The rapid expansion and globalization of real estate portfolios has massively increased the amount of data that property managers interact with. Managing cross-border holdings, tax jurisdictions, currencies and transactions is routine. At the same time, regulators, investors and tenants have elevated sustainability expectations for properties within their realm while imposing more stringent transparency and reporting requirements. Generating expected returns in this environment requires much more active management of revenue and expenses than was necessary even 15 years ago.
Commercial property management has evolved to mean more than maintaining ledgers, collecting rents and keeping the building lobby clean. How can operators satisfy an ever-expanding set of constituents demanding more, faster, better? Property management software can help, but choosing the right solution or solutions for your business requires understanding the past, present and future of real estate technology.
Evolving from disjointed systems
Leading up to the current era, employing multiple technology platforms to execute the various elements of commercial property management was the norm. These systems were characterized by reliance on widely dispersed data sources, risky data transfers and time-consuming manual processing. Lost or inaccurate data often was the price that property managers paid for this disjointed approach.
Starting around the 1980s, property managers realized that the best way to avoid the problems arising from multiple platform integration was to avoid it altogether. This understanding gave rise to a “single stack” technology platform that combined investment accounting, consolidations and investor reporting with asset-level operations such as online payments, procurement, online marketing and energy management. That development would elevate portfolio management technology from a tactical element to its current stature as the cornerstone of property managers’ success.
End-to-end software yields best results
What are the potential benefits of an end-to-end property management system that houses all front-office and back-office data in a single, connected system? Many commercial property managers report reduced cycle times and lower costs of ownership along with fewer errors and inefficiencies that are common with separate systems.
A key advantage of centralizing operating and market data is enabling the visibility necessary for immediate access to key performance indicators and reliable investor reporting. That matters because immediate and complete drilldown is a prerequisite of effective risk mitigation—from the fund level all the way to tenant-level transactions and property operations. In fact, the benefits of the single stack approach extend through the real estate lifecycle, from raising capital and investment management through acquisition and development to lease-up, valuations and forecasting.
Why is it so easy to drill down to source data with this setup? Because the underlying asset operations database is the same database used for investor reporting, portfolio reporting and investment accounting. There’s no added cost for customized software or data warehousing. Property owners and managers have one point of entry, eliminating the need to reload data among platforms.
Along with that, single connected property management systems are scalable for portfolio expansion. They can easily accommodate multiple property types, currency conversions, tax variances, language translation and other elements of multinational portfolio management.
Today’s single connected platforms also make it easy for users to add technologies for mobile and online payments, utility billing management, customer relationship management, facility management, budgeting and more. Again, there’s no data transfer and the core system’s security features apply to the new solutions.
Benefits to property managers and owners from a single system of record include:
• Clearer visualization of growth and profitability that’s needed to make informed decisions about leases, marketing strategy, acquisitions, dispositions and risk.
• Easier portfolio management with a single point of entry for asset management, reporting, investment accounting and other operations.
• Tenant satisfaction that drives retention.
• Greater confidence among investors who receive reliable, up-to-date information.
• The ability to forecast revenue growth from leasing deals in the pipeline.
• Alignment of forecasted capital spending for construction and development projects with actual to-date expenditures and the remaining budget.
• Effective management of operations-related controllable expenses such as energy.
Commercial property managers can take comfort knowing that coaxing separate technologies and systems to talk to each other, dealing with multiple logins and spending inordinate amounts of resources customizing applications are mere memories of a bygone age.
Maintaining continuous connection
A single connected property management platform reinforces the concept of all business operations—from budgeting and forecasting to emerging trends such as coworking membership arrangements—as an integrated whole.
Construction project managers, for example, can enter work orders with just a few taps on a mobile device. The order automatically flows to the back office and is recorded in the core property management software. The adjustment is visible to all parties, allowing the construction manager to stay onsite and poised to undertake the next task.
Deal reviews that previously required multiple emails or meetings can be done with everybody reviewing the same document simultaneously and communicating in real time via a built-in chat feature. Leasing agents can enter assumptions from the field; the information will flow directly to the budgeting and forecasting engine.
Example: Arcadia opts for ‘cool functionality’
“For me, going with the single stack approach was a no-brainer,” said Gary Shaw, president of Arizona-based commercial property manager Arcadia Management Group Arcadia Management Group. “It’s so much more efficient housing several business operations in one place rather than updating software in separate databases for finance and other operations.”
