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Customer-focused commercial property management service results in cost-saving

The service needs of each client and the management model concept that suits them are completely different and applying the same approach to everyone is unjustified, says Merike Kivisild, head of property management at Stell Eesti AS.

Tenders for commercial property management services should consider the expectations towards the service provider in great detail. The trend in current tenders is that businesses request a property management service at a fixed price and a specific manager who will provide such service. It may seem that clients are buying a specific person, and not the company’s services.

On the one hand, in real estate management it is very important who exactly performs the role of manager on a daily basis, but it should also be remembered that the company is in an employment relationship with the manager, and can terminate them at any time, or the manager himself can choose to leave the company. Therefore, the question should be as follows: if the manager leaves the company, what happens to the portfolio he manages and whether the chosen company will be able to guarantee the initially agreed upon quality service. If the decision to select a management company is made lightly and the partner cannot guarantee a consistent service, this aspect can become a headache for the property owner, partners, and tenants.

Having 11 years of experience in this field and managing service contracts using various concepts, I recommend choosing companies that have developed a specific management model with qualified administrative managers. For larger companies, multi-level management minimizes risks, and the service can remain high quality even if a particular property manager leaves the company. The more you initially invest in analysing the company’s capabilities and experience, the more benefits it will bring in the future. This approach guarantees consistently high quality of service and reduces risks – both for the service provider and the customer.

Apart from the personnel issue mentioned above, it is important to note that today’s tenders have a fixed price. In this way it is possible to compare companies on equal terms. In fact, the feasibility of creating a management service using various contract models in the current well-informed commercial property management market is quite low.

Today’s growing trend – and customer expectations – is to ensure energy efficiency of technical equipment and, as a result, cost savings. It should be remembered, however, that you can save money in other ways. If you choose the right partner for the provision of management services, with whom you are able to develop a very specific contract model, the main goal of the contract can be cost savings.

In Estonia, it is quite rare to find the following models of management contracts: cost plus, dynamic fixed price and below baseline models. Rather, they are applicable to international contracts to make agreements more transparent, and the savings in administrative costs can also be significant.

For example, savings can be achieved in a case where management of all administrative costs is transferred to the service provider, and the contract itself stipulates that the service provider immediately guarantees the customer 10% savings on the entire volume of the contract (cleaning of premises and territories, administrative services, technical maintenance, security service, office support service, administration). In this case, various service levels are also established (agreed with the client before concluding the contract). Therefore, the quality should not be reduced, and this type of contract brings additional value to the end user. Such contracts are transparent to both parties regarding all administrative costs.

The service provider’s interest is to conduct a detailed cost analysis and propose cost-saving solutions to the property owner to jointly achieve the set goal. Since management companies have no practice in implementing such a model or such practice is minimal, they often take a simpler route and enter into contracts for the provision of services with a fixed price. It is definitely worth choosing a partner more carefully, taking into account his experience and the content of his previous contracts, as well as the availability of qualified experts.

Today, the service provider managing the client’s administrative costs is not a particularly common model – rather, the service is purchased as required. Each client’s service needs and management model concept are completely different, and applying the same approach to everyone is unjustified. In the future, we must come to approaching each client individually, analysing their real needs for management services, already existing services, and be able to make an offer that would be appropriate and justified, corresponding to the goals and scope of the client’s activity, and not be overly preoccupied with a service based on a specific manager.

The article was published on the website Kinnisvarauudised.ee on 05.01.2024

Photo: Fotosioon studio