As finding and procuring tenants becomes more costly in the wake of the "dot-bomb" era, establishing interactive, service-oriented tenant relationships has emerged ad the new paradigm for success. Kent Goodwin, president of Redwood City, Calif.-based Tower Realty Management Corporation, said, "Customer service in and of itself is not a new idea. It is simply applying a new way of thinking about everything we already do, and putting it in a new context that is customer focused."

MEET AND GREET

Personal interaction with a service-oriented property manager is the goal, explained Goodwin. Tower Realty retained Master Connection Associates (MCA) to conduct comprehensive customer service training for all of its on-site and home office management staff. MCA has its roots in Ritz-Carlton Hotels' management training process, and adapted its program for office properties. Sharing best hospitality industry practices works--five-star hotels are experts at getting fickle customers to return.

Chicago-based Equity Office Properties (EOP) echoes a focus on face-to-face service. Its new program, EOPlus, has pared 150 national offices to 50 by centralizing managers and installing call centers to serve property portfolios. Managers are now encouraged to spend the majority of their time in the building and with tenants, while employees strictly devoted to handling telephone calls provide tenants a live voice 7 a.m. to 7 p.m. Presumably, the new program will realize reduced operating expenses. EOP's chief information officer Scott Morey said there are more people touching on the customer and in a more focused manner.

Once in front of the customer, it's essential to become a vital part of their business. Trained managers know critical phases of the tenant relationship revolve around major changes, e.g., moving into a building, tenant improvements. Thoughtful gestures, such as sending sandwiches and drinks on move-in day or a plant for the reception area stand out in tenants' memories. Delivering anything in person earns points. One San Francisco-based manager makes it a point to personally review a customized Tenant Welcome Package that contains building information and local amenities (maps, transportation, restaurants, banks, post office, etc.) with new office managers. Launching a relationship in a positive manner builds a solid foundation.

GETTING TO KNOW YOU

Understanding a tenant's business is one of the most expedient ways to retain its lease. Valuable knowledge is an elevator ride away. Property managers who visit a tenant can qualify priorities and potential concerns. Is the office filled with accounting staff or salespeople? Accounting staff may have extra HVAC demands during reporting periods while salespeople might appreciate extra conference facilities. The differing needs of these groups dictate contentment with office space.

Develop financial literacy and speak Wall Street's language of symbols and acronyms. Tenant annual reports contain a mission statement, list products and services and name key executives. Lease terms may require tenants to submit regular financial information. Be sure to read these reports.

Knowing the right people is critical to tenant retention efforts. The two "must knows" are the office manager (the local expert on facility and personnel issues) and the top on-site executive. A third important contact is the lease decision maker (who may or may not be the top local executive). EOP has formalized its contact relationship management with a software program called Onyx. With a mouse click, the blinking screen can display every tenant's history, including service order requests, lease information, contact information and pertinent notes.

Long-term tenancies result from care and accommodation. Many firms that own substantial square footage in close proximity capitalize by accommodating tenant office expansion and consolidation needs. EOP's FastOffice[SM] program avails small (on average 2,100 square feet), furnished sites with short-term (between one and 18 months) leases where telecommunication technology allows occupants to just plug in a computer and start working. Landlords might also reconsider interior, difficult-to-lease space that can be furnished and made available for temporary lease to tenants who need space quickly, ensuring there's never a need to seek another building.

STATE-OF-THE-ART SUPPORT AND SERVICES

Technology has enabled landlords and property managers to step directly in front of the customer, automating receipt and processing of many tasks previously handled manually.

Perhaps the most dramatic change has been in the mundane: processing tenant work orders. At EOP, tenants access a customized Web page (the third-party software vendor is invisible to the tenant) to complete a service request form. The form is then communicated via wireless technology (two-way radios, handhelds, etc.), and all work orders are tracked online. Morey reports 60 percent of EOP's requests arrive via the Internet. He theorized more maintenance calls (including billable requests) are made because it's easier to communicate, and lauds the company's software for both its efficiency and tracking abilities. EOP receives a daunting 400,000 service requests a year from its more than 716 properties.

