The world of real estate, incorporating the concepts of real property and property management, is evolving at an alarming rate. This growing demand for effective professional property management, facilities management and asset management is partly due to the increasing numbers of individuals entering the field either as investors or occupiers. Since properties portray complex and unique characteristics, property owners may be inhibited from being able to manage their properties sufficiently, thus giving rise to the development of these various professions. All three phenomenons form a fundamental part of real estate investment, and through the efficient execution of the concepts, an investment has the ability to enhance its intrinsic value. This review critically examines the generic attributes of property management, facilities management and asset management relating to real property, the differences that exist between these aspects of the overall management of properties and the common characteristics that are prevalent between them.
In order to review the generic property, facilities and asset management literature of real property relating to these topics, it is imperative to derive the meaning of real property. "To own real estate, requires possessing the physical property and acquiring certain legal rights to its continual utilisation and redistribution" (Sirota, D 2004). These rights in the property relate to possession, control, exclusion, and disposition, and they convert the concept of real estate into real property. Real property can cover a wide spectrum of duties, and therefore could be defined as any portion of land and the improvements made by human efforts, which are more or less, permanently attached to the property. This concerns anything from the "earth's surface extending downward to the centre of the earth and upward into space" (Kyle, R 1998).
"Property management denotes the management of commercial, industrial and residential real property, which involves overseeing the use, care, or disposal of the acquired property" (Cloete, CE. and Van Niekerk, A. 1994). Various systems, processes and manpower are utilised to manage the life cycle of the property under review. Complex characteristics of properties limit the ability of owners to manage them efficiently, therefore giving rise to the evolution of property management. The profession aims to fullfill the objectives of property ownership by maintaining the value of the property through either achieving a required return, or upholding the suitability of the property for the required use. Recently, the importance of property management has become increasingly apparent to property owners, as during times of economic recession and rising costs, there is a possibility that their investment may deteriorate if the quality of management does not meet the required standards.
The main function of property management is to meet the demands and requirements of both the investor/owner and the occupier/tenant concerning a real estate property. The owner must be ensured that profits will be generated, while the tenant must be provided with general satisfaction regarding the property. Real property management usually consists of various areas of responsibility, which need to be addressed in order to maximise or maintain the overall return on an investment. These areas relate to rental or leasing of an acquired property, maintenance, marketing activities and disposal of real property. The profession involves property managers who, through a combination of unique skills, qualities and knowledge acquired, strategically manage property in accordance with the needs of property owners. Property managers can be classified into 3 categories, namely: "an individual entrepreneur, a member of a real estate firm specialising in property management or a member of the property management department of a large multiservice real estate company" (Kyle, R 1998). However, regardless of their category, property managers all pursue similar characteristics in order to achieve the defined objectives.
Generally, property managers require skills that allow for effective interaction between owners, tenants, employees and outside contractors, in their "attempt to generate the greatest possible net income for the owners of an investment property over that property's useful life" (Kyle, R 1998). Property managers have the duty to choose between the various kinds of real estate that require professional property management, ranging from, residential, commercial, and industrial to special-purpose properties.Â Residential real estate, taking the forms of single-family homes or multifamily residences, portrays the largest demand for professional property management. It is imperative that property managers consider different housing laws when dealing with residential real estate, as government and owners could impose various regulations, having detrimental effects on the overall management of the property. Ultimately, property management, through the specific duties of the property manager, aims to supervise the functions of income producing residential or commercial properties, ensuring that these real estate investments provide their expected revenues. A thorough and comprehensive understanding of the real property market, including economic forces, needs to be assessed by the property manager to ensure that the specific type of property can be "evaluated in terms of its future potential and operating income" (Baird, F 1999). Being able to evaluate the real estate market and recognise various trends is an important credential of a property manager, as it enhances preparation of economic fluctuations and unforeseen crises. Through an assessment of market behaviour, various adjustments can be made to rentals and other factors within their control, reducing the effect of disruptions in the real estate cycle and maintaining low vacancy rates, therefore increasing owner satisfaction.
