More challenges ahead

The main ideas underlying property management are to maintain the swift flow of rent revenue, to optimize the upkeep costs and – in the case of retail facilities – to provide assistance for tenants with regard to generating turnover. We work for property owners, but our role is to create a kind of buffer between the owner and the tenant, who can have very different expectations. The role can be challenging, but it is our job to assess the situation and forecast the future, with particular emphasis on avoiding drastic measures. Property management is about firm diplomacy, clear communication, accuracy and ultimately protecting and enhancing the asset.

Last year, it was the general opinion that the real estate world had become a tenants’ market after previously having had a long run as a landlords’/developers’ market. I do not fully agree with this opinion, because good projects are still enjoying a great deal of interest from tenants. Since the first modern commercial facilities appeared in Poland, business partners have been building up their experience, and gaining an understanding of their rights and limitations. So it is natural that they will want to exploit the current situation by negotiating the most favourable financial terms for themselves – a consequence of the experience they have gained and the changing financial situation. When we look at the retail sector, it turns out that the tenants who are currently negotiating or re-negotiating the conditions of their lease contracts are, for example, expecting owners to become more involved, e.g. in partially covering the cost of furnishings or by implementing stricter controls on the money spent on common areas and marketing. Of course, there is also pressure to lower the rents. In the office sector, where there is some increased supply of modern office space on the Polish market, potential tenants have more freedom to pick and choose, and incentives have become increasingly common (rent free periods, capital contributions to fit-outs, etc.). Property managers and administrators are facing more and more challenges as a result of the growing number of mutual liabilities. The more individual arrangements deviating from standard lease contracts there are, the more work there is in connection with contract execution, and the bigger the responsibility that is put on the shoulders of the administrators who implement the arrangements. Everybody will continue to rationalize expenses in 2010, including the costs connected with the upkeep of buildings. As a result, administrators are likely to start re-negotiating contracts with service and media providers.

Poland and the Czech Republic are in a relatively good situation compared to other CEE countries. Romania and Hungary are in a more challenging position, although there are signs of some improvement. The problems in these countries are connected with the reduced interest from potential tenants and the simultaneous lowering of consumers’ incomes, which directly affects the retail sector. For administrators this means that cooperation with tenants now has to be particularly close, so that they can better understand their situations and predict the problems that might result from them.

What will this year be like? We are expecting no spectacular changes compared to 2009, although there is a sense that investors and landlords are seeking increased levels of support and professionalism in respect of management and administration. Competition will grow due to an increasing number of companies offering their services in the property administration sector. The credit crunch has not only brought about a shake-up for retail companies: by reducing the number of new projects, the real estate business is also trying to sort out and strengthen property portfolio management. This, on the other hand, provides an opportunity for the more experienced and professional property managers, who will in turn provide real value added services for their clients.