Here’s a riddle for you: How is a building manager like a circus juggler? Answer: If anything falls down, people notice. In the case of a property manager, that can include your boss, your ownership entity and the group on which the entire structure hinges: your tenants.
Let’s face it: If you don’t have satisfied tenants, you have no product. Quarterly earnings, capital expenditures for amenities, future asset value—all come tumbling down like so many juggling pins. In this new age of tenant expectations for flexibility in leasing, the consumerization of the workplace and the emphasis on "tenant experience," property managers are expected to meet many different needs. At the same time, many property management teams are facing staffing shortages and are spending extra hours to solve problems as they arise.
With so many factors at play, it can be all too easy to overlook an unhappy tenant who stays relatively quiet about just how unhappy they are—right up until the point you learn they are not renewing their lease.
AN OUNCE OF PREVENTION…
So, how do you prevent tenants from reaching that point of no return? You start at the beginning by listening to their priorities and managing expectations. "We try to engage with the client and leasing team during the lease negotiation process to anticipate any potential issues," says Christy Means, who manages asset services for Cushman & Wakefield in Dallas. "However, many times, the deals are negotiated without our input, so the initial visit comes after the lease has been executed."
By then, she says, promises might have been made that are outside management’s wheelhouse. In that case, she and her team seize their "first opportunity to introduce ourselves to the tenant, explain our role and responsibilities and answer any questions that may arise during the move-in process.
"Sometimes we do have tenant types that historically have more demands, and you have to treat them more tactfully," Means continues. Not surprisingly, law firms and medical office tenants fall into that category. But, no matter the vertical, she adds, "sitting down to understand their needs and setting expectations with regards to landlord and tenant responsibilities are key."
Means cites an example "ripped from the pages" of her own experience, clearly an incident that could have been resolved at the negotiation table. "The tenant didn’t understand the concept of a tenant improvement (TI) allowance. Things that they requested on their change order were over and above their allowance, but they expected everything to be turnkey. The broker had not properly educated the tenant about the process, and, although the change-order process was explained, the tenant was frustrated about the overage."
To resolve the issue and to kick off the relationship on a positive note, Means played the role of liaison between tenant and landlord. "I suggested to the owner that we amortize the tenant’s overage into their lease rate, since the tenant didn’t want out-of-pocket expenses. The owner agreed, and the lease was amended to amortize the TI overages into the tenant’s lease rate. The result was a win-win."
Cathy Kuebler, vice president of Property Management for Billingsley Company, agrees that the tone should be set up front. "Our mission is to start off as great customer service stewards," she says, "and, hopefully, if there’s a bump along the way, it’s something we can work out based on the trust we’ve built. We can’t afford to let people become ‘problem tenants,’ and we certainly can’t afford for them to stay ‘problem tenants.’" Tenants and property managers should be working together as a team; if it begins to seem like a clash between the two, then a course correction is in order.
Katie Sakatch, senior vice president of Asset Services for Transwestern, concurs. "My job is to create a positive tenant experience with every interaction," she says. "Rather than spending time detecting challenging tenants, I focus on engaging with them proactively and positively."
BEAT THE CLOCK
Time, however, is not on building management’s side. What’s more, it may be that the proactive efforts of management to keep customers happy are being undervalued. Notably, it’s an outsider to the property management community that makes that observation.
"Through our work with clients and talking to them about their struggles, we’ve gained a perspective of what’s going on," says Michael Wong, president and CEO of Genea, a cloud-based software company focused on heating, ventilating and air-conditioning (HVAC) and submeter billing automation. The biggest struggle they face, he says, is the inability to launch a proactive tenant satisfaction plan because "they’re in a constant state of putting out fires. It’s a very reactive industry. Everyone understands what the goal is, but, when the rubber meets the road, there isn’t enough time in a day or enough staff to do it all, and a lot of well-intentioned proactivity never happens."
Adding fuel to that particular fire, Wong believes, is a disconnect on the part of ownership. "They see the real money being made on the transaction side," he explains, while the contributions of management and operations are much subtler. "As a result, they’re easily undervalued and seen as a commodity. You can lay off people and cut fees to increase margins, but then you cut service. It becomes a downward spiral." A somber note on top of that sober reality, he adds that it’s a spiral he’s seen "straight across the board and difficult to reverse."
Of course, tenants are people too, and they’re battling their own fires, not the least of which, Wong says, is the battle for talent in the current climate of ultra-low unemployment (see "A New Age of Demand," page 23). "They want a culture and a physical environment that current and potential employees alike want to come to," he says. "And, if there are physical requirements and amenities that help their recruiting and retention efforts, they’ll look for buildings that have those qualities. They can layer on top of that a service level that’s conducive to taking care of their people."
PRIORITIES PRODUCE PROACTIVITY
Obviously, there are no easy answers, and those that do exist won’t increase staffing or decrease hours on the job. But, Wong says, you still have to make service the priority.
The companies that have a higher level of success in terms of accomplishing the proactive part of their jobs are doing just that: prioritizing. "Property teams are generally being overwhelmed with a mountain of tasks," he notes. "The more effective teams are those that stay focused on the highest priority items, and, if tenant satisfaction is the number one goal, as it is for most property teams, they’ll figure out a way to clear off enough time to do their rounds. By setting an agenda and sticking with it, the stronger property teams avoid constantly reacting and are able to proactively check in with tenants on a regular basis."
But, what does that mean, especially for more demanding tenants? We already touched on one early, important step: defining expectations. On an ongoing basis, the message has to be one of consistency.
"When you start cherry-picking who might be more demanding, it’s going to come back and bite you," says Billingsley Company’s Kuebler. "You have to have a high standard of treatment for all tenants, no matter their size or their length of term. Good customer service is good customer service. One size does fit all."
Kuebler, whose firm recently signed Nokia to a massive 350,000-square-foot headquarters lease, advises managers not to rob from Peter to satisfy Paul. "You don’t know what 30,000-square-foot tenant will one day be the size of Nokia."
All the property managers we spoke with adhere to regular tenant satisfaction surveys, some homegrown, some offered through firms like Kingsley Associates. And all, as Wong recommends, prioritize face-to-face meetings to touch base and gauge satisfaction.
"There’s no doubt that our days are busy," says Transwestern’s Sakatch. "However, face-to-face meetings and interactions are critical. We have a program in place called Tuesdays with Transwestern, where our building teams greet our tenants Tuesday mornings as they enter the lobby for the day. We’ve found this to be a great touchpoint, allowing us to see our tenants more often and be accessible to them."
"In the beginning, we might suggest weekly meetings," says Kuebler. "And often, they take us up on it. One telltale sign that we’re doing things right is when they tell us once a week is no longer necessary."
Whatever the timing, such meetings are "an opportunity to ask how we’re doing and what we could be doing better," adds Kuebler. "Seeking their input and then acting on it is a great way of giving them ownership and building that relationship."
Directly addressing the value-add agenda that most owners are focused on, Cushman & Wakefield’s Means kicks such meetings into strategic high gear. "I always look 12 months out to make sure I visit the tenants that might be rolling off. We get a good idea of their renewal interests ahead of time and if they have issues we could address." She’s confident this practice is instrumental in gaining renewals.
This article was originally published in the January/February 2019 issue of BOMA Magazine.