Technology blurs the difference between large and small landlords. Whereas past economies of scale often allowed only the larger landlord to provide more value to their tenants, now smaller landlords can create (and brand) the same responsive service. A single software purchase allows landlords to use vendor partnerships to offer tenants group buying power in a convenient and cost-efficient marketplace. Companies such as Brandywine Realty Trust, headquartered in Plymouth Meeting, Penn., offer online access to the myriad vendors with discounted wares--office supplies, furniture, travel reservations or concierge assistants. According to Brandywine's Web site, 99 percent of its tenants have become registered members since the launch of the product in May 2000.

High-rise owners leverage elevator rides with Captivate Network, which provides silent, visual reports on news, sports, weather, traffic and stocks on high-resolution, flat panel screens installed in building elevators. The panels can also broadcast specific messages, such as safety information or city-wide event listings. Broadcast messages remain onscreen for about 10 seconds, and the average elevator ride lasts 35 to 45 seconds.

EVERYTHING UNDER ONE ROOF

Value-added amenities expand tenants' leased space by creating additional meeting and eating spots. Landlords may designate an unleasable office space as a common conference room equipped with computer portals, video conferencing and kitchenette. Tenants bear the pro rata cost of these common facilities via operating expenses. While traditional building cafes offer more expediency than quality, landlords now seek experienced catering services to upgrade food services, offering cosmopolitan marketplaces with fresh pastas, homemade pizzas, broiled fish, elaborate salad bars and flower stands. A suburban California office building solved its on-site cafe needs with a specialty coffee cart designed to complement the building lobby. On-site fitness centers offer tenants a solution to that ever-popular New Year's resolution to exercise. Other value-added amenities include (third-party) carwash services, dry cleaning pick-up and Federal Express drop boxes.

HOW DO YOU RATE?

Lease renewal rates provide the most accurate assessment of tenant satisfaction, but some landlords liken analyzing (sometimes lengthy) renewal cycles to locking the barn after the horses have escaped. Many turn to third-party consultants to survey tenant perceptions and satisfaction.

Goodwin said: "We've been doing surveys for about five years now [and] recognized that the key to the financial performance of our assets would be tenant retention. We couldn't control the economy or market vacancy rates or rental rates and concessions. What we could control is the tenant's experience at our properties."

Tower Realty-managed properties engaged San Francisco-based Kingsley Associates to conduct an annual tenant survey, which combines Web-based scoring and telephone interviews. The survey questions key areas of tenant concern, including air quality, HAVC, security, janitorial service, elevator operation and management staff responsiveness. In addition, each property manager coordinates tenant focus groups that meet on a quarterly basis (or more frequently if necessary) to discuss property management performance, tenant needs and concerns. Finally, Tower Realty benchmarks on-site personnel compensation to improvements in customer service and tenant satisfaction.

THE BOTTOM LINE

Steve Kingsley, president of Kingsley Associates, said that in a competitive business environment where it costs far more to acquire a new customer than to retain one, the rewards of a successful customer service strategy directly impact bottom line. Tower Realty's Goodwin noted higher occupancy results in higher net operating incomes and also in a lower capitalization rate for valuation. In the end, the adage holds tree: The best customer is the one you have.

The Costly Alternative--Losing a Tenant

Take a glimpse at the cost of losing the fictitious 5,000-square-foot
Imaginary Company:

Loss to lease (assume six months at $25/s.f./    $ 62,500
  year rents)
Brokerage commission for new tenant ($5/s.f.)    $ 25,000
Tenant improvements (assume paint/carpet)        $ 25,000
Nominal marketing costs (flier, potential        $    500
  brokerage incentive)
Potential legal fees for new lease negotiation   $   1000
Administrative and management headache            unknown
Minimum Total                                    $114,000 ($22.80 sf)

When $22.80/s.f. is amortized over a five-year period (assumed new
lease term) at 10 percent annual interest, it amounts to $5.77 per
square foot annually. In other words, the landlord must obtain a $5.77/
square foot leas premium with a new tenant to cover the cost of losing
the previous tenant. That buys a lot of croissants at the tenant
appreciation breakfast. (Evn if a renewing tenant is allowed tenant
improvement funds and a brokerage commission, the loss is still
substantial.)

Alice Devine Wilson, RPA, (aadevine@sbcglobal.net) has more than 18 years of leasing and property management experience.