April 28, 2021

What do we factor in for property budgets?

What goes into a budget for a commercial real estate building? How do we keep the owner’s vision for the asset in mind without putting unnecessary pressure on our tenants? For 3-4 months each year our REM teams perform the juggling act that is budgets for all our managed properties. NAI Elliott real estate manger Julie Fuhrman explains how we wrangle all the moving parts and come up with those numbers.

There are 4 components to the budget process.

The first is reviewing vendor contracts to get an idea of recurring costs. Vendors will give us an idea of if cost might increase or decrease and we assure that the cost itself is still warranted while maintaining the property at a good level.

Next is the client point of view. Considering what the owner or landlord wants from the property. Julie likes to consider what their vision is for their asset. Is it primarily income production or equity-based?

Third, we consider the tenant point of view. We want to make sure to stay competitive and that our triple nets are in the market while still providing the services that the tenants need.

And finally, there are expenses that we can’t control which are primarily the property taxes and insurance. These have a huge affect on our triple nets so they are an important piece of each budget.

As we emerge from a unprecedented and difficult year for our tenants, our goal is to keep our operating expenses at market rate. We don’t want to put any unnecessary pressure on our tenants.

With all those pieces put together, we are able to create a good game plan for the year. One that we hope will work for everybody.

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© 2020 NAI Elliott - All Rights Reserved

© 2020 NAI Elliott - All Rights Reserved

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