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Tenant retention - a strategic approach.

Begin discussing tenant retention with even the most astute real estate manager or owner and the automatic response quickly follows: "Oh, of course we have a tenant-reten- | tion plan! Why, we only hire friendly receptionists; we require all our managers to send a monthly newsletter; and we give an open house every Christmas!"

Silence. While we relish this enthusiastic response to this timely question, strains of that old tune "Is That All There Is?" are heard rising in the background.

While various ideas, promotions, and even gimmicks abound in tenantretention efforts, many property manager have yet to discover the key to foolproof, cost-effective tenant retention. Our experience has led us back to the basics.

Whether the tenant retention requirement emanates from the desire to sustain ongoing occupancy, is initiated in response to a renovation program, or accompanies emergency planning, it needs to be a thoughtful, written action plan with goals, objectives, and a budget.

Tenant retention planning must become an integral component of the property's long-range planning. The subject should no longer float between executives, supervisory staff, and site personnel as some nebulous concept that everyone acknowledges as critically important but no one acts upon. The monthly newsletter and Christmas party days are gone forever as the consummate tenant strategy. In today's market, it takes more.

As property managers, we all have come through the period of "preventive maintenance" as an industry buzz word and have now arrived at the threshold of tenant retention as a very real process. Retention is a pervasive, positive management attitude coupled with a systematic approach to keep tenants satisfied. We like to think of it as "preventive marketing."

More than just a box

In the final analysis, we all provide boxes--walls, a floor, and a roof--within which tenants open businesses or rest their weary heads. Some boxes come with tennis courts, swimming pools, exercise rooms, concierge services, and so forth. Generally, based on price and location, the consumer makes his or her decision among products that are not all that dissimilar.

The question then becomes, "What makes our box better than the next one?" Our considered opinion is that people stay where they are regarded as valued customers.

One can add all the gadgets and amenities on the market, and soon the box next door will have the same gadget, only bigger, better, and newer. While we do not criticize the property that stays abreast of the "Most Wanted" list and offers, perhaps, on-premise day care as an amenity, we might criticize the management that opens a day-care center without first consulting the existing tenant population.

Consider what is communicated to the tenants when announcing the creation of a day care center as a result of a recently conducted management survey (versus a ploy by management to attract tenants). Acting in response to tenant wishes effectively confirms that the tenants are heard and that their comments are taken seriously. What an excellent way to make them feel respected and part of the communitygiving them a voice in what happens to their boxes.

The current economic climate makes it incumbent upon all property managers to know what their tenants want and to respond. Management may no longer say, "No, we don't do that;' or "No, we don't allow that." It is time to be creative and open in our thinking. Everything that is reasonable must be considered. Many managers shop the competition and survey the tenants of other properties, yet fail to initiate a dialogue with their own clientele.

A staff that cares

An on-going, customized tenant retention plan does not necessarily have to be expensive and characterized by "things." Instead it must be firmly grounded in the attitudes of everyone on the management team. Identifying, hiring, and training the right staff people is the real beginning to effective tenant retention. Look for the kind of people who use the term "we" when discussing the property.

It is not enough to recruit the smiling receptionist with the dynamite telephone manner and assemble motivated, "shot out of a cannon" leasing agents if the property manager has an explosive temper and feels that the buildings would be fine if tenants didn't have to interrupt his routine by living or working in them.

Every property staff member has to operate in a customer-service mode all the time. Their everyday, wear-to-work attitude must be accommodating, service-oriented, and appropriately friendly. They must understand that knowing tenants, their children, and even their pets contributes to the tenants' sense of community and their feeling of belonging.

Rapport is phenomenal when both the receptionist and the maintenance superintendent can call every child and pet by name, as we observed at a suburban Philadelphia property of 155 units. In this way a sense of caring is effectively translated into property management.

Practical initiatives make this concept a reality. It is often the maintenance and janitorial staff members who are most visible and exposed to the tenants, yet they are usually the very same people omitted from staff development training opportunities. While leasing agents delve into the liner points of telephone technique and property managers devote a seminar to studying human behavior issues, little is provided to the maintenance staff to enenhance theirpeople skills. All members of the staff have to understand that the concept of tenant retention begins with caring.

Supporting caring with service

Yet, just caring about tenants is not enough. Methods must be developed to monitor performance. Again, maintenance is a key area. Random callbacks from the property manager or maintenance director are critical to ascertain tenant satisfaction with repairs as well as to identify additional potential problems. Periodic questionnaires are also useful.

