Where to Start Cutting Costs on Your Building? Reviewing Management Fees to Improve Profitability

“Vacancies just won’t fill up, and rental income is stagnating.”

“As the building gets older, repair costs keep rising, and the profit left in my pocket keeps shrinking.”

“We’ve been using the same management company for years out of habit, but are these fees actually reasonable?”

For building owners in Osaka, declining profitability is a serious concern. However, increasing revenue (rental income) requires measures like tenant recruitment or renovations—strategies that take both time and money.

On the other hand, “cost reduction” is an immediate-impact strategy that boosts profit from the very day you begin.

Let’s start with the conclusion of this article.

The most reliable, low-risk way to improve a building’s profitability is to review “fixed costs” without treating anything as untouchable. Simply switching electricity providers, changing your elevator maintenance contract, and eliminating hidden intermediary margins in outsourced management can reduce annual costs by several million yen—without sacrificing service quality.

In this article, we’ll walk through specific “reducible expense” items that many owners overlook, along with the correct cost-cutting procedures that won’t compromise your asset value.

Why Prioritize “Cost Reduction” Over “Revenue Growth”?

A building’s profit (NOI) is determined by “rental income minus operating expenses.”

For example, if you want to increase annual profit by ¥1 million, filling vacancies to raise rental income by ¥1 million would require advertising costs, brokerage fees, and interior renovation expenses—and depending on market conditions, it might not even be achievable.

However, cutting ¥1 million in expenses is possible through the owner’s decision alone. And that reduced ¥1 million goes directly into “net profit.”

Letting go of the psychological hurdle of “not wanting to seem cheap” and taking a business-minded scalpel to your cost structure is the first step toward a highly profitable building.

Step 1: Start with “Infrastructure” Costs That Don’t Affect Quality

The golden rule of cost reduction is to cut from areas that don’t affect service quality. Start with items where costs can be lowered without tenants ever noticing.

Reviewing Electricity Costs (Switching to a New Power Provider)

Since the liberalization of the electricity market in 2016, you’ve been free to choose your power provider.

Simply switching the common-area electricity supply from a major utility company to a “new power provider (PPS)” can lower both the base rate and usage-based charges. The quality and reliability of the electricity remain exactly the same. In many cases, the contracted capacity (kW) is also set higher than actually needed, and installing an electronic breaker can help optimize the base rate.

Reducing Water Costs (Flow Restrictors and Air Valves)

Installing flow restrictors on faucets and toilets, or valves that adjust water pressure, can reduce water bills by 10–20% with almost no noticeable change in usability. This is especially effective in buildings with restaurant tenants.

Step 2: Tackling the Biggest Untouchable—Elevator Maintenance Contracts

Elevator maintenance costs make up a significant portion of building management fees, and this is an area with notable industry-wide price disparities.

Switching from “Manufacturer-Affiliated” to “Independent” Providers

Many owners entrust elevator maintenance to a company affiliated with the original manufacturer. However, switching to an “independent maintenance company” outside the manufacturer’s network can reduce maintenance costs by 30–50%.

There was a time when people said “independent companies can’t get parts,” but thanks to legal reforms, manufacturers can no longer refuse to supply parts. Technical capabilities have also improved, making it possible to achieve significant cost savings while maintaining safety.

Reviewing Contract Types (Full Maintenance vs. POG)

Maintenance contracts come in two main types: “Full Maintenance,” which covers all parts and repair costs, and “POG (Parts, Oil, Grease),” which covers inspections and consumable replacements only, with expensive part replacements billed separately.

For newer buildings with a lower risk of breakdowns, switching to the more affordable POG contract can be a smart choice.

Step 3: Eliminating Hidden “Intermediary Margins”

Do you assume everything’s fine because you’ve left it all to your management company? In reality, this “hands-off” approach may be exactly what’s driving up your costs.

Direct Contracting for Fire Safety Inspections and Water Tank Cleaning

When you go through a management company, it’s common for their margin (commission)—typically 20–30%—to be added on top of the payment to the specialist contractor actually doing the work.

Simply switching to “direct contracting” with the specialist contractor eliminates that margin entirely. It does take a bit more effort to arrange, but for tasks performed once or twice a year, the cost savings far outweigh the added hassle.

Optimizing Cleaning Services

Take a hard look at questions like “Do we really need cleaning five times a week?”

Depending on tenant usage patterns, reducing to three times a week may still maintain the building’s appearance. Here too, it’s important to check whether a management company margin is baked in, by getting quotes directly from specialized cleaning companies for comparison.

Two Costs You Should Never Cut

Cost reduction is important, but going too far can damage your building’s asset value and drive tenants away—a classic case of “penny wise, pound foolish.” The following two items are areas where you should actually invest more, not less.

1. The Quality of “Daily Cleaning” in the Entrance and Common Areas

If the entrance and restrooms—the face of your building—are dirty, it creates a terrible impression during viewings, making it harder to secure new tenants. It’s fine to reduce the frequency, but never let quality drop to the point where dirt is left visibly unaddressed.

2. “Preventive Maintenance” for Leaks and Plumbing

Skimping on rooftop waterproofing, exterior wall crack repairs, or pipe cleaning can lead to serious problems like water leak incidents. The cost of addressing damage after the fact can be many times higher than the cost of prevention. Maintenance expenses that affect the building’s lifespan require “planned reserves,” not cuts.

Conclusion: A Lean Management Structure Fuels Your Next Investment

Reducing a building’s expenses is like a form of “passive income”—do it once, and the benefits last indefinitely.

1. Review infrastructure costs like electricity and water to cut expenses painlessly.
2. Switch elevator maintenance to an independent provider—treat nothing as untouchable.
3. Scrutinize your management company’s intermediary margins and switch to direct contracting wherever possible.

By redirecting the funds you save toward renovating the entrance or converting the building to a higher-yield use (such as a hotel or minpaku), you can further boost your building’s earning potential. Shore up your defenses, then go on the offense—this is the strategy of a savvy building owner.

From Cost Reduction to Revenue Maximization—Trust Stay Buddy for Total Building Management

“I look at the invoice from our management company, but I can’t tell what’s overpriced.”

“I want to review our elevator and fire inspection contracts, but I don’t have contacts with the right vendors.”

“I want proposals that lower costs while also boosting the building’s overall profitability.”

Leave all of these concerns to us.

We at Stay Buddy Inc. are a team of building management and real estate utilization professionals specializing in the Osaka City area.

We’re not just a “management agency.” We’re a partner dedicated to maximizing your profit as an owner.

• Free diagnosis of your current management fees, clearly identifying the gap versus fair market pricing
• Direct introductions to trusted specialist contractors (such as independent maintenance companies) with intermediary margins eliminated
• Value-boosting proposals that cut wasteful costs and redirect the savings toward increasing your building’s asset value
• Proactive utilization support, such as converting office space to lodging facilities, tailored to local area demand

Not just “cheaper,” but building management that’s “used correctly and profits correctly.”

Let us transform your building’s financial structure into something lean and healthy. Get started with a free management fee diagnosis and financial consultation—feel free to reach out anytime.