How to Review Your Shopping Center’s 2027 Operating Budget: 7 Questions to Ask Before You Approve It

Every fall, a draft operating budget lands on an owner’s desk. And every fall, many of those budgets share the same origin story: last year’s actuals, plus an inflation factor, adjusted for whatever surprised everyone this year.

It’s an understandable approach. It’s quick and easy to defend. But a budget built that way carries every inefficiency from the current year into the next one. The budget you approve this month sets the expense base for your NOI for the next twelve months, and tenants feel it in their CAM bills.

Here are seven questions to ask before you sign off.

1. When was each service contract last competitively bid?
Landscaping, janitorial, security, trash and parking-lot maintenance contracts often renew automatically, year after year. Vendors who aren’t tested rarely stay at market. A rebid every two to three years, with a clear scope, is basic discipline.

2. Does each scope of work still match the property?
Centers change. A new restaurant extends evening hours. A fitness tenant shifts peak traffic. A vacant anchor changes how much of the lot gets used. Scopes written for the property as it was five years ago are paying for the wrong things.

3. Are recoveries budgeted lease by lease?
A budget is half the picture without the recovery side. Every lease has its own pro rata share, caps, exclusions and administrative-fee terms. If the recovery budget is a single percentage applied across the rent roll, the owner’s real net cost is an estimate, not a number.

4. What was deferred this year, and what does deferring it again cost?
Deferred maintenance doesn’t disappear. Roof repairs, parking-lot sealing and lighting retrofits get more expensive the longer they wait, and some become tenant problems or insurance claims. A good budget names what’s being deferred and why.

5. How does the budget treat insurance and property taxes?
They’re often the two largest uncontrollable lines, but “uncontrollable” doesn’t mean unmanaged. Property rates have softened in 2026 for well-documented properties, and assessments can be reviewed and appealed. Both deserve a plan, not a placeholder.

6. What’s the capital plan, and is it separate from operations?
Operating budgets that quietly absorb capital items, or capital plans that hide recurring repairs, make both harder to read. Owners should see each clearly.

7. How will you know, month to month, whether the budget is holding?
A budget is only as useful as the reporting against it. Owners should get variance reporting on a predictable schedule, with explanations, not just numbers.

What this looks like in practice

At Poag, we build operating budgets from zero. Every line has to justify itself, every contract is tested against the market, and every recovery is tied to the actual lease.

When we took over management of Shops at Livermore in California, a full vendor evaluation and competitive RFP process realigned the service contracts. Trash service alone went from $198,000 to $152,250 a year without a drop in service. Results vary by property, and Livermore isn’t a promise of what any other center will find. It’s an example of what testing every line can surface.

Because management and accounting sit under one roof at Poag, the budget, the recoveries and the monthly reporting come from the same team. Owners receive monthly reports on or before the 20th of each month.

Before you approve

If your 2027 budget looks a lot like 2026 plus a percentage, that’s worth a second look before it’s final.

We’re glad to review your draft 2027 budget and share written observations. No proposal, no commitment.

Brian Lutz, Vice President of Business Development
blutz@poagllc.com | 423.637.0232
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