Tenants have to believe they are getting their money's worth. As evidenced by the increased number of work orders generated when rent increase notices are received, residents want timely service for their investment.

The manner in which services are offered is of equal importance. For example, regular inspections not only safeguard the owner's investment, but provide the tenant with a feeling of being served. There is a perceived value. If the inspection is performed to find fault with the tenant, and that is the management's prevailing attitude, the service to the tenant is significantly diminished.

If a rent increase is imminent, it behooves management to find something small to repair during the inspection even if the tenant has not submitted a work order. Re-caulking a tub, tightening a loose door knob, or replacing a faulty ballast can purchase inestimable good will, if it is done with the attitude that says, "We are doing this for you because you are important to us."

If there are truly no repairs possible, renewal incentives can be offered that will upgrade the unit, such as the installation of mirrored closet doors, custom closet shelving, or track lighting. One property in Pennsylvania installed a $39 "brass" chandelier in the dining area, which not only pleased the renewing resident, but added permanent marketability to the apartment. With the addition of the fixture, send a personal note from the manager reminding the resident how much he or she is appreciated.

Leasing as a retention technique

The leasing agent, in concert with the property manager, can become a critical player in a successful tenant retention plan. It is as important to know why the tenant occupies as it is to determine why he or she fails to lease or vacates. To quote Art Cirkus, founder and president of the Cirkus Real Estate Group, "Know what you're doing right. Know your livability, what makes it a pleasure to live there."

In reality, the renewal process begins upon execution of the original lease. Flowers on the opening day of a business or chilled champagne in the refrigerator of a new apartment home are nice touches, yet they fall far short of goal if the tenants do not again hear from "the office" until 60 or 90 days prior to lease expiration. The first communication with the tenants, virtually since they occupied their space, cannot be a request for them to stay longer at an increased cost, or possibly some additional pass-through, when all they have received the entire term is four walls, a roof, and one welcome gift.

The rapport created between the leasing agent and the tenant during the initial leasing phase must be sustained by periodic contact so that the renewal stage is set. A paper renewal procedure, devoid of personal contact, may be deemed efficient, but is of questionable effectiveness.

The leasing agent's job will be easier if he or she is given cost-effective parameters within which to resell the deal. It obviously makes more sense to invest one month's rent in an existing tenant than to give it to a stranger. Accept the reality of stiff competition.

Consider a "floating" coupon for a partial or free month's rent to be used at the tenant's choice: for example, Christmas or tax time. For excellent tenants, consider returning the security deposit after three years of successful tenancy. The leasing agent's compensation also must foster the desire to retain tenants.

An aggressive retention posture requires dialogue and negotiation. Upon its receipt, a non-rental notice cannot be merely opened, date-stamped, and filed. Sufficient lead time may allow for the reversal of a negative decision.

Flexibility also is an important element in successful retention. One residential property manager made an exception to policy and accepted the local government housing authority's Section 8 subsidy for an ill, elderly tenant so she could remain in her apartment. Another facilitated a roommate situation so that two tenants who were simultaneously divorcing could share a large unit. A third honestly confronted a problem the tenants experienced with prior management. They did move out, but they returned one year later because they appreciated how the manager treated them during the transition process and observed the many property improvements as promised.

Give tenants a voice

Regardless of the real estate managed, an effective tenant-retention plan must rely on direct communication with the consumer of our product. Problems must be confronted and resolved before the tenant begins to look elsewhere. Managers cannot ignore even distant rumblings if several leases are at stake.

Tenants are less likely to go looking or respond to a competitor's offer if they feel they are being heard where they are. The key here is to respond in person. In this age of voice mail and beepers, tenants want the opportunity to communicate with a person for a change, especially in situations where the property manager may be just a faceless name on a memo from a distant office.

Tenant meetings admittedly can be a strain, but also may diffuse potentially negative situations if they are professionally conducted. Prior to a tenant meeting, use the grapevine and any informants who are "in the know" to prepare an agenda. Then, do the required homework, and take a deep breath.

If possible, meet first privately with the most vocal malcontents to address their concerns; in this way, they will be less likely to dominate the group discussion.

Be sensitive to when the tenants can meet. An 8 a.m. meeting in the shopping center deli can work for retail tenants. An evening meeting in a clubhouse, lounge, or neighboring facility

The preparation and implementation of a tenant-retention plan during anticipated renovation or emergency restorations are as important as the architectural drawings and cost estimates. Expertly honed communication and people skills are essential.

