What are the six critical success factors in outsourcing property management?
Despite a number of significant outsources of property management teams in the past decade, many investors still choose to manage their portfolios in-house, understandably opting to retain a level of control and visibility over relationships with their customers, income flows, and asset management.
This is particularly prevalent when portfolios are concentrated either geographically or by sector, and when owners want to maintain and build their brand in the eyes of their occupiers.
However, the case for outsourcing is even more compelling – using a specialist third party to take on non-core activities allows the investor to focus on the more value-add activities of fund and asset management.
As Peter Drucker, advisor to heads of General Motors, Sears, and General Electric, once said: “Make sure your back room is their front room. In other words, don’t you do guard services at your plant. Get someone who specialises in guard services to do them for you. Get rid of in-house printing, in-house conference services, any business that isn’t at the core of your focus.”
Of course, as the UK’s largest independent specialist property management firm, we are firm believers in the virtues of outsourcing property management, and can bring a greater level of expertise, knowledge and energy to delivering this most important element of real estate investment.
Here we share six of the most critical factors in making a true success of it, based on our experience of some of the largest outsources in recent years…
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Collaborate to define the scope of service
From the very beginning, all stakeholders should collaborate extensively to define the specific service required for the particular owner. Use this process to set out clearly defined roles, service delivery expectations, and KPIs, rather than adopting a standard blanket scope of service.
Given that the investor/owner has managed the assets to date, it’s not uncommon to white-label the service to their specific requirements, which requires the property management supplier to swallow their corporate ego and act under the investor’s brand.
In our experience, joint workshops with property owners and other consultants have proven a useful tool to hammer out the shape and delivery of the service required, covering HR, customer experience, tech and systems, project timelines, contract oversight, and the governance architecture by which to escalate any issues.
This approach also helps create a shared vision that brings partners, stakeholders and suppliers together on the journey. This kind of preparation is key – and lays the groundwork for success.
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Take the customers’ view – establish lines of communication with occupiers
It’s vital to be crystal clear on ownership and navigation of the occupier relationship, and to establish firm guidelines as to when and why occupiers would deal with the property manager, or directly with the investor.
The beauty of dealing with a specialist property management company is that there is no conflict of interest. Property managers are free to focus on building productive relationships with occupiers, for the optimal outcome, free of pressure from external business functions.
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Commit to the teams involved to attract and retain critical talent
This can often be an unsettling time for in-house teams faced with the challenge of moving into the unknown: a specialist property management firm.
Yet there are big plusses for both on and off-site teams. Specialist property management firms like Workman are full of highly skilled property managers, facilities managers, accountants, and ESG experts with years of experience and expertise, working across portfolios and sectors for a diverse range of investors.
For individuals, moving to a specialist provides opportunities to develop skills and progress their careers, which are not available in an in-house team. Transferring to a specialist service provider with a canon of experience provides a clear pathway to learn, develop, and progress, while gaining a friendly environment, with the benefit of a significant number of long-term employees who have previously transitioned in this way.
If managed sensitively to reassure transitioning staff while demonstrating commitment to their future career development, the TUPE process mitigates operational risk through loss of knowledge, and reputational risk generated by negative staff feedback.
Done well, this becomes a virtuous circle, meaning expert property managers can retain IP, share and develop skills, while in the long-term attracting new employees dedicated to the business.
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Create a flexible service model built on trust
Just as the service delivery model is a moveable feast, so it follows that the accounting and reporting processes can be tailored to the needs and practices of the investor. Fundamental to this is creating a management model that establishes trust between the property owner and management firm.
For example, we’ve adopted a variety of different approaches to rent collection, including where the investor has continued to raise rent demands, and collect rental income directly.
Similarly, continuing to use the property owners’ systems can enable them to maintain a level of control or visibility after outsourcing the property management. This also enables them to retain ownership of data – an area that is increasingly seen as integral to the investor’s business model.
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Leverage technical skills and industry expertise
The specialist property management provider can often deliver expertise in complementary fields such as ESG and Building Consultancy, where regulations and industry standards are becoming increasingly stringent.
Meanwhile, our sector-specialist approach (retail, commercial, residential) means Workman property managers are experts in their field. Their additional expertise, experience, and learnings – cross-fertilised over the years from a range of investors – can accelerate performance.
Tapping into this level of knowledge and experience is priceless for building owners keen to gain an edge and get ahead of peers.
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Develop a shared future vision
Continued collaboration in the long term guarantees that both parties remain aligned.
This partnership approach, which goes above and beyond the typical client/supplier relationship, allows investors time and space to focus on their priorities.
Joint development of business plans, annual strategy, regular contract reviews – as well as seconding staff to the property owner’s offices on a part-time basis – are all ways in which we’ve previously developed a shared, long-term vision for how portfolios should be run.
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