Commercial Property Management Pricing Guide 2024

Are you aware of how much commercial property management services cost? Discover how accessible providers are and what drives pricing.

Commercial property management is an essential part of any commercial property owner’s operation. Commercial real estate investments require a different toolkit and understanding than residential property management, so it’s best to seek a service provider to meet your needs long-term. Like any professional asset management service, it comes at a cost. Learn how to anticipate what property managers charge with our guide.

Real estate property is at the center of businesses. While remote work has picked up steam during the pandemic, there’s no replacement for in-person collaboration in an office space. This is why commercial investment properties are still heavily in use.

Generally, a commercial property management company would take control of larger spaces, handling things like maintenance and tenant issues.

As you can see above, the cost of commercial property management can range by many thousands of dollars. This is because all properties, property owners, and tenants have a different scope of needs. It’s a property manager’s job to identify and fill these needs as they upkeep the property and act as an owner-tenant facilitator.

Commercial Real Estate Services Costs by Service Type

While commercial property management can certainly be a full-service endeavor, some service providers specialize in a particular area in the industry. Below, you’ll find a few of the niche service types and their associated costs.

While these services don’t showcase cost variance for projects on Clutch, it’s important to note that the scope of a client’s work will dictate the final cost of services.

What is the Real Cost of Hiring Commercial Property Management Companies?

The average cost of hiring a commercial property management company on Clutch is less than $25 per hour.

It’s important to note that, typically, commercial property managers do not charge by the hour because engagements in this industry tend to last much longer than a few months or a year. When companies choose the commercial property management company they wish to work with, the expectation is for there to be a long-term relationship.

For this reason, it’s much more common for companies to charge monthly for their work, while adding on fees and additional costs over time.

Pricing Models Are Consistent, But Commercial Property Management Fees Vary

Pricing can be difficult to pinpoint for property management engagement specifically, not because of differing pricing models, but due to fee structures and the laundry list of potential fees one may incur in any given month.

Most commercial property management companies charge a flat fee for standard monthly services. This flat rate serves as the foundation of the pricing model, staying the same from month to month. It’s intended to cover general services such as tenant screening, administration and correspondence, and lease preparation.

Of course, the terms of what is and is not covered by the flat rate differ between companies and should be discussed before signing a property management contract.

If a property management agreement isn’t set on a predetermined flat rate, it’s also possible that they charge a rate based on the percentage of rental income collected from the property.

The exact percentage will vary based on the type of property, its location, and overall market conditions, but it should stay relatively consistent once you sign your agreement. However, it is important to note that, under this pricing structure, your payment amount will change if you choose to raise the monthly rent for a new tenant in a way that increases your rental income.

*Tip: Charging late fees on rent payments can also enable a higher payment to your commercial property management company because it increases your rental income for that month.

Commercial Property Management Companies Charge Additional Costs and Markups

Partially because of their standard pricing models, property management fees will move the needle on cost.

In addition to the flat monthly management fee described above, these are a few costs that may be incurred:

• Vacancy fees: some property management companies will charge a small fee per unit that remains empty over the course of a given month
• Lease up and lease renewal fees: a flat fee charged to renew a lease for a current tenant in your building
• Eviction fees: property management companies can handle evictions for a flat fee as they’re requested
• New account setup fees: a one-time fee for initial onboarding with the commercial property management company
• Maintenance fees: when a contractor performs maintenance on a unit (or the entire property), the management company may charge a which may include a 5-15% markup on the end cost

The above are very common types of fees that property owners see added from month to month, but plenty of other potential fees are added with less frequency. For instance, owners may see add-on fees for tenant placement, property marketing, legal services, financial reporting, or project management for property renovations or capital improvements.

Some of these fees have the potential to surprise, and the last thing a property owner wants is sticker shock. Make sure you’re on the same page with your management company by discussing fee structure upfront before signing a property management agreement.

What Services Can Commercial Property Management Firms Deliver?

