Property Management 2000

Article excerpt

Property Management 2000 The 1980s proved a turbulent decade for property managers, as the real estate industry was thrust into the national spotlight and came under much closer scrutiny by legislators, lenders, and the general public. The litany of problems is familiar: savings and loans in crisis, near depression in the Oil Patch, extreme overbuilding in numerous markets, and keen competition for prime properties by aggressive--and often savvy--foreign investors.

Will the 1990s bring more of the same? According to leading experts we interviewed, the answer is a resounding "yes and no."

To be sure, the next 10 years will present continuing challenges. The S&L fiasco will continue to play itself out under the direction of the newly formed Resolution Trust Corporation (RTC). Slow economic growth may lead to a lower rate of industrial expansion, fewer new business tenants, and tough competition for the best ones that remain. Slow demographic growth means trouble locating and hiring enough competent new employees, a further brake to your industrial clients' progress, as well as a hindrance to your own company's expansion.

But there are bright spots on the horizon, too. As foreign investment wanes, U.S. institutions, particularly pension funds and big insurers, are expected to more than compensate, backing well-planned projects with patient, long-term money. The Big Boys will demand and appreciate professional management and offer handsome compensation to those who can provide it.

Indeed many experts believe that the 1990s will be the decade when the property manager becomes the "king." He or she will be asked to manage new--and often complex--types of properties, from warehouse space to small-business "incubators" to groups of single-family homes for rental.

Some experts predict a big jump in on-site provisions of day care, medical, and recreation centers within both office buildings and industrial compounds. And the futuristic "multiuse complex," in which families live, work, shop, worship, go to school, and are entertained within the same high-density building or group of buildings, may finally become a reality by the year 2000.

Who will supervise these exotic hybrid structures? Who will have to deal with tenants, subcontractors, government officials, and various other, still undefined constituencies. Why, the property manager, of course!

Below, we highlight trends that a national sampling of futurists and other experts believe will have a major impact on property management in the 1990-2000 decade.

The big picture

Institutions will

become major players

At present, U.S. institutional investors allocate on average less than 5 percent of their total assets to real estate holdings. "That is greatly out of sync with the rest of the industrialized world," comments Ivan Faggen, worldwide director of the real estate services group of Arthur Andersen & Company in Los Angeles.

Far Eastern and European institutions now keep 20 percent of their assets, on average, in real property. And Faggen is one of several experts who think U.S. institutions will attempt to do some catching up. "Many pension fund administrators have announced their intentions to raise their real estate portfolios to 10 percent or even 15 percent of assets within the decade," he says. "Projecting that out, using the conservative 10-percent figure, it could mean an extra $300 billion in domestic institutional money chasing real property by the year 2000."

What this means for property managers: While few institutions will choose to be more than passive investors in the projects they back, they will expect careful documentation of progress, costs, occupancy rates, and the like.

On the up side, there may be job opportunities. "Pension funds and other institutions may bring experienced property managers on staff as asset managers," says Faggen. …