Foundations of Real Estate Management
BOMA International®
Module 1: Real Estate Administration
Tenant Relations and Tenant Retention
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Objectives
Demonstrate why retaining tenants benefits a building owner more than replacing tenants
Describe at least five tactics to improve tenant satisfaction in his building
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Remember:
You work for the owner,
But you serve the tenants.
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Tenant Satisfaction
Satisfaction = needs are met
What about exceeding tenant expectations?
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Creating Raving Tenants
Would your tenants go this farto show their appreciation for your
company’s service?
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Satisfaction
Your definition of satisfaction is not as important as
your tenant’s definition
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Listen to Your Tenants
That which is not measured cannot be managed.
Conduct annual tenant satisfaction survey!
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Performance Measurement
Tenant satisfaction benchmarks
Prior scores for the building
Other buildings managed by the PM company
Other buildings surveyed this year
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Performance Measurement
The goal:
No matter how good (or bad) your survey results are…
Continuous Improvement
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Performance Measurement
Frequent, memorable connections
yield
Higher levels of tenant satisfaction
yield
Tenant renewals
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Yet…
Year after year,
20%
of tenants report they never heard from their property manager
in the past year
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Goal
None of your tenants should respond that you did not have proactive communication with them in an
entire year.
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Building Relationships
Relationships with your tenants are important…throughout the lease…not just the month before the renewal
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Tenant Meetings
Why are tenant meetings hard to schedule?
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Tenant Meetings
Don’t go to them!
Bring them to you!
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Tenant Council
Comprised of tenants, vendors, property management team, and chief engineer
Three-way communication
To/from tenants
To/from vendors
To/from PM staff
Purpose: communication, problem solving, joint decision making
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Tenant Council
Meets monthly for no more than 1 hour
Invite all tenants
Send an agenda ahead of time
Send meeting minutes afterwards
Hold everyone (vendors, tenants, and PM employees) accountable
No one wants to come back to the next meeting without resolving this issue
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Typical Tenant Council Meeting
Review capital and major projects
Feedback about vendors, service levels, and building operations
Review items on the agenda
Invite dialogue from participants
Obtain “success stories”
When team members and vendors have exceeded expectations
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Typical Tenant Council Meeting Vendor reps usually area managers or
supervisors who can implement changes/manage issues that are brought up Janitorial vendor attends every meeting
Security vendor attends every meeting (when there is an on-site security)
Other vendors added as needed
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Typical Tenant Council Meeting
Tenant Can Even Choose Vendors Provide an “ownership” stake for tenants
Typically for larger bids at a property (janitorial, landscaping, security, etc.)
PM bids to competent vendors
Invite “short list” of vendors to present to PM and Tenant Council
Tenant Council and PM choose vendor
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Improving Tenant Service Levels Walk around and look for problems Answer phone Return calls promptly Provide your mobile and pager number
for emergencies Call your own number and/or answering
service number after hours - what happens? Are you treated well? Can you get the help you need after hours?
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Improving Tenant Service Levels Track work orders Fix problems once so they do not recur Make sure your team members are
Friendly, helpful Service oriented
Be “easy to do business with” Over-communicate. Do what you say you will do – when you
say you will do it
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Improving Tenant Service Levels
Over-deliver Recognize and reward team
members
Never stop learning. Never stop teaching. Never stop improving.
Combination of email, personal visits, flyers, and telephone calls to
communicate with tenants
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Improving Tenant Service Levels
Two biggest tenant complaints are Janitorial HVAC
Use Tenant Council and a proactive approach to eliminate these problems leading to Service call volume reduced by 50-60% Better use of engineers’ time
Manage Strategically!
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Putting It Into Practice
What Best Practices can you
employ to make your tenants Raving
Tenants?
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Putting It Into Practice
Think outside of the box – what are someAMAZING things you can do to deliver exceptional customer service to yourtenants?
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What About the Picnic?
The picnic is once a year – neither “frequent” nor “meaningful”
Decision makers typically don’t attend Time compression makes interaction “meaningless” for many tenants Who is paying for this?
Often the tenants – and they know it!
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Tenant Picnic
Face it: The annual tenant appreciation
picnic is a great party, but it does little to improve tenant satisfaction.
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It’s All About Tenant Renewals
Frequent, memorable connections
yield
Higher levels of tenant satisfaction
yield
Tenant renewals
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Renewals v. Re-tenanting
Owner Perspective Reduced commissions Reduced TI costs No lost revenue from downtime Renewal rental rates (while lower) often
mean higher profits
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Renewals v. Re-tenanting
Tenant Perspective No moving costs No disruption of business Able to stay in a well-managed
building Renewal rental rates can be lower
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Renewals v. Re-tenanting
Even moderate-sized tenants who renew
can save an owner $$$,$$$
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Renewals v. Re-tenanting
In a 300,000 sf office building, a 20,000 sf tenant has the option to renew (or not). Assume:
$27 rental rate (new) v. $25 (renewal)
5 year lease term
$20 TI allowance (new) v. $5 (renewal)
4% leasing commission (new) v. 2% (renewal)
12 months marketing time for vacancy
$0.02 per square foot for marketing costs Source: Kingsley Associates
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Cost of Keeping or Losing a Tenant
1.8 years0.3 years2.1 yearsPayback
$44.60$7.50$52.10Cost (PSF)
$892,067$150,000$1,042,067Total Costs
$400$0$400Marketing Costs
$91,667$50,000$141,667Commission
$300,000$100,000$400,000TI
$500,000$0$500,000Lost Rent
Property Savings
Tenant Retained
Tenant Lost
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Tenant Still May Move...
...Even if you do everything right Decision made by “corporate”
Decision purely economic
Not able to accommodate tenant’s expansion or contraction or other business changes
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Tenant Still May Move
But, it’s a game of odds…
Raving tenants tend to renew leases
Mediocre or average performances may mean lost leases