How Technology Can Help CRE Leaders Manage Triple Net Leases
Triple net leases — where the tenant pays real estate taxes, building insurance and maintenance in addition to rent and utilities — can offer big benefits for property owners.
Because the tenant is responsible for scheduling and paying for maintenance, triple net leases offer a good source of stable, passive income with fewer unexpected headaches.
However, because the owner is less involved in the management and maintenance of the property, he or she may not learn about issues until the tenant moves out. If the tenant allowed the building to fall into disrepair or used equipment improperly, the damage could be substantial. And once the lease is up, those damages become the property owner’s (potentially very expensive) problem.
For corporate real estate (CRE) leaders in charge of a large portfolio of multiple properties, resolving the problems caused by careless or naive tenants can cost thousands of dollars and put a property out of commission for months. However, it’s not feasible for a CRE leader to closely monitor and check in on every property. Plus, that level of hypervigilance would cancel out one of the largest advantages of triple net leases—not having to micromanage them.
Instead, CRE leaders can take advantage of technology to do the monitoring for them. More specifically, they can use asset management software, facility management software and lease management software to ensure every building in the portfolio is properly maintained without having to physically visit each one.
Asset Management Software
Asset management software provides a comprehensive view of every asset within a property, including its location, warranty details, maintenance manual and service schedule. CRE leaders can use this information to create a recommended maintenance schedule to give new tenants when they move in. This increases the likelihood the tenant will have the assets regularly serviced to prevent breakdowns.
CRE leaders can even go a step further and install Internet of Things (IoT) sensors and connect them to the asset management software. IoT sensors can be installed on industrial equipment such as air conditioning and heating units to monitor temperature, noise and vibration levels. Because the sensors are integrated directly with the asset management software, if a sensor detects an asset is malfunctioning, it can automatically trigger the creation of a service ticket with instructions on what needs to be fixed.
Facility Maintenance Software
In buildings with sensitive equipment, the ability to know immediately when the climate goes outside optimal conditions is huge — especially if the issue occurs in a low-traffic area.
IoT sensors can be used in conjunction with facility maintenance software to measure humidity and moisture levels of spaces within the property. These sensors can identify issues like a small leak and alert maintenance teams, preventing them from becoming major problems.
Connecting asset management software to facility maintenance software makes property management even more automated and easier for the CRE leader. Together, the two platforms give CRE professionals insight into the true cost of ownership and what value a property adds to the portfolio. The property manager can use the data within the two solutions to determine if lease details should be updated prior to signing an agreement with a new tenant.
Lease Management Software
The final piece of the CRE leader’s powerful technology trifecta is lease management software. Lease management software gives CRE leaders on-demand access to crucial details on every lease, including monthly and yearly lease obligations, as well as contract start and end dates. It’s also a central repository for all important lease documentation.
But it’s not just for property leases: lease management software can be used for multiple types of lease agreements, including those for assets, insurance and utilities. Visibility at this granular level allows CRE leaders to set realistic expectations regarding the conditions of the property and assets at specific times throughout the rental agreement. This enables them to confidently answer questions from current and potential future tenants and also make objective evaluations on the tenants’ treatment of the property and assets.
Whether you’re considering entering into a triple net lease agreement or you’re already using this type of contract, it’s crucial to consider investing in asset management software, facility maintenance software and lease management software. What you save on maintenance costs from implementing this technology will more than make up for what you spend on initial setup expenses.