Common Area Maintenance (CAM) reconciliations for commercial properties can be a nerve-racking task. It is given that commercial real estate accounting can be challenging and tricky if not done diligently and timely. This is one area that is prone to human errors. Due to inaccurate and incomplete CAM reconciliations landlords not only suffer huge negative cost impact but inefficient reconciliations are often point of contention between tenants and landlords.
As you kickstart 2020, it is important for landlords to understand the impact of inefficient CAM expense reconciliation. And how streamlining this process can help improve ongoing leasing strategy, minimize costs while strengthening tenants’ experience and relationship.
Negative impact of poor CAM reconciliation
While part of CAM expenses such as property taxes and insurance are fairly simple to understand and calculate, it is the maintenance costs and operating expenses that are complicated, often resulting in errors. Consequently, wrongly reconciled expenses can either lead to thousands of dollars in loses for landlords or significant overcharges for tenants. Such inaccuracies, both undercharges and overcharges incredibly increase financial, operational and reputational risks.
Unlocking strategic value by improving efficiency
Besides the obvious financial consideration, enhancing the process of CAM reconciliation can help landlords significantly improve their market position that in turn influences the portfolio performance. Let’s look at how ramping up CAM reconciliation efficiency can unlock your potential to enhance overall leasing strategy.
- Tenant relationship – When the reconciliation process is accurate, transparent and timely, tenants understand and also pay on time. Punctuality and accuracy help landlords gain trust and boost relationship with tenants, and reduce CAM related conflicts. Transparency in how expenses are charged is a vital step towards creating a synergistic environment between commercial property owners and their tenants – a key to building brand reputation and successful leasing strategy.
- Increasing retail competition – As commercial real estate continues to witness rapid growth in retail properties, shrinking market share can influence leasing and vacancy factors. Rents may get competitive and landlords would vie to retain and gain tenants by adding incentives. In such a competitive environment every cost factor would impact the ability of any landlord to grow successfully into the future. And hence the growing need for establishing greater control over and management of CAM expenses.
- Negotiating future lease – To efficiently manage the performance of a commercial property it is important to negotiate a lease that covers landlord’s costs and is mutually viable and profitable. Streamlining the reconciliation process improves visibility into the expenses and provides a solid foundation for future lease negotiations based on data rather than assumptions, making the process easy, productive and effective.
Managing operations and portfolio performance
In a volatile and competitive landscape, commercial property managers need to focus on ensuring seamless operations. Which is why, they hardly have bandwidth to efficiently manage processes such as CAM reconciliation on time, much less implement process improvement strategies. However, as highlighted CAM reconciliation plays a key role in overall leasing strategy and financial stability. Commercial property owners cannot afford to not stay on top of recoveries or strain their relationship with tenants due to process errors. Therefore, it is advisable to engage specialized partners who can dedicatedly focus on managing CAM reconciliation using accurate process, advanced and efficient systems. This will also help save substantial cost as well as time that can be used to drive more strategic outcome in order to survive and thrive in an ever-shifting retail environment.
To know more about how Springbord can help you get started on the right foot from the start of the year, talk to us now! We will be happy to answer any of your questions and guide you through our service portfolio.