Why Real Estate Investors Seek Out Hiffman National and Other Local Property Managers

From Chicago Business Journal:

By Wendell Hutson
Staff Reporter

As more global real estate investors turn their attention to theChicago market, more local property managers are needed.

That’s where companies like Hiffman National, a unit of Chicago-based NAI Hiffman, come in — especially as commercial real estate makes its way through the Covid-19 pandemic — said
Bob Assoian, executive vice president and managing director of Hiffman National.

“Good property management understands that solving the leasing problem is the most important thing we do, not just taking care of maintenance and operations,” he told the Chicago Business Journal. “This makes (owners’) life much easier, especially when you consider many owners — who can be private equity firms, pension funds and wealthy individuals— are not local.”

The national portfolio for the Oakbrook Terrace, Illinois-based firm is 130 million square feet, which includes 107 million square feet in Illinois. Industrial real estate accounts for 53 million square feet of Hiffman National’s portfolio, with the rest consisting of office and retail.

“What clients want from property managers is for them to be an extension of themselves,” contends Assoian. “There’s the commodity piece of property management like maintenance and collecting rents, but there’s plenty of companies that can do that piece of the business. Our company works with owners that value good property management by getting involved in conversations about how to spend money smartly.”

As a 35-year veteran real estate professional, Assoian expanded on which property type has performed well in Chicago during the pandemic and which ones have done poorly, as well as the No. 1 concern investors have these days about commercial real estate.

Which property type has been negatively affected the most by the pandemic?

Office has been hit hard by the pandemic as employees are slow to go back into the office. Retail has also been negatively impacted as a lot of consumers shifted to online shopping. We are seeing (that) office owners who invest back into their buildings are seeing good leasing activity in those buildings despite the overall vacancy rate for office around 20% nationally.

Then there are buildings that are simply vacant boxes because those owners may not have the funds to invest in their buildings. It’s important to note that people want to come back to the office to collaborate and do things they cannot do on Zoom.

It’s not all about downtown anymore, either. Sure, there’s the Fulton Market District that’s doing well, but good suburban corridors like the East-West are also seeing good activity as building owners make the best use of their space.

Why is industrial outperforming every other property type these days?

Right now, industrial is experiencing record-level leasing in the Chicago market, and some submarkets have a vacancy rate as low as 5%. Industrial is extremely hot right now, and there’s so much money chasing it largely because industrial is a lower-risk product, and you don’t have the same high costs when a tenant moves out. With industrial, a landlord may paint and put new carpet in the office, which is usually small, but otherwise you’re painting a warehouse or something like that compared to an office building where construction materials to build out space cost more.
Ten years ago, industrial was not a sexy product, but for the last five years it has been as sexy as you can get. The hottest areas for industrial investors to focus on (are) the I-55Corridor and in central DuPage County where there’s low occupancy rates.

What concerns do investors have about their properties?

Investors are concerned most about the uncertainty of the commercial real estate industry and how it might look six months or a year from now. Keep in mind that whenever there’s a crisis like the pandemic, there’s people looking to buy property at a vulture price. Crisis situations create opportunities for investors to be taken advantage of, and this worries them, especially office building owners.

In addition, some institutional investors who own a lot of commercial real estate want more sophisticated accounting and cost control (from their property manager), requiring more attentive operations management.

Read the article online in Chicago Business Journals.