As the economy takes its toll on corporate balance sheets, property managers work overtime to keep tenants happy.
If the resounding battle cry for property managers a year ago was “drive rental rates,” the new mantra is “keep existing tenants and maximize efficiency.” And for the majority of property managers today, maintaining the existing tenant roster means spending more time, money and know-how in exchange for lease renewals.
“If you can't drive rates given the market environment, it's critical that you are maximizing your efficiencies in how you're operating the building,” says Dan Pufunt, national head of property management at Chicago-based Jones Lang LaSalle (JLL). According to Pufunt, getting the most out of a building equates to better energy management and maximizing alternative revenues such as rooftop antennas, retail and other services.
Lesley Lisser, senior asset manager of FirstService Williams, agrees. “We're trying to go back to a back-to-the-basics approach to management,” says Lisser, senior asset manager for the firm, which has 60 million sq. ft. of primarily Class-B space under management in the New York tri-state area. “We're going to address everything we can in terms of tenant relations, improving costs, green initiatives, extra security, and precautions against flu and other contagious diseases.”
What a tenant wants
Against the backdrop of rising bankruptcies and scarce cash, property managers are now charged with the critical task of assisting their investor and corporate clients with capital preservation. CB Richard Ellis Group (CBRE), which ranks No. 1 in this year's survey with 2.2 billion sq. ft. under management, is dedicating more resources to understanding what moves its largest clients need to make.
“We're focusing our efforts on our largest clients, trying to really dig into what their needs are and to deliver thoughtful, strategic solutions to them,” says Tony Long, president of asset services for the Americas with CBRE.
Revenue from property management is down approximately 2.5% from last year, says Long. However, space under management by CBRE actually increased by as much as 12% from last year. “So we're doing more for less,” says Long.
Part of the success can be attributed to CBRE's new restructuring services group that addresses a range of client needs beyond property management — from restructuring debt and equity to helping clients underwrite distress acquisitions. So far this year, CBRE has picked up 25 million sq. ft. of properties in receivership.
JLL, which ranks No. 2 in NREI's survey with 1.4 billion sq. ft. under management, also is taking a more holistic approach to property management, and providing more services that go beyond the day-to-day operations, including management, corporate accounting, and engineering and operations.
“The corporate providers are looking for opportunities to maintain or to increase profitability in tough economic times until recovery occurs,” says Pufunt.
Despite a willingness on the part of property managers to go the extra mile for their tenants, the relationship is far from a one-way street. The financial health of tenants has also become a paramount concern to property managers, even as tenants demand concessions.
“We are trying to work with tenants that we feel are financially sound to maybe help them out during a tough time,” Lisser says. “It's a constant credit evaluation of tenants.”
Deeper shades of green
Shaving costs also has kept green building practices at the forefront, primarily for the savings garnered from smarter energy management and as a tool to attract new tenants. “Sustainability saves clients money on energy, on matters that relate to their investors or the tenants that occupy their buildings,” says Long.
CBRE now manages 17 buildings that have attained the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) certification for existing buildings, and expects that total to grow to 50 by year's end.
Like CBRE, JLL has remained at the forefront of the green movement. More than 500 of its employees have achieved LEED accredited professional (AP), a grueling process that requires months of study and a four-hour written exam.
“We tell our managers it's important that you translate what you learn in the LEED AP certification process into value for our clients,” says Pufunt. “We see the real economic benefit that our tenants can realize.”
MAJOR PROPERTY MANAGEMENT ASSIGNMENTS
|Panattoni||An 11-city multi-building portfolio totaling 16.7 million sq. ft. of space across property types||Colliers International|
|Nokia||A 20 million sq. ft. global portfolio encompassing more than 380 properties in 60 countries||CB Richard Ellis|
|GenCap Partner||The 110 Tower is a 391,473 sq. ft., 30-story Class-A office tower in Ft. Lauderdale||Transwestern|
|Target||University Shopping Center encompasses 201,654 sq. ft. of retail space in Shreveport, La.||Stirling Properties|