In Touch with Tenants - Low-Cost, High-Impact Ways to Retain Tenants

Winter 2012

No building owner wants to lose a creditworthy tenant, especially in this economy. But at the time of lease renewal, how do you keep tenants in place, especially when competitors are banging on their doors with a variety of offers? According to John Falco, principal, and Phil Mobley, vice president, Kingsley Associates, San Francisco, there are proven ways to achieve high levels of tenant retention. Kingsley has been surveying commercial and residential tenants on their likes and dislikes about the space they occupy since 1985.

“The data shows that tenants are initially attracted to office space by location, price and strong management. When it comes to what keeps a tenant in the space, it is landlord responsiveness, good communication and the willingness of management to accommodate the special needs or requests of the tenant,” said Mobley.

John Falco

John Falco

Falco and Mobley outlined six ways that building owners and managers can increase tenant retention.

1. Exceed Tenant Expectations
“The hotel sector has a different mindset when it comes to customer service. Hotels look at a problem as yet another opportunity to exceed the expectations of the guest — office building management needs to do the same,” noted Falco.

“Property managers often think of a service call as a distraction that takes them away from their responsibilities. They need to change their approach and make the tenant feel even more satisfied with their leasing decision. At the time of renewal, that type of customer service becomes a factor in the decision of the tenant to remain in the building,” he remarked.

“When it comes to lease renewal, tenants typically choose from more than one building. All other things being equal, if tenants receive a high level of service in the current building, they will not risk moving to another property where the same level of service may not be provided.”

2. Build Relationships
According to Kingsley, landlords with large portfolios are training their property management personnel to move beyond the role of customer service representative to one of relationship builder.

Phil Mobley

Phil Mobley

“In our surveys, tenants are regularly asked what management behaviors are needed to build the landlord-tenant relationship. Survey results indicate that a major component is responsiveness with an appropriate degree of urgency. It is important to personally communicate with the tenant — don’t leave a note or send an email. Telling the client face-to-face builds relationships,” said Mobley.

3. Be Proactive
Besides responding to issues and complaints, Falco and Mobley suggest the property manager plan an unscheduled visit to the tenant to follow-up on a service request.

In the short term, this strategy will create work for the property manager because he or she will probably hear about what is not functioning properly, including a burned out light bulb in need of replacement. However, in the long run, the added attention will foster a stronger landlord-tenant relationship.“Whether responding with urgency or being proactive, when a tenant perceives that the property manager performs well, our research shows that the tenant will renew the lease 60 percent of the time. When the service is not up to par, the chance of renewal falls below 50 percent,” said Mobley.

4. Give the Building a Great Face
Every building has a face — good, bad or indifferent. It might be the property manager, the receptionist, the security officer in the lobby or the engineering team. “Everyone who works for the landlord and interacts with tenants is the face of the building. While it is not necessary to be a Type A salesman, building owners, their staff and third-party vendors must recognize that customer service is an important part of their responsibilities,” said Mobley.

This includes vendors who do janitorial work, window washing and landscaping. The service vendors must present themselves well, smile and be friendly.

5. Communicate Early and Often
“Tenants do not like being kept in the dark, stressed Falco, so it is up to building management to communicate with tenants in a positive and consistent manner. Of course there are a few challenges regarding how frequently the property manager can converse with tenants. Sometimes the building manager thinks an elevator upgrade will be finished on a particular date and then it turns out to be six months later than planned. Those things can happen, but it is important to let tenants know what is going on,” noted Falco.

6. Take Care of the Building
Kingsley suggested that property managers treat the building as something that will be around for a long while, well beyond the first lease term. “If an issue looks like it is being deferred or neglected, it is a major red flag for the tenant. We all know that budgets are tight and there are priorities, but be careful that it is not an obvious overdue issue that the tenant will recognize and react to negatively,” commented Falco.

On Green Buildings and Tenant Events

Are sustainable buildings and frequent tenant events essential to tenant retention? According to Mobley, green features in buildings do sell, with all other things being equal. From its research, Kingsley has found that there are not many tenants who will pay significantly more to be in a green building; however, it is absolutely a selling point.

Tenant events are nice, but not necessary, to win lease renewal, according to the Kingsley team. “We have seen very high levels of tenant satisfaction and renewal rates in buildings that do and do not feature tenant events. Expectations vary by local market and what has been done in the past,” said Falco.Tenant activities can also help building management in another critical area of tenant retention: relationship building. He noted that, “Although tenant events are not critical to lease renewal, they are a great opportunity for property management to relate to a larger number of occupants in the building.”