The property manager and owner need to assess the structure of their relationship, as three basic relationships can exist, namely: "formal fiduciary relationships, employer-employee arrangements and principal-agent arrangements" (Kyle, R 1998). However, the roles and responsibilities of each professional in the above relationships are very similar, based on accuracy, skill and loyalty. Property management involves the assembling of a management plan, outlining the owners' objectives and property manager's responsibilities', with the intention that adaptations can be made in accordance with future market changes. A management plan "is the financial and operational strategy for the ongoing management of a property" (Kyle, R 1998), and includes a detailed analysis of the market, subject property and application of owner's objectives. The market analysis includes a regional and neighbourhood analysis, which is valuable for interpreting economic trends and determining the optimum income that can be realised from a building. A crucial aspect of the management plan relates to the congruency achieved by the owner and property manager in pursuing the owner's objectives towards the investment. Once this is achieved the property manager can finalise the proposed management plan.
Various other essential duties and responsibilities on the property mangers behalf involve assessing tenant occupancy, collecting rental payments, inspection of premises, and ensuring that taxes, insurance premiums and maintenance bills are paid. Understanding the needs of tenants is critical in developing a respectable and sustainable tenant/manager relationship. If a property is not managed correctly or if tenant occupancy is low, the return on the investment is jeopardized, tenants become dissatisfied and marketing costs increase (Kimmons, J 2008); therefore emphasising the critical importance of securing tenant satisfaction. Property management aims to ensure that tenants receive value for the amount of rent paid and services promised during lease negotiations. Rental increases have a detrimental effect on the property manager and the tenant, as a tenant does not want to pay more, and the property manager wants to retain the current tenant. A property manager needs to assess the situation carefully, as eliminating services or maintenance activities to reduce rental payments may in the long run affect the desirability of the property, and in turn replace high-quality tenants with lower-quality tenants. "When vacancies occur, property managers may advertise the property or hire a leasing agent to find a tenant" (Property, Real Estate, and Community Association Managers, 2009). Another fundamental requirement concerning property management relates to rent collection, which concerns the prompt payment of rent by the tenant on specified dates. If the tenant fails to pay rent on the agreed date, the property manager must follow a specific procedure before the appropriate legal action is taken. If a lease agreement is terminated by either party, the property manager and tenant must inspect the premise before the tenant leaves and another inspection must occur once the tenant has removed any personnel property.
Management of real property usually requires an integrated approach to coordinating and managing a properties buildings, workplaces and infrastructure, involving the safe and secure operations of the asset, while supporting the primary objectives of the property. This refers to facilities management and is constructed in a cost effective manner, aimed at long-term preservation of the property value (Wikipedia, Anon. 2009). Facilities management is a concept adopted on a worldly basis, and has been increasingly utilised with properties due to the "increasingly high cost of space to the owner, the impact of information technology and global competition with the resultant pressure on organisational efficiency" (Barrett, P. 1998). The phenomenon deals with various principles relating to real property, concerning operational issues of maintenance, tenant security and cleaning. As properties possess unique characteristics and attributes that contribute to their complexity in nature, there is an extreme emphasis on the importance of reducing costs during their operations. Facilities management allows for a strategic and tactical management function to counter act the issues of complexity and rising cost associated with properties.
Facilities management preserves the surrounding environment of a property for its tenants, and the measure of this performance in relation to functionality can be critiqued by tenant satisfaction. Most properties are seen as worthwhile investments provided they are able to "support and accommodate a wide range of activities, while taking into account competing needs" (Atkin, B. 2009). With the attractive potential investment benefits that properties portray, it is crucial that significant emphasis is placed on the roles and responsibilities of supporting services. Reducing operating budgets of a property may increase initial financial benefits, however will detrimentally jeopardise the future development of the property. Facilities management portrays a holistic view of the "dynamics of the workplace that arises between the people and processes adopted and between the people and their environment" (Atkin, B. 2009). It consists of a variety of principles, which strive for the functionality of the built environment by formulating a fruitful interaction between people, place, process and technology.
