In Touch with Tenants - How to Renew Tenants and Fill Space Quickly

Spring 2012

What’s the best way to renew the tenants you have and to quickly fill any voids in the building? First, stop calling them tenants. Second, don’t refer to yourself as “the landlord.” Third, don’t call that large document you have a lease.

Instead, visualize those occupying your building as guests or customers, just like the hotels do; picture yourself as the service provider; and call that weighty document you have your customers sign a service agreement rather than the lease.

That’s the advice of Michael Lipsey, president of The Lipsey Company, Altamonte Springs, Fla. Lipsey is an internationally recognized leader in training and consulting for the commercial real estate industry with more than 30 years in the business.

“If we use different language, then we change the way we approach this business,” Lipsey suggested. “When you have your building engineers, property managers and asset managers, who are typically entrenched in Argus Runs and Excel Models, thinking about ‘customers,’ ‘guests’ or ‘clients’ instead of tenants, you are half-way there. It brings a new sensitivity and perspective to your organization.”

Here are some key tips from Lipsey to keep buildings full:


Michael Lipsey

Always conduct memorable building tours. Getting in touch and staying in touch with your customers begins on their first visit to your building and lasts the entire length of their stay. “Many of my clients have a three-tier system of building tours,” he said. “There are Silver, Gold and Platinum building tours. The Silver tour is for smaller space users looking for perhaps a two- to three-year agreement. Beside the prospect, the tour might include the building’s leasing agent and tenant rep broker. The property manager probably would not get involved at this level.

“From a Gold tour on up to a Platinum tour, you need to have both your building engineer and property manager on the tour. The engineer is the most qualified person to answer the customer’s questions about the building; the property manager needs to be there because he or she runs the building. It is amazing to me how many times building tours are conducted without the property manager even knowing that a tour is taking place.”

Lipsey emphasized that the tour must be made memorable because if the prospect is looking at 10 buildings, chances are he or she will ask for a proposal from you if your building tour is memorable and having senior people on the tour helps makes it memorable. Offering refreshments at the end of the tour is another way -- or take it to the next level and offer them a gift card for lunch at the restaurant next door. Think of how guests are treated on a Ritz-Carlton timeshare tour, he urged.

Celebrate the building’s occupants. Besides providing extraordinary service for your building’s guests, keep in touch with them by celebrating their anniversaries at the building. Lipsey recommended having a continental breakfast for a customer on their anniversary in the building. “Tell them you are delighted to have them in the building beginning their second (third, fourth, etc.) year,” said Lipsey. “At the breakfast, ask them how you have performed over the past 12 months. How is the response time of staff? Is the air conditioning working properly? Are there any unmet needs? What amenities would they like?

“Many of my owner/clients now do an annual barbecue for the building’s customers, where families are invited. There are so many things that today’s best landlords are doing to keep in touch with their customers,” he said.

Get visible and stay visible to your customers. Lipsey said that space users want owners and managers to be more visible. What kind of visibility? How often? Lipsey offered an example. A building owner hired him to evaluate an office building in Pittsburgh that the owner wanted to sell. Lipsey called the property manager who suggested that they meet in the building’s lobby at 7:45 a.m. Lipsey found the property manager greeting all building occupants by name as they entered in the morning. Lipsey spent the day with her going over the building but at 4:45 p.m. she returned to the lobby where she said goodbye to everyone. In the following days Lipsey interviewed the building’s occupants on what they liked or disliked about the building. A critical question was: If you were to renew your lease, why would you do it? To the person they answered: “Barbara [the property manager]! We love Barbara.”

Finish 1,500-square-feet of space. Lipsey said that a lot of space users need about 1,500-square-feet of space. When a floor in the building becomes available, instead of demolishing everything and urging the prospect to use his or her imagination to visualize what the finished space will look like, why not finish 1,500 square feet of the space? It may not be exactly what the prospect was looking for but it is beautiful space and ready for occupancy. It might just convince the prospect to take this space rather than waste a lot of time traipsing all over town looking at 10 other examples of unfinished space.

Price each space individually. Each space in the building needs to be priced separately, according to the consultant. Lipsey has developed a pricing tool that allows a user to walk through a building and price each space on its own.

“A big mistake that owners make is the $40 per square feet they charge for space on the ground floor facing the parking garage and the $40 a foot they charge for space on an upper floor overlooking the Pacific Ocean,” he contended. “That makes no sense. If you visit a Mercedes dealership, not every car there has an $80,000 price tag. There are different models available and different years available. Space should be priced the same way. If you have 12 vacancies in your building, there should be 12 different price tags. That way, the prospect can see that you are discriminating in how you price your space.”

Offer a variety of lease options. If you have smaller users looking for 1,500 square feet for two or three years, give them a service agreement of a few pages, not a lease the size of War and Peace!

Lipsey suggested having at least three documents: a franchise agreement, a service agreement and the big lease.

The franchise agreement is typically two pages; it is for less than 2,000 square feet, less than two years and for space requiring no TI. The prospect takes it as is the beginning of next month.

The service agreement, the next document, could be for anything less than 5,000 square feet; less than three years; and need very little work done to the space, except maybe a paint job.

The big lease is for the big client taking space for multiple years.

Hire commercial real estate people with care. Lipsey said that if you hire someone from the hospitality industry, they get it immediately when it comes to customer service because the hotel guest can and will leave the next morning if service is not good. Those who come straight to commercial real estate need more training. “Today, the property manager must think of himself or herself as being manager of a Four Seasons Resort,” he said. “Think of what a manager of a Four Seasons would do if confronted with your problem. He or she would be concerned about the guest and about customer service.”

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