Asset Management Fees for Commercial Real Estate
When you hire a company to manage your commercial property, you don’t expect they will do it for free, don’t you? Instead, you expect them to charge you with some money for their services. This sum of money is known as a property management fee.
In general, there are two basic property management fee types:
- Flat rated fee
- Percentage based fee
Flat rated fee is a fixed amount of money a company charges for its services. In other words, your rent or asset value doesn’t affect the fee. Depending on company’s pricing policy, you are to pay it annually or monthly for the services they provide. Moreover, a one-time payment for some extra services can also be issued on a flat rate basis.
On the contrary, percentage based fee depends on your rental income. So, given the fixed percentage, the more you get from your rents, the more you pay for managing your commercial unit. To calculate the exact fee amount, you need to multiply your unit price by the agreed commission rate.
Secondly, when it comes to percentage based fees, it is essential to distinguish fee basis:
- Rent collected
- Rent due (scheduled)
If the basis is the rent collected, you pay only when the subject of your contract with commercial property manager is rented. However, in case with scheduled rent basis, you pay even if your property is vacant. To clarify, the rent collected basis benefits the landlord, while the scheduled rent basis benefits the property manager.
To sum up, we recommend comparing the amount of fees based on fixed and percentage rates. If your rent value is high, it may be reasonable to select flat rated fees. Anyway, if your property management company applies percentage rate, try to negotiate a rent collected basis.
What Affect Property Management Fees?
Of course, no one wants to overpay. But chasing for the lowest price isn’t always a good practice. Especially, when it comes to management of your commercial real estate. Therefore, you need to understand the basic principle of pricing within the industry. And the basic principle here is you usually get what you pay for. That is to say, what scope of property management service you pay for.
The exact number of services that can be offered is difficult to estimate. It depends on how meticulously contract specifies the details. The number of 100 is not unheard-of. However, here we listed most demanded commercial real estate management services. For your convenience, we divide them on three main groups, depending on the subject they deal with:
- Tenancy related services
- Owner related services
- Property related services
Check the table to get more information about each service group:
|Group name||Activities included|
|Tenancy related services||
|Owner related services||
|Property related services||
Typically, commercial property owners prefer to apply all these options and expect higher prices, these services provided. However, really client-oriented real estate management companies don’t transfer some of these services into their fee. For example, advertising and lease renewal can be charged with no fees at all.
How Much Does a Commercial Property Manager Cost?
As we have stated earlier, the exact cost of commercial property manager depends on the scope of offered services. Still, we are ready to give you brief cost picture for a commercial property management industry in Dubai.
Typically, management fees here start with 5% and can come close to 7%. However, these quotes include only tenancy related plus a few of owner related services. For more dedicated packages, property managers usually charge from 6 to 8%. However, the commission rate can come up to 20% when it includes all ever possible services, from marketing strategies to pest control.
This means, owning an average priced retail shop with a rent of AED 100,000 you will pay from AED 5,000 yearly (a bit more than AED 415 per month) just for rent collection and administration services. To get more, be ready to pay from AED 6,000 to 20,000 (AED 500 – 1,667 per month). Do you own more expensive property, for example, a fitted and furnished office with a rent of AED 200,000? Then, your expenses can rise up to AED 1,000 – 3,300 per month (AED 12,000 – 40,000 yearly).
In contrast, BSO applies flat rated pricing to benefit the owners of expensive commercial property. Full information about our prices you can find on our website.
However, flat rated management fees for commercial property are not common in the UAE. For example, one of the most popular practices of property management companies in Dubai is to differentiate fee types. They can charge either flat rated or percentage based depending on what gives the highest payments. In addition, property managers charge these fees as a payment for one-time services. For example, it can be a AED 100 fee per a visit.
Given this, an AED 500 monthly fee BSO charges is just a golden opportunity! A lucky chance to relieve yourself from concerns related to managing your commercial property! So, it’s high time to contact BSO and discuss details of your contract.