Facilities management adopts two common approaches to performing various services for facilities - an internal and external approach. The external approach is known as "outsourcing" and has become an important concept in the facilities management process. Outsourcing has numerous beneficial and detrimental effects on the overall operations of a property. It refers to when owners contract with external organisations to provide services which cannot be provided internally. This provides owners with more resources and time to focus on broader issues within the property, therefore reducing the load of other "internal" professionals concerned. There is however, a perception that this concept negatively impacts facilities management and the operations of the property. Firstly, outsourcing eliminates direct communication between owners and tenants, preventing the establishment of solid tenant relations, and ultimately resulting in tenant dissatisfaction. Secondly, owners may in the future, be unable to control various aspects of the property, as outsourcing may "lead to delayed project implementation" (Francois, C. 2010). The internal approach concerns in-house facilities management, which is defined as a service directly employed by the owner. The in-house approach is preferable where the facilities management concept requires building skill and knowledge for improved customer service. More importantly, the "in-house approach has been found to improve tenant satisfaction, which aids in improving productivity" (Kamarazaly, M. 2007).
The management of any property or building entails dealing with innumerable risks, which arise during the process of meeting the owner's objectives. These risks need to be assessed and analysed as they hinder the possibility of achieving best value, however through awareness of the risk, opportunities may arise, to counteract the potential risk. Effective facilities management comes from being able to initiate strategies that are able to eliminate risk and in turn add value to the intentions of the property. Facilities management forms an integral part of the operational phase of a properties life cycle, as facilities relating to a property need to be fully functional, efficiently managed and utilised to their capabilities in order to enhance productivity and support the owners objectives. The development of an effective facilities management strategy is required in order to satisfy tenant expectation and ensure performance of services. This strategy will incorporate an analysis of objectives, resources available and relevant facts, while criteria will be drawn up to evaluate the objectives of the owner and then an "implementation plan will be established that includes the critical aspects of mobilisation training, review, feedback and procurement" (Best, R. 2003). There are two perspectives in analysing facilities management, a short-term perspective and a long-term perspective, both consisting of different outcomes and requirements. The short-term perspective focuses on maintaining or improving current services, while the long-term perspective assesses the potential changes that a property will encounter in the future and determines how these changes will affect the operational aspect of a property. As facilities management entails a strategic and operational role, owners and facility managers have important functions to fulfil. Strategically, owners need to be "aware of potential impact of their decisions on the provision of space and services" (Alexander, K 1996), while facility managers, from an operational perspective, must ensure fully functional operations to create an optimal environment for occupants to operate in. In order to meet the strategic needs of a property, it is important to provide and sustain an operational environment.
The operations relating to the professional discipline are carried out by a facility manager who is primarily concerned with the objectives of the owner and the needs of existing tenants in relation to the use of the building/property and other constructed facilities. The other professionals required for effective facilities management are the "special consultants and service providers" (Best, R 2003). Each professional is responsible for a particular duty in the facilities management industry and in order to enhance the use of facilities management a balance of professional responsibilities needs to be maintained. The facility manager has the responsibility of preserving and overseeing the operations of large commercial buildings and other properties. These responsibilities include repairing and improving the infrastructure of the property, while also identifying and restructuring new projects to improve the properties current facilities and ensuring up to date maintenance for tenants, owners and visitors. The role of the facilities management team is to allow for the day to day operations of services of a building to run smoothly and effectively without any distraction to tenants and in a cost-effective manner. Facility management is responsible for every aspect of building maintenance, security and grounds maintenance in relation to the physical operation of a property. Facility managers may also be liable to negotiate terms of leases and offer extra facilities which may not be included in the original landlord-tenant lease, while serving as mediators in disputes arising amongst tenants.
The entire concept of facilities management promotes a professional environment that encourages the desired operations of the facility, while removing any unnecessary burdens on the functionality of individuals, owners and tenants. Therefore after a thorough analysis, facilities management can best be described as "creating an environment that is conducive to carrying out the organizations primary operations, taking an integrated view of the services infrastructure, and using this to deliver customer satisfaction and best value through support for and enhancement of core business" (Atkin, B. 2009).