After choosing the core platform, Arcadia added new solutions for procurement, invoice processing and other operations. “Having a paperless procure to pay system with purchase order and invoice processing within the core system has saved time, money and resources. Our per-invoice cost dropped 60 percent, which translates to thousands of dollars and a lot of paper over a year,” Shaw said. “We can collect payments online, and tenants can update records and renew leases. That’s the cool functionality of the single stack that allows real-time records access and updates.”
He added, “When we had separate databases, we had to update third-party software every time there was a change to a property. None of them talked to each other. It was a disaster and a major time waster from an administrative standpoint. Now, having everything in one spot is great. We don’t have to make updates in multiple spots. Everything’s together in one place. That has been a huge time saver.”
Property management software benefits across the board
Business operations that benefit from integrated commercial property management systems include:
Procurement and accounts payable
Centralized property management software enables a fully paperless procure-to-pay process by integrating electronic invoicing with the accounts payable processing system. Integrating invoice processing, routing and synchronization with various accounts payable systems across an organization can eliminate paper and the cost of paper handling, reduces invoice cycle time and enforces process consistency across the organization. Cost savings of 20 to 80 percent have been documented.
Vendor invoices are scanned in bulk into the property management database, transformed into electronic transactions and routed through approval workflows that leverage the property management platform’s functionality. Payments are then made via EFT or paper check.
“Going green” has evolved from a slogan into a dominant credo of commercial real estate. Tenants, local governments and regulators increasingly expect sustainability in the buildings they occupy. The Urban Land Institute reported, “Real estate has been proactive on sustainability issues for many years. As a matter of self-interest as well as social responsibility, the industry is moving ahead to advance its sustainability performance regardless of the direction of national policy.” One of the most prominent examples is New York City, which launched the Climate Mobilization Act to decrease greenhouse gas emissions for commercial buildings by at least 30 percent over 10 years on the way to reducing such emissions by 80 percent by 2050.
A centralized property management platform supports efficiency in sustainability, as it does in other business operations, by allowing shopping, invoice processing, vendor management, spend management and analytics from one platform. Online catalogs—including green catalogs offering eco-friendly maintenance, repair and operations supplies—can be configured to match a company’s unique portfolio needs, allowing uniform standards and compliant purchasing.
The revolution in property management technology has also helped commercial property managers succeed in energy consumption management initiatives launched to satisfy regulatory, tenant and/or investment expectations. Modules built into the core property management platform help lower energy consumption and expenses without sacrificing occupant comfort. Automated, integrated platforms for utility billing and energy management offer insight into energy performance and the effectiveness of conservation and efficiency projects. Cost and consumption analytics help property managers spot errors and identify leaks. Demand response and remote turn-down of vacant spaces is also possible with thermostats that are connected to property management systems.
As an example of what today’s energy management software can do, SL Green, New York City’s largest office landlord, installed intelligent energy optimization technology in a 1.9 million-square-foot building. The solution has produced annualized estimated savings of 7 percent of heating, ventilation and air conditioning spend and increased its ENERGY STAR® score by 58 percent. The company received a 99 percent return on investment and simple payback in 1.2 years.
A centralized property management system unifies investment and property management operations as a single, fully connected organization. That gives investors easy access to information such as rent rolls, attributes for each investment, market values, internal rates of return and cash flows.
Portals connected to the property management platform can make thousands of pages’ worth of financial reports and other documents available online to any number of authorized users. That’s a lot of labor, materials and mailing costs saved. Furthermore, capabilities for receiving reliable information on demand inspire confidence among current and prospective investors.
Reports can take hours to compile when interfaces to the property management system have to be used. Mistakes could take weeks to correct. By contrast, full integration of all business processes enables report generation with the click of a button. Regional managers, for example, can immediately drill down into facilities reports, all the way to the transaction level if needed.
Implementation do’s and don’ts
Installing a single connected system of property management software that manages real estate assets from property to portfolio to investor is a smart move—if it’s done right. Steps that pave the way to a successful implementation include:
• Planning thoroughly. That means minimizing disruption by defining the purpose, technical and functional requirements, and expected outcome of the implementation. Seek expert advice on what you should upgrade and why, which options best meet your needs and whether implementation is best done incrementally or all at once.
• Vetting suppliers. Do your homework on who has the best record of success in the industry, offers the best value for your money and is most likely to be a long-term collaborator as your business needs evolve.
