Commercial property tenants 'like gold dust'

Nicholas Piper says tenants prefer one point of contact. Photo / Supplied

Commercial property tenants are like gold dust in the current market, says Nicholas Piper, general manager of Bayleys Property Services, which now has more than $1 billion worth of commercial and industrial property under management.

"The biggest risk property owners and managers face is that existing occupants will not renew their lease and be lured to alternative premises," Piper says. "Skilful and proactive asset and tenant management is critical to minimising further erosion of property capital values.

"The costs associated with a tenant vacating are enormous and will generally be far more than the cost of an effective tenant retention strategy.

"Therefore a retention strategy should be focused on understanding and correctly interpreting tenants' evolving needs and adding value to their business whenever the opportunity arises."

Piper says owners and property managers need to spend time nurturing and developing mutually beneficial relationships with tenants based on trust and respect.

"The primary objective should be to ensure all tenants at all times experience an unequalled level of objective, professional, personalised and transparent service so they don't have any reason to consider relocating."

The elements of a programme which Piper says "works particularly well" include:

Maintaining a strong operating cost budget ethic. "This is achieved by continually challenging and benchmarking building services costs - looking for ways to reduce those without compromising the quality of service. We have found there can be a lot of wastage in this area with significant savings to be made - which translates to lower operating costs for tenants and owners alike."

Full disclosure and transparency. "This is particularly important with operating cost budget preparation and wash-ups, make-good assessments and the determination of 'market' related rentals."

A dedicated point of contact. "All concerns, ranging from maintenance to account queries, are best dealt with by one property manager who responds to any concerns any tenant may have as efficiently as possible. Tenants get very frustrated very quickly if they are required to deal with a multitude of different people."

Regular visits. "Property managers should go their buildings and meet with tenants on a weekly basis."

Piper says applying the above principles has resulted in Bayleys Property Services reporting a record year despite a challenging business environment.

In the financial year to the end of last month, revenue from Bayleys Property Services property management contracts increased by 29.9 per cent on the previous year and the agency's subsidiary secured new management contracts on 14 substantial commercial and retail properties in Wellington and Auckland.

Piper says a focus on preventive maintenance and improvements to building services is particularly important in the current market.

"As a result of the large current pool of available office space, both existing and prospective tenants are aware of, and do, compare the services in the accommodation they occupy with that in suitable alternative commercial buildings.

"Inferior building-related services will have a dramatic impact on the ability to either retain existing tenants or to attract prospective occupants.

"It is therefore critically important for property managers to instigate and fight for the ongoing execution of suitable preventative maintenance programmes and planned improvements to the services of buildings they are assigned to manage."

The move towards "sustainability" is also growing in importance, Piper says. "Any substantial improvement or upgrade project will be obsolete at date of completion if the conversion to a green-star rating is not achieved at the same time."