Capital expenditures (CapEx) are a major driver of potential revenue in commercial real estate, but managing them can be a challenge. Fortunately, the right approach and proptech tools can make managing CapEx projects considerably easier, and set you up for success with future projects.
Here are five tips for property managers to best manage CapEx in commercial real estate.
1. Prioritize CapEx projects effectively
Sometimes, effectively managing CapEx means determining that you may not need to take on a project after all. While some projects are operational, such as upgrading an elevator or enhancing lighting for energy efficiency, other projects may be discretionary, such as on-site amenities like rooftop gardens or fitness centers. Further still come other projects that can influence revenue, like renovations to attract high-paying tenants or adding new spaces for retail tenants.
Find metrics or build out a scorecard to rank CapEx projects based on how critical they are, including factors such as urgency, potential return on investment, and impact on tenant satisfaction. This makes sure that you’re using your resources effectively, and you’re putting the most beneficial projects first. Simple metrics to start with could include return on investment, overall cost, and market conditions.
2. Develop a strong CapEx planning process and clear approvals
Whether you’re dealing with maintenance, expansion, or other strategic CapEx (such as smart building technology), any good project starts with a clear plan. Ensure that you create a detailed plan that includes project scope, timeline, budget, and potential risks.
The first step of this is rigorous approvals. With checks and balances within the business, everybody will be actively managing the parts of the project that they’re closest to – and will have clear visibility into the goals and progress of the project. Done right, this should make sure that any work will align with overall property strategy, and consider both short-term and long-term goals.
3. Keep a strong handle on CapEx project status
Clear processes around budgeting, expenses, and progress are critical to ensuring CapEx project success. This starts with a detailed budget and timeline – costs broken into specific line items, contingencies for unexpected expenses, regular cost reviews and progress checks, and a clear set of goals and checkpoints.
Some software tools are incredibly helpful for managing CapEx spending, especially across multiple projects or at multiple properties at once. This includes being able to centrally manage work in progress makes life easier for keeping tabs on multiple projects, and comparing which projects are having the most success.
4. Communicate project status throughout with all stakeholders
Open communications with property managers, tenants, contractors, and other relevant parties can make a big difference in maintaining strong relationships. This makes sure that everyone’s needs and expectations are met, and any changes to work or access to properties are well-understood by all parties involved.
The right platform can automate communications between property managers and tenants, and make sending notifications easier on both ends. With mobile capabilities and push notifications, you can keep tenants up to date on all things related to your most significant building projects.
5. Analyze your CapEx investments – and take lessons into the next project
It’s important to understand if your investment paid off, so you can understand how to better manage your CapEx projects next time. There are a few ways you can analyze it – from ROI analysis, to a post-project risk assessment, to a long-term impact analysis.
Doing this right means collecting a lot of data, and that’s made easier by having all of your data in one place. Instead of going into multiple tools at once, a tool that can give you a single dashboard with all of your data can save you time and ensure a clear understanding of your project. Budget, sustainability, NOI, and more all in one dashboard can be a major support from your building operations platform.