First, it is advisable to develop a written long-range overview and present it at a tenants' meeting. In this way, questions and concerns can be addressed from the outset. Offer periodic updates to keep everyone informed. Include any "bad news" honestly and openly before the tenant reports it in the form of a complaint.

If information is provided in advance, the tenant is more likely to believe that the property manager does not singlehandedly control the weather, the utility company's response time, or code inspections. Tenants will respect the property manager's word and appreciate his or her candor if they are treated as intelligent participants in events.

Try to keep correspondence with tenants on a positive note. When seeking cooperation from tenants to change a habit or behavior, phrasing such as "It would be appreciated if..." rather than "DO NOT ..." may get results.

During renovation, it is imperative to cultivate the construction superintendent and his or her key personnel. Their cooperation is crucial to keeping the tenants informed and satisfied. Contractors should also be advised of acceptable work standards at an occupied property, i.e., personal appearance, volume of radios, cleanliness of the site, fraternization with tenants, and so forth. Workers making long distance calls from tenants' telephones or leaving dirty tools on white bedspreads contribute little to enhancing a tenant's desire to stay.

Another vital element in tenant relations during a renovation is providing tenants with a way to respond to unexpected problems. When a subcontractor leaves the property, calling it a day with the water turned off at the main, the public relations skills of the answering service become crucial whether they realize it or not. The answering service becomes the tenant's first after-hours link to management, and often tenants are not in the best frame of mind when they initiate the call. As this example points out, every representative of the property must be attuned to responsive action.

At some point in the renovation project, it helps to thank each tenant and acknowledge necessary inconveniences. A residential property which had just gone through six months of sub-metering, window replacement, and added insulation took Christmas as the opportunity to give each tenant a "thank you" letter with a red ice scraper tied to the doorknob with a red ribbon. Everyone came home from work to this surprise and seemed to genuinely appreciate the gesture. The words shared a clear message from management and expressed sincere appreciation for the tenants' tolerance of the inconvenience. Consequently the residents realized that they were appreciated. This property increased rents 38 percent in the 18 months following the renovation with no negative effects on occupancy.

Retention at newly renovated residential properties has a greater chance for success if leasing agents are honest in their presentation from the onset and the models portray a true picture. There is nothing more detrimental to tenant retention than describing or showing a feature that is not available in the unit the tenant occupies.

Residential renovation is especially challenging if dealing with occupied units housing pets and/or children. The overall schedule needs to consider the school calendar so that major projects such as pouring concrete sidewalks are not attempted when the community's population is at maximum density.

Advance scheduling of interior work is essential so that infants and pets can be accommodated elsewhere. Tenants appreciate the manager who is considerate of their personal circumstances.

Making the commitment

In conclusion, the inevitable questions become, "So what's it gonna cost?" "Who is going to do it?" Followed quickly by the comment: "The property managers are already too busy."

It is our belief that the required change of focus and possible alteration of attitude demanded by a successful tenant retention plan may be accomplished without great cash outlay if all participants are committed. Tenant retention is everybody's responsibility. However, the basic motivation has to come from the top down.

As the owner's goal shifts from "fill those vacants" to "keep the 85-percent occupancy I've got in there," the inherent attitude in personnel also will need to change. Given the proper environment and sufficient support, even the most recalcitrant individual can grow into developing a responsive, positive attitude toward tenants.

As the IREM speech entitled "Real Estate in the Year 2000" states: "The property manager who has remained in touch with tenants, who has learned that just putting in a pool and a nice refrigerator in every apartment or a newsstand and an executive dining room in every office building won't guarantee full buildings, will be the property manager who enters the next century ahead of the pack."

Enis L. Hartz, CPM(TR), is a partner in Hartz, Reber & Associates. The firm provides a complete range of consulting services to the property management industry in all property types. Ms. Hartz is a member of the IREM national faculty, and serves on the Board of Ethical Inquiry, the Publishing Committee, and the Rittle Scholarship Award Committee.

Susan K. Reber, CPM(TR), is a partner in Hartz, Reber & Associates. She has worked as a manager of regional shopping centers for a full-service real estate firm and as a specialist in historic renovations. She was honored by IREM for her volunteer consultations at the Ronald McDonald House in Philadelphia.
COPYRIGHT 1992 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Hartz, Enis L.; Reber, Susan K.
Publication:Journal of Property Management
Article Type:Cover Story
Date:Mar 1, 1992
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