EXPERIENCE MATTERS

Properly operating and maintaining real estate assets will prolong their life as well as enhance their value. Often, however, this takes a third party, thanks to the human tendency to miss what’s right in front of our eyes.

I recall touring a relatively new high rise apartment building. This one was 30 stories, built in 2010, and one of six my client owned. As part of the process, I looked at the elevator machine room. Elevators are probably the most essential piece of equipment in the entire building. 

I walked in and saw a shiny steel cable coiled up – wire rope – sitting on the floor. I asked about it. I learned that the elevator manufacturer and maintenance company had informed the managers that: 

· The cable was faulty.

          · It was the managers and owners’ responsibility to replace it. 

Wait, what? Replacing a single elevator cable for a thirty-story building costs several thousand dollars. This was not a minor project. The building was relatively new, and if a cable needed replacement soon after installation, the only reason could be a fault in design, manufacturing, or installation, or something else what was not the owners’ fault. The managers were simply doing what the maintenance company had told them. They trusted them. 

I didn’t. In fact, it’s my job not to. I’ve been in this profession for many, many years, and I’ve seen a lot. And one thing I’ve seen is vendors who can’t resist the temptation to relieve a trusting customer (or one who doesn’t know the specifics of a warranty) of his money. Was this happening here?

I challenged the position and asked the managers to review the elevator maintenance elevator agreement and warranty. I also contacted senior management of the elevator company about the situation. I learned that recent changes in the regulations governing elevator safety had also altered the specifications for cables. An upgrade was required, and under the terms of the warranty, the building owner was not financially responsible. This was good news to my client. Not only did the managers and owners of that high rise building not have to pay for the replacement of the cable, but all of their high apartment buildings were brought into compliance without any additional cost. All because I checked, and asked.

This is a perfect example of something I do, which is act as a neutral, skeptical, knowledgeable third party. The ‘third party” part is particularly important. In the day-to-day routine of their work, my clients might not question things, dig a little deeper, or think about what might happen instead of what is happening. They’re too busy. 

That’s the role I fill. While most maintenance companies are reputable, for example, you should carefully review the operating documents, particularly for major projects. Usually there are no surprises. But every once in a while, there’s a big surprise, and as in this case, big savings.

 Hollywood doesn’t often make movies that include lessons in how to treat tenants. But the 2018 movie Tomb Raider actually did. It’s a funny scene, but it makes an important point when the security guard is rude to a young woman who turns out to own the building.

The relationship isn’t done when hands are shaken and the lease is signed.  It’s just getting started. Just as the wedding isn’t as important as the marriage itself, the lease is less important the tenant experience, and the relationship it creates. The strength of the landlord/tenant relationship will have a significant influence on the tenant’s decision to stay when their lease is up for renewal.  

Commercial brokers are also extremely important players in the office leasing process.  Brokers hear from other tenants about the landlord’s performance, how tenants are being treated by the building staff and the building’s responsiveness to issues.   Responding to tenant’s calls quickly and staff making the extra effort - like a personal greeting in the lobby - can go a long way to building a long-term positive relationship.  Tenants and brokers have long memories. 

Performance consistency is also important in retaining and attracting tenants.  Ensuring that employees and vendors treat both tenants and brokers respectfully is paramount. Everyone from security guards to maintenance engineers are your ambassadors.  How they greet and treat the tenants should be relentlessly emphasized. Management staff needs to be just as respectful and timely in carrying out their responsibilities.  In addition to leading by example, incentives should be explored to promote a positive work environment by recognizing the employees and vendors for their treatment of tenants and maintenance of the property.    

It is certainly a lot less expensive to retain existing tenants than to deal with the turnover, downtime and associated costs of leasing to new tenants.  

Sam Walton, Walmart's founder, once said, “There is only one boss— the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” That goes for tenants, too, and service is what makes the difference.