Commercial real estate owners have had plenty of legitimate reasons to explain underperformance in recent years, including higher operating costs and insurance, tax increases, and shifting tenant and resident expectations.

But as owners head into the fourth quarter and finalize their 2027 business plans, another question is worth asking: Is the market driving the property's performance, or have market conditions exposed an operational opportunity?

“It's easy to point to the market when an asset isn't meeting expectations,” said Tommy Wells, principal and CEO of J Street Property Services. “Sometimes that's absolutely part of the answer. But our responsibility as operators is to understand what we can control, identify opportunities early and execute on them.”

For owners evaluating their assets heading into a new year, several signs could indicate it is time to look beyond market conditions and take a closer look at operations, Wells said.

Get To The 'Why' Of What Happened

Owners have access to more property data than ever before. Occupancy, leasing, collections, expenses, work orders, traffic, renewals and financial performance can all be tracked and reported.

But reporting numbers isn't the same as managing them.

When performance misses expectations, ownership should understand more than the variance. Wells said a strong operating partner should be able to explain what is driving it, what is controllable, what action is being taken and when the team expects to see results.

“The conversation should move from ‘here's what happened’ to ‘here's what we're seeing, why we believe it's happening, what we're doing about it and how we'll measure whether it's working,’” Senior Vice President of Operations Sarah Turner said. “That distinction becomes increasingly important when every dollar of NOI matters.”

Look Beyond Pricing 

Pricing and concessions are important tools, but they shouldn't be the only tools.

When leasing or occupancy slows, reducing rent or increasing concessions can quickly create activity. But before giving away revenue, Wells said operators should understand the entire customer journey. This requires asking questions such as what does the property's online reputation say? Or, are existing residents being retained?

For commercial properties, the questions may look different, but the principle is the same. Tenant retention, service, building condition, positioning, operating expenses and leasing strategy all influence performance.

The takeaway, according to Turner: “Price can compensate for an operational weakness. It doesn't necessarily solve it.”

Understand Where Every Dollar Is Spent

Owners cannot eliminate every increase in operating expenses, such as insurance premiums, taxes, utilities, and labor and materials costs.

But Wells cautioned that “costs went up” shouldn't be the end of the conversation. Property management should continuously evaluate vendor contracts, staffing, purchasing, utilities, preventive maintenance, recurring services and repair-versus-replace decisions.

Sometimes, the opportunity is a major contract renegotiation. Other times, it is found in dozens of smaller operating decisions.

“The goal isn't simply to spend less,” Turner said. “It is to spend intentionally and understand the return on every dollar being invested in the asset.”

Take Ownership Of Problems

Every property will have challenges: Equipment fails, employees leave, occupancy changes or unexpected expenses happen. 

However, surprises will quickly erode confidence. The differentiator is how those issues are communicated and managed.

“For owners, handling issues isn’t the problem; it’s learning about them too late,” Vice President of Partnerships Clint Williamson said. “Strong property management creates an operating rhythm where issues are identified early, communicated clearly and paired with a plan.”

Management won’t always have an immediate answer, but ownership shouldn't have to wonder whether someone is taking responsibility for the problem, he said.

Don't Recycle Last Year's Budget

Budget season creates an opportunity to step back from day-to-day operations and ask a bigger question: What does this asset actually need to accomplish next year?

“A budget shouldn't simply be last year's performance with new assumptions layered on top,” Wells said. “It should connect the owner's investment strategy with what is happening at the property.”

He said this is the time to question where revenue can realistically grow, where occupancy or retention is being lost, which expenses deserve greater scrutiny, and what assumptions are based on market conditions and which depend on execution.

“A thoughtful budget doesn't just forecast the next year,” Wells said. 

“It creates the operating plan for it.”

A 90-Day Plan To Address Operations

Recognizing that an operational issue needs to be addressed doesn't automatically mean changing property management companies. Sometimes, an existing team needs clearer priorities, better systems, stronger accountability or a change in leadership.

Whatever the solution, an operational reset should create clarity, not chaos.

For owners considering a management transition, the first 90 days can be particularly important, Turner said.

For the first 30 days, she said, operators should resist the temptation to make immediate changes and instead walk the property and talk to the people closest to the operation. This can also include reviewing data, understanding the leases, evaluating delinquencies and reviewing capital needs. 

“The numbers tell you where to look, but being at the property often tells you the ‘why,’” she said. “The first month should establish a clear picture of where the property stands before determining where it needs to go.”

For the next 30 days, work on identifying the handful of priorities that can have the greatest impact on the asset. Depending on the property, these might include revenue strategy, leasing, collections, staffing, maintenance, vendor contracts, expense controls, tenant or resident experience, reputation or deferred capital needs.

“Each priority should have an owner, an action plan and a way to measure progress,” Turner said. “This is where an operational reset begins turning into measurable execution.”

By the third month, ownership should begin to see more than transition activity. Wells said an operating rhythm should be evident and include clear reporting, defined priorities and updated forecasts when appropriate.

“The goal is not to declare an asset ‘fixed’ in 90 days,” he said. “It is to ensure that ownership and management understand where the property stands, where it is going and who is accountable for getting it there.”

Close Enough To See It

Tools like dashboards or monthly reports are invaluable in flagging trends and documenting results. But those tools are most valuable when paired with people who understand the property well enough to recognize what the numbers are saying and act on them.

“Hands-on management doesn't mean abandoning sophisticated systems,” Wells said. “It means using those systems to make better operating decisions.”

No management company can control interest rates, new construction, insurance markets or every shift in tenant and resident demand. Those realities will continue to shape real estate performance in 2027. But owners can control how quickly their management team recognizes changing conditions.

“As owners finalize budgets and business plans for 2027, perhaps the most valuable question isn't ‘what is the market going to do next?’” Wells said. “It may be ‘are we operating this asset as well as we could be?’”

This article was produced in collaboration between J Street and Studio B. Bisnow news staff was not involved in the production of this content.

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