Physical maintenance in the retail industry is as unavoidable as taxes and sometimes as expensive. To keep net operating income (NOI) and uptime as high as possible, building owners, operations groups and retail tenants need optimum strategies to ensure work happens when needed. For many, having a self-performing third-party maintenance partner — one with the in-house resources to do the necessary work — is an efficient and economical move.
There are two business rationales for continuous maintenance, which can include services like carpentry; plumbing; heating, ventilation and air conditioning (HVAC); equipment repair; roofing; flooring and paving for parking.
“One rationale is that if you don’t maintain the facilities, it impacts your sales environment,” says Bill Schaphorst, vice president of Business Development at national maintenance, repair and remodel firm MaintenX. “That in turn impacts client satisfaction experience in visiting your business. The other rationale is that, by performing routine maintenance on facilities, you extend their life and reduce payments for expensive reactive repairs.”
Anticipating Expenses to Maximize NOI
In other words, expenses and repair downtime can reduce NOI for the building owner and profitability for the retail business, which faces more direct costs with a net lease arrangement.
A common rule of thumb has been that repair and maintenance are about 15 percent of total commercial building expenses. Upkeep costs of equipment and interiors must be factored in separately. But over the last few years, costs have grown dramatically. According to Producer Price Index data from the federal government, between 2019 and 2024, commercial and industrial machine maintenance and repair costs more than doubled, increasing by 104.7 percent. Building maintenance and repair expenses went up by 79.5 percent.
Choosing Between Maintenance Models
The right management model can constrain costs and maintain uptime. There are three main models, each with pros and cons.
Third-party, self-performing maintenance. “The self-performing maintenance model is where a third-party organization, like MaintenX, typically does everything with their own technicians, rather than with subcontractors,” Schaphorst says. That includes HVAC/R, plumbing, electrical, roofing and general contractor services. The firm also does all scheduling, work and follow-up. A self-performing organization therefore has great control over the resources it needs, allowing it to better communicate with and satisfy customers.
Third-party, broker model maintenance. “Brokers models, instead of having their own technicians, have a contact list of subcontractors,” Schaphorst says. While the approach reduces capital expenses and overhead for the broker — and, in theory, provides the ability to offer a lower initial bid — there is a cost in time and attention. “They’re hands-off. They’re never connected to the technician but, rather, they interface with the subcontractor. The communication is tough. And you have to realize that subcontractors are going to take care of their core customers first.”
The result is that clients are not as easily able to direct work. Information sharing tends to be less timely or accurate in this model, as inquiries cycle from client to broker to subcontractor to technicians and back again. As subcontractor profits are now layered into the total cost to the customer, an originally low-cost solution can become more expensive.
All maintenance and repair work in-house. Some organizations do some or all their maintenance and repair work in-house to maximize control and responsiveness. To do everything, a company needs an extensive portfolio to cost-justify the needed personnel, equipment and materials inventories. Even then, the best resourced might still rely on a third party to perform more complex work or to act as backup when the in-house teams are busy.
Solving Client Problems
The best third-party maintenance and repair organizations do more than fill service requests. They are consultants who bring experience from many client situations and encounters and know how to resolve problems.
For example, MaintenX had one client with properties in Puerto Rico, an area they did not usually service. But the client had a problem, so MaintenX started in a way they generally don’t — by using subcontractors. The experience reinforced why broker models often frustrate.
“It was a thorn in our side, trying to hire vendors and get people to go to job sites on time,” says Herman Wilkinson, vice president of Service Operations at MaintenX. Luckily, the amount of work required was enough to establish their own crews. “We ended up hiring some local technicians full-time to make servicing the customer easier and more rewarding.” It was an investment, but now MaintenX can control results and have a technician available within an hour or two.
Best Practices for Scheduling and Contracting
A provider can also help set up preventative maintenance programs that can quickly pay for themselves. Wilkinson worked with a retail chain with around 1,600 locations. Each year he would present the results of the quarterly preventative maintenance program, using charts and graphs to show how much the company saved. Any work that would eventually need to be done — like replacing equipment — could be scheduled conveniently. “They can save money and not have to worry about after-hours or weekend charges,” Wilkinson says.
When considering a third-party maintenance and repair organization, Schaphorst says to decide first what role you want them to play, whether regular complete or partial outsourcing or some form of conditional backup. Ask the provider where their technicians are located to determine if they can cover you directly or if you would need them to manage subcontractors.
Schaphorst says that one of the smartest questions to ask in advance is to explain your budget and say, “What can you offer in return?” Finally, work with the firm to see whether a preventative maintenance regime that catches problems in advance provides enough of a return on your investment to implement.
— By Erik Sherman. MaintenX is a content partner of Retail & Restaurant Facility Business. For more articles from and news about MaintenX, click here.