When investors or buyers purchase real estate properties, transactions involving large amounts of money occur. These large sums of money, convert real estate properties into substantial assets.Â The management of individual properties does not require as much man power, as the management and supervision of a number of properties. This results in the establishment of asset management, as investors/owners and large companies are given the ability to segregate their needed attention over a wide spectrum of properties. Asset management is the "management of real property with regards to the selection, maintenance, inspection and renewal of property" (Cole, A. 2008).The management of real property plays a vital role in determining the operational performance and profitability of an investor's property portfolio.Â Asset management also relates to the process of "maximising value to a property or portfolio of properties from acquisition to disposition" (Cole, A. 2008) within the objectives defined by the owner/investor. By using strategic planning such as investment, operation and marketing analysis, financial returns of a property portfolio are maximised.
This systematic process enhances property assets in a "cost-effective manner from acquisition to disposition that optimises returns on investments" (Anon. 2010). An important aspect of asset management is that integration must be established throughout the process between maximising the value of the property portfolio and achieving the defined objectives by the investor/owner.
The investor will start off with a certain number of immovable properties that make up their specific property portfolio. The investor can either be an individual, group of individuals, a company or a trust. In certain cases the investor would need to appoint an asset management firm in order to help the investor maximise his return on investment. The asset manager would be directly appointed to manage the investor's property portfolio in accordance with the terms and conditions set out in the asset management agreement. An asset manager supervises and is responsible for a portfolio of properties rather than dealing and managing one individual property. An asset manager basically deals with monitoring the financial performance of numerous large properties, "studying local market conditions and trends and comparing individual properties against other similar properties within the property portfolio" (Dunis, C. 2000).
The general nature of the appointment of the asset manager would be to simply manage the investor's property portfolio which would ultimately include providing advice and proposals to the investor with regards to acquisition and disposition of properties. The duty of the asset manager is also to manage and maximise the financial property portfolio, while authorising capital expenditure that may be necessary to maintain the property portfolio. To effect such authorised capital expenditure that may be necessary to maintain the property portfolio. This could include refurbishment or minor improvements of existing properties within the portfolio. Another duty of the asset manager is to represent the investor and do anything in the name of the investor which the asset manager considers necessary and desirable for the management of the property portfolio.
In any property portfolio there is always a need to acquire or dispose of property to maintain and enhance the quality of the investor's property portfolio.Â When taking into account the disposal of properties within the portfolio, the asset manager would look at those properties that are under-performing and those that are producing little or no income. The disposal of a property is triggered when that investment no longer fits in with the investment strategy of the portfolio, whether it is due to its age or income-generating capacity. Other possible factors that an asset manager can take into account is decreased profitability, location demographics, risky lease profiles and the fact that the property was initially purchased as part of a larger portfolio but does not meet the investment criteria as a stand-alone investment. It is a vital part of the asset management process that all under-performing properties be disposed in order to realise some capital for the overall maintenance and management of the property portfolio.
With regards to acquisition of properties which will ultimately be added to the investor's property portfolio, the asset manager will need to conduct the following procedures; an investment analysis, approval, as well as a procedural plan. The investment analysis involves the initial assessment of the property which needs to be undertaken. This assessment involves checking tenancy, basic location research, quality of property and expected yield. Once these basic elements have been met, a property visit is then undertaken and further analysis is performed on the tenant mix, lease profiles and security of income, age and physical condition of the property. If the proposed property meets the various criteria then the asset manager will sign a standard offer to purchase.
