Market trends are evolving, as is the role of property managers. Demand for new industrial and logistics space continues to soar, and choosing the right management company is not only important, but critical for ownership success in today’s climate.
But what should industrial owners look for when hunting for property management services?
Chicago Industrial Properties recently spoke with Carrie Szarzynski, Senior Vice President — Midwest Region, Hiffman National, one of the country’s largest industrial property management firms, about how the right team can make it easier for warehouse and logistics owners to attract and retain tenants at their facilities.
Perhaps the most important characteristic of good property management is the willingness and ability to form a strong connection with the tenant. Though one might assume many users operate independently, Szarzynski said maintaining a proactive relationship to address concerns and ensure the building is appropriately cared for is becoming more important — especially considering the flood of activity and the challenges associated in today’s market.
And because the unoccupied period in between tenants has lessened due to consistent demand, monitoring the building and its systems condition throughout tenant use has become necessary, as has paying close attention to tenant needs.
Environmental, Social, Governance, for example, or ESG, is also shifting the market significantly for larger institutional owners, which is changing how buildings are staffed. One PM team could manage 15-20 buildings prior to the rise of ESG, but with ESG becoming more important in the eyes of both clients and lenders, PMs’ list of responsibilities continues to grow. According to Szarzynski, PMs must now collect users’ monthly utility information so that it may be turned into ESG ratings.
“We hardly had anybody asking questions about ESG two years ago, but we’re seeing it more and more,” Szarzynski said. “Forty percent of our clients are already engaged and committed to it, and the others are asking questions daily. Many of our clients have also hired senior ESG professionals, and we must now report to them, as well.”
If a building owner wants to show ESG compliance, they must show the building is environmentally efficient, which is where PMs step in. Many clients are also looking to partner with PM companies who have implemented an ESG program within their own organization, which means PMs must concern themselves with not only ESG for the buildings and clients they work with, but dually, their own internal policies, as well.
Simply, ESG is changing the scope of responsibility for PMs in the market. But that’s not the only interesting shift.
Because the market is experiencing such competitively high trades, some of Hiffman’s clients are beginning to explore the acquisition of more Class B and flex buildings to achieve higher investment returns.
“You might have a one-hundred-thousand-square-foot building with seventy small tenants,” Szarzynski said. “That’s incredibly labor intensive and not our typical assignment. Finding creative solutions to cover costs is important because that’s a different level of involvement.”
“Creative” has been a frequently used word this year, as occupiers, or those who wish to rent, find ways to combat the market’s many obstacles. Tenants who want space will get it — even if at the expense of another available building.
Hiffman is also seeing clients buying unique properties, be it houses, office buildings, et cetera, to knock them down for their own industrial build-to-suit. It’s no longer just about finding open farmland. It’s much more strategic in the way clients seek to expand their portfolios, but it’s not solely due to lack of space. Location also plays a big hand.
“It’s incredibly competitive and has been for the last several years ,” Szarzynski said.
That said, Hiffman is starting to see a small slowdown in trading, which will likely continue through year-end, as a result of recent global events, concerns of recession and higher interest rates but it is not yet certain when or if the supply/demand imbalance will equalize.
One thing we know: PMs are essential in today’s market and, now more than ever, it’s crucial to remain responsive to tenants’ and clients’ evolving needs.
“Property management is more than collecting rent,” Szarzynski said. “It’s risky for a building owner to rent to a company without someone monitoring its use. Ensuring the [PM] team is engaged and involved with every building and every user is necessary, and it’s that much more important in today’s market to provide users the support needed to be successful in their endeavors.”