Property Maintenance & Repair: There Is a Better Way.
by
Howard M.Wender, SIOR
Director of Business Development
Strada Real Estate Services, Inc.
Property maintenance and repair. Not a very glamorous subject and certainly not high on the food chain in the big wide world of commercial, retail, and industrial real estate, but is no less important than filling a big vacancy, disposing of surplus property, refinancing an asset or creating a safe and secure environment for employees and customers. Whether dealing with a single property or an extensive portfolio, there are as many ways of addressing this issue as there are different property types. How can an industrial REIT lease space if vacancies are in disrepair and show poorly? How does a bank compete for business if several of its lobby lights are burned out or if ceiling tiles are stained? How does a large company with multiple locations deal with such issues as maintaining surplus property? Property maintenance and repair is the “nuts and bolts” of the industry, and it is the infrastructure by which it succeeds or fails.
Whether one is an investor or user of real estate, he or she grudgingly enters the maintenance and repair business because of the assets they control. As a result, these costs are not always considered an opportunity to save both money and the valuable time of human capital.
Since 2002, Strada Real Estate Services has applied a proven model that allows owners to gain real savings from maintenance and repair. The following example demonstrates the savings derived from outsourcing the maintenance and repair of one suburban bank building:
Year 1
Year 2
Year 3
Existing Maintenance Employees
$ 40,560
$ 41,777
$ 43,030
Client Management Time
$ 6,760
$ 6,963
$ 7,172
Annual Maintenance Contractor Costs
$100,000
$103,000
$106,090
Estimated Annual Maintenance Budget
$147,320
$151,740
$156,292
Strada Technicians
$ 74,880
$ 77,126
$ 79,440
$ 1,690
$ 1,741
$ 1,793
$ 50,000
$ 51,500
$ 53,045
Proposed Annual Maintenance Budget
$126,570
$130,367
$134,278
Annual Savings *
$ 20,750
$ 21,373
$ 22,014
(*Annual Savings are approximate and, in our experience, occur in most scenarios. However, they may not be achieved in all circumstances)
Although the cost of the maintenance technician is greater in the Strada model, a 14% annual savings is realized by lower maintenance-contractor costs -- as many minor issues that typically had been handled by licensed professions (plumbers, electricians, etc.) can be more economically resolved by Strada technicians -- and by the reduction in client management time (valuable human capital).
Strada Real Estate Services was created by people with extensive knowledge of property management and was organized to meet the real need for a cost-effective and professionally managed process. A major frustration of anyone responsible for a portfolio of assets is the need to contact different vendors for electrical, plumbing, mechanical, etc. Our corporate mission is to establish a new level of service by packaging the complexities of property maintenance into a single 24/7 central source of responsibility.
If you have any specific issues you would like to discuss, please call me at (630) 325-9301, Ext. 208 or email me at hwender@stradarealestate.com.