Although the asset manager is "not fully authorised to make final decisions on purchasing or selling of a particular property, the asset manager is a critical component to the overall investment process at the ownership level" (Dunis, C. 2000). Â
After assessing the generic attributes of property management, facilities management and asset management, it is evident that common characteristics exist between the various professions. Various professionals are involved in the operation and management of the above processes in order to fulfil the needs and objectives of the real property owner. In real property, the owner strives to maintain the value of property, which could involve generating high returns or enhancing the suitability of the property for the required use. Property management manages the life cycle of the property through assessing tenant occupancy, rent collection and inspection of premises to provide the owner with profitable returns. Facilities management manages the owner's occupied physical assets of a property, concerning the properties buildings, workplaces and infrastructure to ensure the owner maintains the value of the property through creating a suitable environment for the required use. Asset management utilises strategic planning, such as an investment, marketing and operational analysis to allow for greater financial returns on a property portfolio, which epitomises the defined objectives of the owner. In all three management functions, the common goal is to achieve the owner's defined objectives over the duration of the property's useful life - outlining a distinct similarity.
The various services of property management, facilities management and asset management occur during the operational phase of a property. Therefore, while the property is performing its required functions, in accordance with its specific use, various roles concerning the three management concepts are being executed by the appointed professionals during the same phase. Marketing activities, rent collection, leasing of space and maintenance are areas of responsibility performed by a property manager during the operational phase of a building. Installation, repairing, cleaning and maintenance are specific services implemented by facility managers during the operational phase of a building. Asset managers aim to maximise the value of a property from acquisition to disposition, through the selection, inspection and renewal of property over the lifecycle of the property - which involves the operational phase of a property cycle. Therefore all three concepts play a vital management role during the operational phase of real property, contributing to the profitability of the property.
The effective implementation of property management and facilities management both aim to create an effective and comfortable environment for occupants to operate within, while ensuring the property can perform its required function. Tenant satisfaction is a key principle in property management, as respectable and sustainable tenant relations are established through understanding tenant needs, maintaining tenant occupancy and ensuring consistent rental rates. Facilities management provide services which assist tenant satisfaction and enhance tenant perception on the "value for money" concept, through establishing that their money is worth the return received. Property management and facilities management provides an environment "conducive to the business practice they serve".
An overlapping commonality within property management and facilities management is the role that the occupier fulfils throughout both processes. An occupier's duties cover a range of property management activities, such as planning and design, while also providing support and service of space to a property, which concerns facilities management. Both property managers and facilities managers are liable to negotiate leases on the owner's behalf, which may not be included in the original agreement of the landlord-tenant lease. The overall process of property management and facilities management are extremely similar in that they both are involved in the management of the day to day operations of a property, such as security, maintenance and cleaning.
The structure of authority relating to the professionals involved in asset management and property management are similar. Asset managers have the responsibility to report all issues and reviews of local property management personnel to portfolio managers, in order to ensure that portfolio strategies are achieved. Property managers manage daily operations for various properties by assessing tenant relationships, on-site construction management and maintenance, while also reporting to portfolio managers. Therefore, when properties are vertically integrated, portfolio managers are the higher authority for both the asset manager and property manager.
Alternatively to the various similarities that exist between the professions, there are distinctive differences which are also relevant in the management context of real property. Property management in comparison to asset management portrays unique differences relating to the degree of expertise management that each profession prevails. Property management is "reactive" in the sense that it involves the management of daily operations relating to a building, therefore promoting the ability to repair premises when needed, react to tenant's disputes and collect rent when payment is due. The primary focus is on the operational objectives of a property, while also determining competitive prices for goods and services required for performing various functions at the property. This "reactive" characteristic ensures that owner's objectives are met and that a fully functional environment amongst investors and occupiers is established.
In contrast, asset management is seen to be "proactive" in its manner of achieving the maximum net income of a property, as it involves the ability to cause something to happen rather than waiting to respond to it after it happens. In studying current market conditions, asset management allows rental rates to be reviewed regularly so that they reflect similar characteristics to the prevailing markets. Over the life cycle of the property, various investments are monitored in order for asset managers to devise viable plans in ensuring properties perform and achieve the desired goals. Asset managers further contribute to there "proactive" nature by employing property manager to certify that the property is leased, maintained and marketed effectively before the property begins operations.
