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Tenant service key to successful management.

Ford Chairman Donald E. Petersen once said, "If we aren't customer-driven, our cars won't be, either."

These days, those words reflect the guiding philosophy of many American companies. From car makers to breweries, from airlines to retailers, businesses are recognizing that the customer is king. Property managers are no exception.

In the world of real estate, management is the message for the 90's. We all know why. A rising market, fueled by deregulation and lax underwriting, left us with 470 million square feet of empty office space. Credit is tight, development is constricted, and the oversupply of space in likely to last well into the decade. Even using liberal assumptions, constructioin in the 90's is expected to be half the level of the 80's.

As every industry maven knows, sound management can profoundly effect thevalue of real estate investments. Effective, professional management is being relied upon to make the difference between real estate investments that succeed and those that don't. This new emphasis on management has caused an industry-wide re-examination of the roles of managers. Distinctions among property and asset management have always been somewhat murky. In this market, their roles have become more integrated than ever before.

Property managers used to be distinctly operations oriented. They were responsible for handling daily building operations, leasing, tenant relations, and maintenance. Their perspective was short-term, and their focus was on tenants -- securing them, if not necessarily retaining them.

In the current market, the role of the property manager has expanded greatly. Because they have the advantage of being close to the market, property managers are being relied upon to gauge tenant trends and monitor demand for space first-hand.

Property managers are uniquely positioned to understand tenants' businesses. As a result, they are being asked to set strategies for negotiating with tenants to keep retention up and replacement costs down. They are being called upon to create and implement growth plans for properties and to contribute to strategic decision-making. They are being asked to be the eyes and ears of the market -- to advise asset managers and owners of market conditions and help them to respond accordingly.

The asset manager's role has changed as well. Traditionally, asset managers functioned as owners' representatives, selecting property managers and setting guidelines within which they could operate. The primary role of the asset manager was financial: their goal was to improve the asset value of the property.

Enhancing value is still the primary task of the asset manager. But asset managers can no longer afford to be removed from the market. Tenants' concerns are now their concerns, because the tenant, in this market, is king.

Asset managers can no longer guide a property to financial success without the benefit of a stable tenant base. Once leasing agents secure tenants, there is strong economic pressure to keep them, and that means meeting their needs.

So while yesterday's property manager could dedicate its resources to running its own operation, today's manager has to maintain a crystal clear focus on the tenant. Of course, this means property or community events, commemorative gifts, flowers, maps, tokens, coffee mugs, umbrellas . . . but most of all, service. And fundamentally, it means knowing your tenants, and making sure there are no surprises. A good tenant relations program provides frequent communication and constant feedback so that property and asset managers can gauge their performance.

By observing tenant behavior first-hand, property managers can provide asset managers with valuable insights to aid in planning. Yesterday's "location, location, location" has become today's "service, service, service." Property and asset managers that know that are most likely to guide properties to success in this market.
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Title Annotation:Property Management Supplement
Author:DiRuggiero, Ralph
Publication:Real Estate Weekly
Date:Oct 2, 1991
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