By Bri-Ann Stuart. When it comes to strengthening the bottom line, most people turn first to revenue generation. It’s fair; revenue generation can spark visionary conversations about new tenants, programming, and technology that could be brought on-site. In parallel to this conversation, however, it’s important that owners and managers of retail assets discuss where cost efficiencies can be found at the property. It’s a less glamorous conversation, but it could yield meaningful results.
Not sure where to begin? Throughout my career, I’ve identified a few areas to start:
- Go into budget season with fresh eyes
I cringe when I hear someone say, “For next year’s budget, I’m adding 3% across the board.” For my team, it’s an expectation that we are purposeful when creating a property budget each year. We prioritize major items first – such as contract cleaning and security – to determine if any savings can be realized. For example, some service providers will purchase their own supplies for a project. In this circumstance, ask yourself, “Is that necessary? Can I provide the supplies and avoid the upcharge?” Another best practice is to define controllable and non-controllable costs. For example, before the pandemic, consumers expected that retail sites would be cleaned in the evening. This sentiment has changed. Nowadays, customers take solace in seeing cleaning staff at work. Ask yourself, “Can I change the hours of our housekeeping staff to save on overtime?” - Consider collective tendering
When it comes to housekeeping, security, or waste removal, I’ve saved anywhere from 20-30% when negotiating a group tender. Material discounts have also risen for large ticket items such as roofing, asphalt, or HVAC, in the range of 3-10%. In addition to the dollar and cents argument, group tendering can help with competitive bidding, permit efficiencies, and service delivery.
At Colliers, our National Service division has a dedicated procurement team that builds strong relationships with group vendors across multiple sites to ensure high quality and responsive service. Recognizing that smaller retail sites may not be as attractive for a new vendor, group tendering ensures no site in a client portfolio is disadvantaged due to size or location. - Proactively plan capital projects
Playing catch-up is costly. I expect our teams to conduct annual reviews of each site’s infrastructure to ensure we’re planning for when upgrades are required. I’ve seen it one too many times, where larger capital projects – such as a roof placement – are not planned for in advance and then the project grows in scale, cost, and urgency. Furthermore, I encourage capital projects to be planned strategically with other site improvements – or improvements across multiple sites – to save time and money. What separates good from great property managers are those that can anticipate what improvements a future high-profile tenant might expect – a specific entrance for example – and build that into the capital planning process.
While there is no cookie-cutter approach to cost efficiencies, there are common questions owners and managers of retail assets should be asking themselves. It’s these less glamorous conversations that, when done properly, can strengthen the bottom line and provide the funding for the more glamorous conversations down the road.
(Bri-Ann Stuart is Vice President, Portfolio Management and National Retail, REMS, Colliers. The article was originally published on collierscanada.com)
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