It is important to simplify the differences between the responsibilities of a property manager and asset manager. The property mangers role is to manage the on-site functions of the building in accordance with the operational objectives of the property, while acting as the primary consultant for improving tenant relationships. The role of asset managers is to manage the performance of the property portfolio in order to enhance and maximise the return on investment. This is done by hiring the property manager who will help enhance the value of the portfolio by ensuring that each property within the property portfolio is marketed, leased, staffed and maintained. Property managers do not specifically review and analyse the financial performance of a property in terms of expenditure, revenue and current market conditions. Asset managers closely assess the financial figures of a property to justify various expenditures and enhance profitability. A more strategic approach to analysing economic conditions and different movements in market demands is adopted by an asset manager.
A critical difference that exists between facilities management and property management concerns the overall function of the two processes. Facilities management is adopted to examine, maintain and monitor the performance of the owner-occupied physical assets relating to a property. Property management however, as mentioned above, is concerned with tenant occupancy and tenant satisfaction, thus focusing significantly on only the leased spaces of a property. Facilities management focuses on obtaining a cost effective approach, through minimising costs and maximising performance, for the long term utilisation and value preservation of the assets owned by the investor. Property management is typically focused on achieving returns to benefit the investor, therefore establishing strategies that relate to short term lease returns in comparison to facilities management which consists of strategic plans relating to long term lease returns.
During the operational phase of a building, the owner may encounter disputes resulting from tenant dissatisfaction. Property managers can be used as arbitrators for disputes amongst tenants, and the decision made is final and binding. Facility managers can serve as mediators in disputes arising amongst tenants, and the decision is not binding on the parties involved. The differing characteristic in this regard is the legal authority, being a mediator or arbitrator, given to both the property manager and facility manager during their various professions.
Facilities management differs from asset management in the sense that facilities management is the process to plan and maintain a work environment that effectively supports the goals and objectives of the owner, while predominately focusing on the tenant organisation and sustainable tenant relations. Therefore emphasising that facilities management focuses on the physical function and operation of a building for the sole benefit of the owner, through considering the tenant needs and ensuring a suitable environment is established, for the tenant to perform required functions. The role of asset management is to achieve the objectives of the owner/investor by managing the investor's money and making decisions on what investment choices should be taken. Therefore illustrating little significance and interest in the benefits that a property and the profession can provide for its tenants.
Another difference between the two concepts concerns the scope of services that each profession provides. The facility manager would manage the common area of the property as well as the tenant facilities, whereas the property manager would only manage the common areas of the building such as managing residential apartments or a shopping centre. (Wong, 2007) Facilities management analyses a more specific area of management concerning services within a property (commercial centre or residential apartment) in relation to property management that manages a property from a general perspective concerning inspection of premises, rent collection and overall maintenance. Property management is taken primarily from an operational nature whereas facilities management is taken from both an operational nature and from a tenant point of view. The property manager's role is a broad role that deals with leasing, marketing and rentals whereas the facility manager's role focuses mainly on the tenants needs in the use of the building and other facilities in order to provide a proper working environment for the occupants (Eedson, 2007).
An integral difference concerning property management and facilities management involves the purpose of the profession. Both professions possess characteristics that allow for similar functions; however their intended purpose is significantly different. Although both professions have the ability to negotiate lease arrangements; property management is the profession primarily responsible for lease arrangements, rentals and daily operations of a property. Facilities management however fulfils the purpose of identifying the needs and objectives of the property, and then achieves optimal performance through minimising costs and maximising standards.
To conclude, the generic attributes of each profession play a significant role in the management of real property. Despite the differences and similarities, each individual concept contributes to ensuring the owner maintains the value of the property through either generating high returns of revenue or enhancing the suitability of the property for the required use. Property management, facilities management and asset management, through the use of various professionals, allows for the objectives of the investor to be met, while creating a co-operative environment for occupiers to conduct business operations. Without these professions, investors would be unable to make profits and tenants would become dissatisfied with the services required to perform their desired functions.