Management fees are spent on maintaining a property’s value, to everyone’s benefit.
Imagine you just moved into a new apartment, in a brand new building. The handover and fit out went smoothly, but instead of enjoying your new property you find yourself discussing service charges - a regular additional monthly expense - even though you are not in a rented property.
How can this be? Do we need service charges? Are these charges too high or maybe too low? As always, the truth lays somewhere in the middle. This is why condo owners and developers need property management companies.
Although there are a number of international property consultants in Vietnam, property management is still very new to the country and the expectations of owners are very different. “It always amazes me that people will spend hundreds of thousands of dollars on an apartment, but then complain about the monthly management fee,” said Mr Brett Ashton, Managing Director of Savills Vietnam, which now manages over 60 buildings in Vietnam and market some 40 developments, including retail, residential and office. “The management fee is there to protect their asset and ensure the building is properly run and maintained,” he added. “It costs money to keep lifts working, common areas clean, pay electricity and hire staff. If this is not done properly and not funded sufficiently, then the asset (people’s apartments) starts to lose their value.”
Mr Ross Lightfoot, General Manager of Knight Frank Hanoi - one of the world’s largest privately-owned global real estate agents and consultancies - is of the same mind. “It is obvious that inexperienced developers who manage the project themselves have had a lot of complaints from residents,” he said. “Those who engage a professional management firm to manage their project will have to pay higher management fees, and in turn charge a higher fee to residents.” If the management firm does a good job, there may be only one complaint about high management fees from residents. “If they do not, the situation becomes worse, with inevitable complaints and disputes,” he added.
Depending upon the services offered there will be a different range of fees, for swimming pool maintenance, waste collection, and gas and water delivery, among others. “It is not only the features of the building but the benefits and services that are offered to residents that make a project truly high-end,” Mr Lightfoot said. “Fees will be calculated to be affordable and reasonable to achieve satisfaction from both residents and the management board.”
Apart from Savills Vietnam, other property management firms such as CBRE Vietnam, Colliers, and Knight Frank Vietnam are also well-recognised in the market, followed by local service providers like Megagroup, Eden, Him Lam and VietRees.
Many people believe property management is “easy money” when in fact there is a lot of hard work involved and profit margins are slim. “We have worked with our client for over six years on this impressive development and it is incredible that the efforts of our client and the Savills team are being recognised globally,” said Mr Ashton. “It is crucial to understand the expectations of both the landlord and the market.
As the economy weighs upon real estate, understanding the changing dynamics is critical. We take the time to explain these changes to our clients so that together we can make informed decisions as to the best way forward.”
Landlords often believe that appointing a manager will bring best practice management that enhance the value of the project and the quality of life for owners. Mr Michael Piro, Director of Sales and Marketing at Indochina Land, which is developing Indochina Plaza Hanoi (IPH), one of the most anticipated high-end residential projects at the moment, told VET that it appointed CBRE as the official property manager of the Indochina Plaza Hanoi condominiums because the company has developed one of the most advanced property management systems in Asia, facilitating immediate client access to detailed asset information, and adding value by way of efficient evaluation and management of the property portfolio. “Our objective is to make fees as affordable as possible while allowing sufficient budget to operate the residences at a first-class standard while maintaining the quality common areas and facilities in a way that protects and enhances the value of the residences to the benefit of our owners,” said Mr Piro.
The real estate services market includes specific services for developers, owners, tenants and investors. A real estate service company usually offers consultancy services, property management, space planning, facilities management, corporate real estate services, leasing, valuation and sales for various types of property.
Clearly there is competition in the market from foreign and local firms for property management, but according to industry insiders this is healthy. “As the market remains relatively small, there is much competition to work on projects that are going ahead, particularly given the reduced number of projects coming online,” said Mr Craig Wallace, Manager of Valuation, Consulting and Research at DTZ Debenham Tie Leung (Vietnam). DTZ provides a full range of services including investment agency, leasing agency, property and facilities management, project and building consultancy, valuation, research and investment and asset management.
As the market is challenging at present, DTZ is finding that there are many opportunities to provide M&A services, helping parties to successfully form partnerships to invest in projects or to develop land. A key project DTZ is working on in this regard is the USilk City project in Hanoi, where they are providing retail consultancy. Sales and marketing advice is also core to DTZ’s business and at the present they are providing these services to clients such as Keppel Land, VinaCapital, IJM Land, Vietnam Land SSG Limited, and Lavenue, to name just a few. It also acts for many landlords and tenants in providing leasing and tenant advisory services in the retail, office and industrial sectors.
In 2012, property experts see competition becoming even fiercer as the market continues to witness fewer deals. However, such conditions also create opportunities for property management companies to work with clients in need of professional advice and assistance to help then get the edge over the competition.