Most sponsors outsource property management. We do not. Not for industrial, office, or retail. Here is what that costs you.
When a sponsor uses a third-party property manager, they are outsourcing the day-to-day operations of the asset to a firm that manages dozens or hundreds of properties across many different owners. That firm has its own incentives, its own overhead, and its own priorities. They are not wrong for having them. But those incentives do not always align with yours.
At Westlake, we manage our industrial, office, and retail assets in-house. Here is what that alignment actually produces:
1. Expense discipline. When property management and ownership are the same team, every vendor contract matters. We rebid janitorial, landscaping, and maintenance contracts regularly because we are accountable for the NOI. A third-party manager has less skin in that game.
2. Business plan execution. When a lease needs to get done, there is no handoff between the asset manager and the property manager. They are in the same room.
3. Tenant relationships. In infill markets where tenants have real options about where they renew, the quality of the management relationship matters. We know our tenants. We know their businesses. That is hard to replicate through a third party.
Not every asset class works this way. Self-storage, for example, is highly systematized -- revenue management software, standardized operations, high turnover. Third-party management works well there. But for industrial, office, and retail, the alignment between management and ownership is a meaningful edge.
Two questions worth asking any sponsor: Do you do property management in-house? Do you do accounting in-house?
The answers tell you a lot about where the incentives actually sit. Have you ever asked a sponsor this question?
Wednesday Real Estate 101: In-house property management
