When industrial is so busy, with properties popping up everywhere, owners are trying to keep tenants in the buildings that they are already occupying. We are a part of that. When owners can say to a tenant that they work with a professional property management company, one with a long history of managing real estate, they have another factor to encourage those tenants to move to their facility or to remain in it.
The competition for tenants is high. People can move to different buildings. They are moving. They are considering their options. We are about making sure they have a positive experience, one that makes them less likely to leave a building.
What are some of the things that property management companies can do to keep tenants happy and to keep building owners informed about their properties?
Szarzynski: There are creative ways to connect with tenants. We have one person who does special days. He might bring hot chocolate to the tenants on a certain day. There is a National Animal Cracker Day each year. He’ll bring animal crackers on those days. Those are inexpensive ways to connect with tenants, to let them know that you are thinking of them.
We walk through our properties. We study what systems the buildings are using. We can recommend more efficient systems when necessary. We keep files on every vendor that goes into or out of that property.
We also take a layered approach. We have one leader above the property manager assigned to a property, maybe two. If that property manager wins the lottery and moves to Tahiti, the building owner is not left teaching a new property manager about the building and its systems. We have that covered with our layered approach.
What are property managers generally responsible for at industrial buildings?
Szarzynski: That has changed over the years. Back when I started in industrial, property managers made sure that tenants were doing what they were supposed to do, that they took care of what they were responsible for according to the lease. That has changed. Now we are responsible for most of the buildings’ care. We are usually responsible for landscaping, roofs, the building structure, parking lots, snow removal, just about everything.
We are responsible for identifying capital improvements that need to be made. Maybe the building needs to be painted or the signage changed. We assist with this. We are responsible for figuring out what tenants are doing in their spaces to be environmentally friendly. We recommend steps to tenants that they can take to lower the energy they consume. We are also responsible still for making sure that the tenants are doing everything that they are required to do according to the leases they signed.
Do property managers get many late-night calls about problems at properties?
Szarzynski: All the time. A lot of people think that office and industrial are very different. They are. But the basics don’t change. There are still emergencies. There are still calls at night. There are pipes that break. It might even be more challenging with industrial. If a pipe in an industrial building breaks, there is no labor there 24/7 like there might be in an office building. There is not an engineer or security guard keeping an eye on things. The water from a broken pipe might run longer in an industrial building. The emergencies are still the same, but the work needed to get the property back to where it was before the leak can be more challenging.
Are more industrial users turning to property management companies than in the past?
Szarzynski: Not so much with the big industrial boxes, but definitely in the flex space. Clients understand that managing 50 to 100 clients in a small flex property is more labor-intensive. More importantly, there is added risk if you are not watching that space closely. If you have a flex space with 30 tenants and not all of those tenants are doing what they’re supposed to be doing? That can cost you much more than hiring a property management company.
In 2022, we saw a huge increase in the amount of flex properties that we were managing. It’s important for industrial owners to make sure that their buildings are being maintained. That is an asset that the owner bought to make money from. Our job is to make sure they continue to do that successfully. You have to be more engaged with industrial tenants than most people believe to make sure that they don’t leave large costs behind for the owner when they move out.