October 4, 2013

A Comprehensive Annual Business Plan For Commercial Real Estate


If you’re a commercial real estate owner, it’s the time of year when your management company will create an annual business plan and budget for the property of yours that it services. This plan should give you evidence that your property manager is carefully analyzing and modifying your investment goals and objectives to reflect market and economic pressures. A robust plan with a budget (the plan’s implementation tool) that is accurate, appropriate, and attainable, should take a comprehensive approach.

Here is a five-section table of contents with all the elements of a comprehensive annual business plan. Is your property management company delivering this kind of plan to you?


  • Building Attributes:   Lists the building’s name, location, description, square footage, year built, date purchased, major tenants, parking capacity, stacking plan, rent roll, and its property profile.
  • Strategies/Objectives/Value Enhancement:   Discusses the long-term strategies and objectives associated with the asset. Includes value enhancement possibilities that exist and how they will be carried out, tenant survey results and what steps were implemented to address issues raised, as well as property sustainability programs such as LEED and Toby initiatives.
  •  Critical Issues:   Discusses any topics including, but not limited to, redevelopment plans, environmental issues, legal issues (tenant bankruptcy, eviction, defaults, etc.), real estate tax appeal status, reductions, eminent domain proceedings/negotiations, and proceeds.
  •  Competitive Project Profiles:   Provides an aerial map of the facility. Identifies competing projects in the area, primary competitors to the property, and supplies the relevant information.


  • Market Review:   Briefly discusses market conditions at both a macro and micro level, using available research reports from third-party sources as necessary.
  •            Macro:  Describes MSA economics, any pending ordinances, laws, and tax changes that will affect the property.
  •            Micro:  Notes real estate related market conditions, both city and submarket, with average rental rates, occupancy rates, absorption rates, rental concessions, new buildings coming online or under redevelopment, availability of large blocks of space, potential or planned development.
  •  Leasing and Marketing Plan:   Describes the property’s leasing and marketing plan, listing major objectives to be accomplished. Also, it identifies probable changes in the occupancy status of major tenants (e.g., renewals, non-renewals, expansions, etc.).


  • Review of Current Year Budget:   Compares the current year budget to the forecasted budget, noting significant variances and their causes.
  • Review of Current Year Goals:    Describes the status of goals and objectives outlined in the current year business plan.
  • Current Year Reforecast to Current Budget Year Comparison:   Compares, in a brief narrative, the current year reforecast to the current budget year, noting significant changes and reasons for those changes.


  • Capital Plan for Budget Year:   Discusses in narrative form capital projects budgeted for the coming year, including their estimated costs, commencement and completion dates, justifications for projects, and payback periods, if applicable.
  •  Five-Year Capital Plan:   Identifies major capital expenditures, other than tenant finish, that are anticipated over the next five years, beginning with the budget year.


  • Property Goals for Budget year:   Lists all operational and leasing objectives.
  • Leasing Parameters for Budget Year:   Provides suggested leasing benchmarks for new leases and renewals, including original proforma terms for comparison and budgeted occupancy.
  • Expense Details:   Provides a list of all service contracts. Includes contract costs for the current year and budget year, showing percent change, insurance amortization, and real estate tax calculation.
  • Current Year Budget to Coming Year Budget Comparison:   Provides explanations for variances in excess of $5,000 and/or 10 percent, as well as key performance indicators, such as BOMA/IREM comparison.
  • Budget Summary
  • Budget Detail
  • Ten-Year Cash Flow with Assumptions

For more information, please email John Bridges at jbridges@thomasduke.com.

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