Commercial property management companies offer a wide range of services to help property owners and investors effectively manage their commercial properties. These services are wide-ranging: property operations, tenant relations, financial management, and maintenance.

• Property Maintenance and Repairs: overseeing property maintenance and repairs, including coordinating landscaping, janitorial services, HVAC system upkeep, and general repairs.
  
• Tenant Procurement and Marketing: assisting property owners in finding tenants for their properties through tenant screening, lease negotiation, and lease administration tasks. More specifically, this could include advertising available spaces, conducting tenant background checks, and managing lease renewals or terminations.
  
• Financial Management and Reporting: handling financial aspects of property ownership and operations, including rent collection, financial reporting, budgeting, and expense management. Further, property managers may also handle utility bill payments, property tax management, and other financial obligations on behalf of the property owner.
  
• Lease Administration and Documentation: drafting and reviewing lease contracts, tracking lease terms and renewals, and ensuring compliance with lease agreements. Property managers also handle tenant move-ins and move-outs, conduct property inspections, and document the condition of the property.
  
• Tenant Relations: promptly addressing tenant inquiries and concerns, handling complaints, and serving as the tenant’s main contact. This fosters tenant satisfaction and retention, which keeps occupancy rates up.
  
• Risk Management and Compliance: staying up to date on local regulations, building codes, safety standards, and environmental regulations to ensure the property remains in compliance. Property managers implement risk mitigation strategies, conduct regular safety inspections, and address any compliance concerns promptly to minimize legal and financial risks associated with the property.
  

Why Do Clients Value Commercial Property Management Services?

The advantages of hiring a commercial property management company are seemingly endless. So much so that a property manager is viewed as a necessity by owners everywhere.

If you’re still not convinced, here are some of the most impactful ways a service provider can contribute to your success:

• Time and Resource Savings: By hiring a commercial property management company, property owners can offload the responsibilities and free up their time to focus on other important aspects of their business or personal life.
  
• Tenant Satisfaction: Effective tenant management ensures a positive tenant experience, leading to higher tenant retention rates, reduced vacancy periods, and a stable cash flow for property owners.
  
• Cost Efficiency and Vendor Management: Property management companies leverage established networks of trusted vendors and contractors to obtain competitive pricing and ensure quality services for property maintenance, repairs, and renovations.
  
• Emergency Response: property managers act as a central point of contact, coordinating emergency services and implementing contingency plans. Their swift response helps protect the property, mitigate damages, and ensure the safety of tenants and occupants.
  

Hiring a commercial property management company may seem to be all about peace of mind. However, it’s also key to streamlining property operations, enhancing tenant satisfaction, and maximizing property performance.

Factors That Influence Commercial Property Management Fees

The cost of working with a commercial property management company can vary based on several factors. Aside from the differing fees discussed earlier, these indicators signal when the cost of a commercial property management company is going to cost more than normal.

• Property Size and Type: larger properties or properties with complex structures, such as shopping centers or office buildings, require more extensive management efforts and costs.
  
• Scope of Desired Services: the more comprehensive the services, the higher the cost is likely to be. For example, a property management company is responsible for tenant procurement, lease administration, maintenance coordination, and financial management, will cost more compared to one providing a more limited set of services.
  
• Property Condition and Maintenance Needs: Properties that require extensive repairs, regular maintenance, or have aging infrastructure may require additional resources and specialized expertise to ensure proper upkeep.
  
• Property Market Value and Rental Income: Higher-value properties or properties with substantial rental income may command a higher management fee, as the property management company's efforts contribute to maximizing the property's overall value.
  

Professional Property Managers Ensure Profitability for Property Owners and Real Estate Investors

Running a commercial property is a lot different than turning a single-family home into a rental property — tenants are large-scale organizations with expectations, and there are different local regulations to follow.

Don’t go it alone — hire a commercial property management company to facilitate a great relationship with tenants and take care of day-to-day operations, so you don’t have to.