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The mechanics of meeting tenant expectations

Property management is often the 'human resources and public relations of the business'
Tuesday, January 6, 2015
By Rebecca Melnyk

Ryan McAskile, senior vice-president and manager at DTZ in Mississauga, spent years in the brokerage business, advising clients on rental rates and where to lease. But last year, when he became a tenant himself, he suddenly had to start communicating on particular issues such as extending a lease, reconstructing new space and dealing with property management and glitches in the aftermath of rebuilding, the HVAC system, for example.

What McAskile realized from this tenant perspective is that certain specifics really matter, such as knowing base building conditions and what a space consists of, making sure that what is negotiated in a lease is followed through to completion and the ongoing relationship between tenant and landlord.

“The tenant relationship is huge,” said McAskile, speaking at a seminar in December 2014 on tenant perspectives. “Some people do it really well and others don’t.”

But property managers are often in tough positions, left to execute the promises and deals negotiated during a lease phase. At the same time, communication among all parties is integral to a tenant’s happiness.

McAskile, along with an expert panel, offered advice to property managers on how to help meet tenant expectations, in turn, increasing property value.

Symbiotic relationships

Leasing agents often promote a building as frontline individuals, but their role is extremely finite in the life of the tenant relationship, said Jamie Boyce, associate vice-president at CBRE Limited.

“That transition from the deal, lease and legal counsel to the property manager is critical because there needs to be a proper understanding of what is in the contractual or legal relationship between parties,” Boyce said. “Proactive communication during that period of a lease cycle supports a positive relationship. When it comes to renewal time, or a change like downsizing, that comfort with the property manager or landlord exists.”

He views a property manager as a recipient of the tenant. “The leasing team has negotiated and created that rapport and the tenant is delivered to the property manager,” he said. “But it can be unfair to the property manager, if during the deal stage, tenant expectations haven’t been managed appropriately.”

However, if those expectations have been communicated properly, then the responsiveness will be equally geared. Boyce recently experienced a situation where a sprinkler head broke and filled a basement with water.

“We had a good relationship with the tenant and the tenant discovered the issue and engaged with the process,” he said. “Their knowledge of the way the building was operated and their expectation of the way the building was operated allowed for a clean start to rectify what was a material issue.”

Boyce pointed out that tenants are equally responsible from the beginning. If a broker is involved in a deal, he or she can quickly set the tone on what may or may not be achievable from a particular landlord, such as what level of service to expect from an asset class. However, tenants must listen to the message and understand what to expect. This understanding equally stems from a landlord’s leasing representative. “They need to be very confident what the policies and practices are as it relates to what the ultimate agreement is going to be,” said Boyce.

Beyond economic factors, anything from environmental requirements to insurance provisions should also be effectively communicated from day one, so there are no surprises when issues are negotiated in the final document or when a property manager points out responsibilities in a lease.

Susan Rosen, partner at Gowling Lafleur Henderson LLP, says property managers should have a heightened awareness of the leasing process. “You have to know every layer. You have to know what the agents and lawyers do, what the owner is doing and, sometimes, they have to know as well, which is cause for communication breakdown.

Rosen suggests property managers encourage companies and organizations to hold semi-annual or annual meetings revolving around an internal forum to discuss issues—things that keep repeating, base building conditions, what each individual needs, what the role of others’ positions are.

In turn, property managers can better facilitate their jobs and enable other parties to be more competent and understand concerns, so issues can be negotiated upfront. “Everyone should be on the same page,” she says. If you’re not negotiating everything upfront with the tenant to mitigate upgrades, tenants will be unhappy.

Relationship building with limited resources

Michelle Flynn, chief operating officer at MONA Networks and panel moderator, asked how property managers working off-site or with small teams can improve communication if resources are limited.

McAskile suggested proactively approaching tenants will conserve time, even if it seems like extra work. “If a tenant, especially one with deep pockets, finds out they missed a notice day to expand or take on extra space they needed for their business, you might face potential problems,” he cautions.

Regularly approaching tenants, understanding how their business is going and how their space is working for them, like their air systems, for instance, is crucial. “Even if you think you can’t do something, don’t say you can’t; say, ‘We can figure out a way to make this work,'” he said, adding, “all it takes is a little verbage, a warmer language—it doesn’t have to be adversarial.”

“The property management side of the business is very much the human resources and public relations side of the business,” added Boyce. “At the fundamental level, it’s a human aspect of the business, ensuring there is active dialogue, comfort in a relationship and a perceived knowledge of each other’s expectations.”

Boyce said that from a tenant’s perspective, the landlord is often a partner in their day-to-day business. “At the most basic level, that human connectivity between parties needs to exist in order to work through issues,” he says. “If there is a costly reconciliation charge, at least there is an ability to have a good discussion, rather than a legal battle.”

Relationships to add value

Rob Renaud, managing principal and broker of record at Newmark Knight Frank Devencore, said communication also presents an opportunity to add value for the ultimate company to work with.

Recently, one of Renaud’s future clients wanted to spend $4 million to renovate their building space. The property manager and leasing representatives of the owner didn’t know. The AAA publicly-traded company had six months left on their lease and intended to spend a lot of money, willing to do anything to earn capital offset to help renovate. If they couldn’t get the money, the project would have deteriorated and they would have lived in steel space for another six years.

Soon after Renaud got involved, his company informed the property manager and leasing parties, and the client received $1.5 million and approval for the rest, while extending their lease for eight years to earn that benefit.

“If you’re able to keep the communication dialogue going,” said Renaud, “there are interesting and positive ways to add value, and this property manager was able to do that.”


Rebecca Melnyk is online editor of Canadian Property Management and Building Strategies & Sustainability.

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