Happy tenants = happy owners: How tenant-retention programs provide a competitive advantage
Most business owners have developed an intimate understanding of the cost of employee turnover, and therefore devote just as much time and effort to retention as they do recruitment. The same argument can be made for properties: It’s much cheaper to keep the tenants you have than to replace them.
Just think about all the little extras that come with replacing a tenant: extra calls, additional property visits, more advertising—more of your time spent racing against the clock to fill that space. And those extras can add up: Depending on what kind of tenant you’re chasing, that turnover cost can run anywhere from $1,000 to $5,000 each.
While office tenants may leave you for a wide variety of reasons – many of which aren’t under your control – smart owners and property managers are using robust tenant-retention programs to make a difference where they can.
Better tenant retention by adding value
While our individual identity certainly stretches beyond just our job, we typically spend more of our waking hours at work than we do at home. As a result, we tend to create and cultivate our own “functionally dysfunctional” families at our workplace. And that unique culture gives your properties their own particular personalities, which, in turn, attract other tenants with similar interests.
A qualified property management company must be tuned in to that personality to more effectively manage the property. One of the best ways to do that is with a tenant-retention program customized to each property.
Yes, it’s true that the success of a tenant-retention program is often hard to quantify; however, assuming a tenant is satisfied with the lease terms, location and square footage, a solid program can set you apart from your competition.
An article from the Building Owners and Managers Institute International elaborates on the importance of these efforts:
“If location and value among competing buildings are essentially equal, the next determining factor for a tenant to remain or move will likely be the quality of management services … Tenants who feel valued and are comfortable that their needs are being anticipated and fulfilled are more likely to renew their leases. The property/facility management team that can deliver superior service and stay close to the customer through excellent service and communication will differentiate itself from the competition and keep their tenants, and their owners, happy.”
So, what goes into this plan? Working with the owner, a property manager should be able to build a road map that addresses several areas:
Curb appeal still rules, and the physical appearance of the property is a good representation of how it’s managed and maintained. Your property should meet, if not exceed, what’s expected within its classification and clearly reflect what’s provided in level of service and environment. The tenant also needs to see you’re committed to the property and to their tenancy. Make physical improvements to the property when warranted, and consistently seek new and creative ways to provide an atmosphere that fits the vibe of the building.
If you’re going to keep tenants happy, you should know as much as you can about them. What’s their business? How would you describe their company culture? When is their lease up? How likely are they to renew? What are their needs? How can you meet those needs? Create a detailed profile and keep the lines of communication open; it’s important the tenant knows you’re listening.
Remember that you can communicate in many ways: emails, newsletters, regular meetings, etc. Just keep a regular schedule. Quarterly tenant luncheons, for example, can serve as an informative yet casual time to relay relevant building information, promote upcoming events and receive feedback on any issues or hot topics that would be beneficial to discuss in a collective tenant setting. These also provide networking opportunities for tenants as they become more familiar with the various companies and array of services represented.
It’s all about enhancing the tenant experience. By constantly soliciting input from your tenants, you can create events that quickly become building favorites. From simple pancake breakfasts to large-scale events with live bands and cash prizes that close a city block—learn what’s important to your tenants and actively participate in the process and you’ll win hearts and minds.
If you’re ready to build a deeper relationship with your tenants – while also maintaining cash flow and achieving your owner objectives – an effective tenant-retention program can offer an important competitive advantage (along with a little peace of mind).
Joni Cross is associate director of property management at Copaken Brooks, a full-service commercial real estate firm headquartered in Kansas City and serving the Midwest. The company’s full suite of services includes: property management, construction management, leasing (office, medical, retail and industrial), investment acquisition and sales, tenant representation and HQ relocations, condo management, asset management, and development. Share your thoughts on our Facebook page or on Twitter @CopakenBrooks.