08 Jul Management keeps buildings at top of the game
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A study by international property services firm JLL shows that both residential and commercial developments that have been managed professionally and consistently have outperformed competing properties that are less well managed.
JLL, a property services company, recently carried out an internal analysis of sales’ price performance across luxury condominiums in four distinct neighbourhoods’ in Bangkok, including Chidlom, Phrom Phong, Thong Lor, and Ekkamai.
The analysis compares average selling prices at completion and average re-sale prices at mid-2016 between projects that have been managed professionally since completion, typically a period of 5-7 years, and less well-managed ones despite similar locations, characteristics, and market positioning.
Across the four neighbourhood’s, average selling prices in projects without professional property management saw compound annual growth rates ranging from 1.1% to 3.9%. In contrast, projects that have been managed professionally over the life of the project have experienced growth rates ranging from 4.2% to 8.5%.
At the neighbourhood level, average selling prices at professionally managed properties grew twice as fast as the comparable projects in Chidlom, seven times faster in Phrom Phong, 3.5 times faster in Thong Lor, and nearly twice as fast in Ekkamai.
The residential market is not the sole domain where quality property management is highly valued. The same study by JLL shows that consistent quality property management contributes greatly to the competitiveness of office buildings.
Professionally managed, Park Ventures Ecoplex, Sathorn Square, Bangkok City Tower, and Q House Lumpini have a combined occupancy rate of 97.1%, compared to the grade-A average of 91% in central Bangkok.
Just as important, achieved rents at these buildings are significantly higher than other grade-A buildings nearby, with achieved en-bloc figures fetching a 10-30% premium over nearby competitors.
On the other hand, multi-owner strata-titled office buildings face the same challenges in securing quality property management as do many residential projects.
These challenges include common area management (CAM) fees that are not high enough to support the same quality of management as in nearby single-owner buildings and juristic person conflicts. Generally, CAM fees range from 50-60 baht per square metre per month for most mid-high range residential condominium developments and 60-70 baht per sq m per month for higher-end developments.
To be clear, multi-owner buildings can be very successful in terms of occupancy. Examples include the Lake Rajada Office Complex near the Asoke intersection and Sathorn Nakhon Tower, adjacent to BTS Chong Nonsi.
Both buildings have occupancy rates of 99%, however, rents are in some cases as much as 50% lower than single-owner peers nearby.
Furthermore, rental growth in strata-titled office buildings has lagged behind both market-wide rental growth and steadily rising capital values (sale prices), leading to declining yields for investors.
At the same time, single-owner buildings like Park Ventures Ecoplex, Sathorn Square, Exchange Tower, and Sun Towers, all of which have been sold over the last 12-18 months, have achieved yields not seen since the depths of the recession in 2008-10.
Property management is more than just housekeeping and security work. There is plenty of evidence that without professional property management, real estate assets can lose competitiveness, no matter how well they were built.
Source: Bangkok Post