Managing Mixed-Use Developments
In the property sector, we’re seeing more and more mixed-use schemes and developments being planned and implemented. Projects like the £2.5bn Bankside Yards scheme, which will include office, retail, hospitality, leisure, and residential properties, are leading the recent surge in mixed-use developments across the industry. In addition to this, retail to residential conversion continues to push on, with organisations like Hammerson seeking to replace traditional anchor tenants with clusters of residential units.
These schemes provide excellent investment opportunities. However, the management of different property types can be a complex and nuanced task, requiring the administration of multiple types of leases, and can lead to organisations using multiple management systems to cover all of their requirements.
Managing a Mixed-Use Development
Different sorts of leases require different capabilities from your management systems, meaning that as soon as you pivot towards mixed-use, the management of your development can become complex. For example:
- Assured Shorthold Tenancy (AST) management may require a residential rental management system capable of handling resident finding, tenancy progression, internal unit maintenance responsibilities and landlord accounting.
- Long leasehold management requiring operators to cater for ground rent billing, service charge management and year end reconciliation, s20s and a myriad of compliance requirements.
- For Commercial units, leases may be of larger value, with more frequent and potentially costly rent reviews, along with the requirement to bill rent and service charges. These leases may also have rent free periods, requiring the ability to straight-line for reporting purposes.
- Retail units can include more complex leases still, with either a fixed rent or turnover based rent dependent on sales generated, with different break points in sales and percentage rates and different percentages on different product sales.
- VAT variations also need to be considered, as mixed-use sites will often require a reconciliation of irreclaimable VAT at year end.
Finding a system to deal with mixed-use schemes can be challenging. Often, systems from a residential background can’t handle complex turnover rent, while agency specific systems are often not designed to handle service charges or the property to unit relationship hierarchy of commercial and retail properties. Vice-versa, systems designed for Commercial/Retail management lack the ability to deal with some of the nuances of residential management such as ground rent and service charge notices, billing different charges on behalf of freeholders and RMCs or the tenancy progression functions for signing up ASTs. It is also not uncommon for commercial systems to be heavily property-centric and miss the emphasis on customer interactions that permeate through the residential space.
Because of this, it doesn’t surprise us to find many businesses using many different systems to manage mixed-use developments, which can lead to several issues:
Using multiple separate management systems to handle mixed-use developments can lead to a fragmented, siloed, opaque way of working, resulting in a lack of cohesion across the scheme and an inability to access an overall view of a scheme or portfolio’s performance from everything to leasing, maintenance, finances, or customer issues.
This can also cause a huge time inefficiency when reporting to clients or investors as data from disparate sources needs to be manually combined.
In both cases, the use of Integrated systems allows for a more rounded approach, the joining up of teams and the consolidation of data and processes. This also allows senior level managers access to a fuller picture of the portfolio as a whole and allows for more informed decision-making processes.
This also applies to the front-end challenges of a mixed-use development. With numerous different types of tenants, there is a danger of complicating the customer experience with different portals and apps geared towards commercial tenants, visitor management, and residential tenant aspects. Pushing towards a more joined-up approach to connect all tenants in a single configurable portal will allow you to foster a better community within the development and get maximum satisfaction for your customers and a better ROI from your tech.
Where majority leasehold developments are reasonably easy to model ground rent income for, the inclusion of commercial and retail or Build to Rent units introduces rental income and owner expenditure that accentuates the need for understanding the potential cashflows of a development.
With variance in rents, breaks and lease lengths, plus fluctuations in turnover rent, operators need a way to effectively project the income and model how this could change or be increased through effective asset management.
For a mixed-use development, a much more sophisticated toolset is required, with integrated asset and investment management solutions that can consume data from your core property management solutions, allowing for more cohesive asset management strategy.
Another challenge for mixed-use operators includes onboarding more complex leases. It can be a step change to manage and understand the nuances and implications within different leases and agreements.
Even more basic can be the wasted time taken searching through to paper-based or PDF images of documentation relating to tenancies.
AI extraction tools (like MRI’s Contract Intelligence) can help with both pain points. Firstly, through using AI to abstract key data points from lease documents for data migration back to MRI property solutions. Secondly, for users who want to reduce time spent querying leases, our OCR can convert any document into instantly searchable machine-readable text, cutting down that time to mere seconds. This allows operators to free up time and better serve their customers.
At MRI, our property management software are developed with an open and connected ethos, meaning our systems are fully integrated and are designed to make the management of mixed-use developments simpler. Get in touch with our team today to find out how we can best serve your next project.