Generate your personalised, FREE 12-Month Wealth Growth Plan - in just 8 questions! CLICK HERE

Understanding Commercial Real Estate Property Management Fees: How to Effectively Manage Them

commercial real estate property management fees
Understanding commercial property management fees is essential for real estate investors aiming to optimise their investment returns. These fees vary due to multiple factors and can significantly influence profitability. This guide delves into the key factors that shape these fees, explores common fee structures in Australia, and offers strategic tips for negotiating more favourable rates. By grasping the nuances of these fees, investors can make informed decisions that align with their financial goals.

Key Factors Influencing Commercial Property Management Fees

Commercial property management fees vary for several reasons, and understanding these can help investors manage costs effectively. Understanding the ‘average property management fees’ and the overall ‘property management cost’ is crucial for investors to manage costs effectively.

Property Type

The amount of work and knowledge required to manage a given type of property determines the management costs. For instance, the demands of several tenants and the necessity for regular property upkeep and modifications necessitate a more hands-on approach to managing a retail space, which drives up management costs. On the other hand, industrial locations might need fewer management activities and visits, which could lower the costs.

Services Included

The scope of property management services provided by a property management company significantly affects the fees. These services can range from typical offerings like lease management, general property maintenance, and active tenant management to more tailored solutions, including financial responsibilities and customisation to meet the unique needs of different types of commercial properties. Some companies offer comprehensive service packages that include these services, which can be more expensive but might offer better value by simplifying property management. On the other hand, companies that offer a la carte services can appear cheaper initially but might end up costing more if additional services are needed, especially considering the costs associated with property management services can vary from firm to firm and from state to state.

Market Conditions

The overall health of the real estate market also impacts management fees. In a robust, competitive market, property management agencies might reduce their fees to attract more clients. Conversely, in markets with fewer competitors, management firms might increase fees due to the lack of alternative options for property owners, leading to higher overall costs.

Understanding Fee Structures in Australia

Commercial property management fees in Australia are typically structured in one of several ways, each with its own set of advantages and implications for property owners. Understanding different types of fees, including the ‘lease renewal fee’ and the overall ‘property management fee’, is crucial for property owners.

Percentage of Rent

This structure is widely favoured because it directly ties the property manager’s fee to the performance of the property, as the fee is calculated as a percentage of the property’s gross rent. This alignment of interests encourages property managers to maximise rental income.

Flat Fee

Alternatively, some agencies charge a flat fee regardless of how much income the property generates. This can be advantageous for owners of high-income properties as it caps the management cost, but it might reduce the incentive for property managers to strive to increase the property’s income potential.

Hybrid Structure

Combining the percentage of rent with a flat fee, the hybrid structure offers a balance, providing a stable income for the property manager while still incentivising them to enhance the property’s earnings. This structure is often preferred by both property managers and owners who seek both predictability and performance incentives.

Tips to Negotiate Management Fees

Understanding the roles and services provided by a commercial property management company and commercial property managers is crucial in effectively negotiating management fees, as it directly impacts the fee structure and the types of services you can expect for your commercial property. Here are some tips for negotiating better terms on management fees to significantly reduce costs and enhance property profitability:

Market Knowledge

Having a comprehensive understanding of the current market rates for management fees is crucial. This knowledge serves as a powerful tool in negotiations, ensuring that you are neither overpaying nor undervaluing the services provided.

Service Scope Clarity

It is vital to understand exactly what services are included in the management fee and which services might incur additional costs. This clarity allows property owners to negotiate either a more inclusive package or a reduction in fees for excluded services, thus ensuring that they only pay for what they genuinely need.

Long-Term Contracts

Property management firms often prefer the security of long-term contracts and might offer more attractive rates for such agreements. While this can be beneficial, it is important for property owners to ensure that there are adequate provisions for terminating the contract should the management company fail to meet performance expectations.


Navigating the complexities of commercial property management fees becomes more manageable with a deep understanding of the factors that influence these fees, the various fee structures available, and effective negotiation strategies. An added advantage of working with an experienced managing agent in commercial real estate is that the management fees are typically borne by the tenant in the case of a net lease. Furthermore, these fees are considered a capital expense and are therefore tax-deductible.

A proficient commercial property manager can provide substantial savings to the owner by ensuring that they are not overpaying on outgoings. They ensure that all the correct rates per square metre are applied, and incremental increases are implemented, while also making certain that tenants pay the correct outgoings. This meticulous management adds value to the overall property and enhances the profitability of the real estate investments.

Having a commercial property buyer’s agent who is well-versed with the market and possesses the skills to negotiate property management fees on your behalf will not only save you money but also help you avoid potential pitfalls. This ensures that you receive the right level of service from a property management company, thereby enhancing the value and profitability of your real estate investments.

Need help navigating Commercial Real Estate Property Management Fees? 

Book a free consultation with an experienced commercial buyer agent at Revolve Commercial today. Whether you’re new to commercial property investment or looking to refine your existing strategies, we’re here to assist you every step of the way. Our experts are equipped to guide you through the intricacies of property management, ensuring you achieve the best possible outcomes for your investments.