• Valuing versatility. Find out if your proposed upgrade will accommodate remote users, multiple real estate market segments, differing investment types, a diverse array of clients, varying accounting rules, multinational portfolios and other complex requirements of your business. You’ll also need to know if the new platform can scale as your needs grow.
• Confirming drilldown. Being able to drill into financial data to the transaction level is very important, especially if you’re obliged to comply with Sarbanes-Oxley or other regulatory requirements.
• Determine hosting. Cloud hosting provided by property management technology suppliers is increasingly the norm. This option often proves to be more cost effective than maintaining your own IT network infrastructure and handling licensing, disaster recovery and network security on your own.
• Consider external stakeholders. Look for solutions that enable superior reporting and services to tenants, suppliers and investors. These capabilities include online tenant rent payments and investor reporting. The right property management software can bolster the perception among clients and prospects that you’re a technologically advanced, reliable and efficient supplier.
• Prepare employees and clients. Rolling out new enterprise-level software requires time and resources. It’s a safe bet that the hearts of some users will remain with the old system, making effective change management essential for a smooth adoption. Educate your team members about the advantages of a new system and help them understand how it will improve business and enhance their daily routine. Tell your stakeholders how your new system will create a better experience for them. This also builds enthusiasm and acceptance for the project.
Things to avoid when considering a new software implementation include:
• Underestimating the impact. Implementing new software by definition means changing how you conduct business, ideally for the better. That’s why it’s vital to have a thorough understanding of your current processes and how the new property management software will impact them.
• Calling it “IT Only.” A major software implementation affects everybody, so all stakeholders need to be involved from the get-go. It’s also worth bearing in mind that every user represents a potential source of ideas for making the upgrade a smooth, painless, productive exercise.
• Scope escalation. This is probably a familiar implementation scenario. First there’s one change. Then another one. And before long the implementation has transformed into something you barely recognize. This sequence elevates costs and confusion while all but guaranteeing implementation delays. Avoid such trauma by making sure your project’s objective is clearly defined and universally accepted. If changes to the project must be made, manage them very carefully.
• Doing too much. Change can be discomforting, especially when it’s radical. That’s why phasing in new software is often better when done a bit at a time. A staged approach also makes it easier to demonstrate and track progress.
• Insisting on a custom fit. Tailor-made software sounds great. But is adding complexity and cost to the project really worth it? The most advanced real estate solutions on the market can meet most needs out of the box. That’s why it’s usually best to limit customization during the upgrade process or avoid it altogether. Any potential customization should be accompanied by a solid business case that justifies the cost of development and maintenance.
• Keeping it secret. Don’t keep your team members in the dark. An effective employee communication plan can promote acceptance and understanding of the project.
• Skimping on testing and training. Creating a test plan that loops in all project team members and end users will pay big dividends. So will identifying everybody who needs training on the new system and developing role-based instruction for them.
Reaching a better place
Technology no longer merely supports property management. It’s a crucial driver of revenue, tenant attraction and retention, stakeholder satisfaction and employee recruitment. As PwC and the Urban Land Institute noted in the 2020 edition of their annual real estate trends and forecast, “The rise of property technology has been rapid across all real estate sectors, and it is expected to intensify as competitive conditions intensify.” That trend has increasingly manifested in commercial property managers replacing multiple software systems with a single, integrated business-wide system.
“Real estate services of the future must evolve from building and systems management to the integrated management of spaces for users. In this new model, the manager becomes a performance manager with highly productive employees supported by advanced technology and analytic tools,” professional services provider Deloitte declared in a research report. “Data is the new gold: the future of real estate service providers.”
Real estate technology is indeed approaching this level of maturity. It’s catalyzing innovations that enable efficiency, visibility, tenant and stakeholder service, risk mitigation. It’s also maintaining connections in extraordinary circumstances such as the COVID-19 outbreak. By understanding technology’s potential and making strategic technology choices, commercial property managers can build more efficient and agile enterprises.
Joel Nelson supports strategic sales and marketing initiatives as a senior writer for Yardi. He also worked as a communications specialist for Boeing Space & Intelligence Systems and Hughes Electronics Corp. He has earned recognition from the International Assn. of Business Communicators (Award for Communications Excellence), Lawrence Ragan Communications Inc. (Top 10 Employee Publication) and Public Communicators of Los Angeles (Awards of Excellence). Joel earned a bachelor’s degree from Pomona College. Learn about Yardi’s decades of experience in providing comprehensive property management software solutions to public, private and nonprofit organizations around the world.