2009 NNN Rates Determined: Costs Back Under Control in the Upper Valley

By
Commercial Real Estate Agent with Lebanon Property Management, Inc

Maintaining a cost of living increase that is in keeping with the surrounding area, marketplace, and competing properties is of utmost importance to keeping a commercial property occupied.  Some of you may have read a previous post comparing 2007 - 2008 dramatic cost increases in the Upper Valley - Dartmouth - Lake Sunapee Region of New Hampshire.  I am pleased to offer this follow up report to demonstate the effectiveness of cost cutting measures taken by our Company, in turn creating marketable properties with low to zero vacancy.

 

As you see, the table below, shows one property that reports a decrease in overall expenses in 2009, resulting in some nice refund checks to tenants, a sure way to a happy customer!  The second property, with far greater annual upkeep and expenditures, was still able to maintain a reasonable price increase due to some smart money management on the part of our property management company:

Lebanon Property Management, Inc.

Both properties had seen an unreasonable and extreme cost increase in 2008 for each of the listed categories.  For both, grounds maintenance was the 800 lb. gorilla in the room.  We had been sub-contracting all of our grounds maintenance services out to other businesses in the area without a service contract since we do not provide property maintenance services - only management.  We were able to shave well over half of the total expense simply by signing a service contract with a different provider.  Of course the caveat is that with a budget plan such as this, some months you win/loose more than others.  The upside is that not only is the expense pre-determined and budgeted for, more times than not, with an annual contact including grass cutting/landscaping it will balance itself out with the snowfall.

Other expenses listed here aren't quite as controllable as the grounds maintenance might be however we were still able to beat out the prices of gas/oil by signing a price agreement plan for the year.  Buyer Beware: prices CAN decrease after signing a contract.  That is the way of the marketplace however, for us, we were able to settle on a price that we felt that - even if the market went down slightly - we were comfortable paying.  The more properties you manage & gallons you pre-buy, the better your pricing.

 

Lebanon at a glance:                  2008 Rate/ft² = $8.91                2009 Rate/ft² = $8.48

Expense

2008

2009

Electricity

$10,200

$7,000

Grounds

$19,700

$9,320

Heat

$32,800

$31,051

Taxes

$64,500

$63,633

Water/Sewer

$2,200

$2,165

Hanover at a glance:                  2008 Rate/ft² = $8.32             2009 Rate/ft² = $8.50

Expense

2008

2009

Electricity

$35,100

$25,670

Grounds

$41,000

$8,705

Heat

$27,700

$37,032

Taxes

$105,200

$109,122

Water/Sewer

$10,200

$7,714

 

In conclusion, we are so pleased that all of our hard work has been repaid as we are starting out our 2010 year with one property (Hanover) completely rented! Our vacancy rate had been nearly 25% at the beginning of 2009. Higher NNN rates not only compromise your Base value, they effect tenants pocketbooks and therefore your bottom line.  If a space is vacant, your client-owners are the ones footing the bill for all those spaces - vacant or not - that still continue to rack up expenses.  Your clients, customers, and your paycheck will all appreciate a bit of money management skills passing through.  NNN cost savings is a win-win-win situation!

 

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