A strong property management team has always been essential to office building owners hoping to attract and retain tenants: It’s a key benefit that helps owners set their buildings apart from competing properties.
Today? Property management teams are even more important to the owners of office properties.
It’s no secret that the office sector is struggling today. The work-from-home movement means that many companies are renting less office space. That makes it more difficult for office building owners to fill their properties.
Having a strong property management team in place? That’s a key amenity that building owners can tout to prospective tenants, another tool they can use to entice tenants to choose their office property over others.
Property managers today, then, are partners to building owners, working with them to identify and meet the needs of tenants. Not only does this help building owners attract new tenants to their office properties, but it also helps them retain those tenants they already have, lowering their buildings’ vacancy rates.
We spoke with two property management professionals in the Minneapolis-St. Paul market about how this business has evolved since the start of the COVID pandemic and what it might look like in the future.
Here is some of what they had to say.
Jen Nergard
Vice president
Commercial property management and leasing
Schafer Richardson
Minneapolis
Do clients expect more from their property management companies today?
Jen Nergard: Absolutely. We are a privately held company. With that, we have assets that we manage in our REIT and outside our REIT. The majority of our decisions are made by those in our office who work with Schafer Richardson. This means that we can be nimble and adjust to what we are seeing in the market today. We understand that it is a tenant’s market, so we have adjusted to that.
What does that mean? You have to respond in a way that allows the tenants to call the shots. If you want that tenant to remain in your building, you have to make sure that they understand that you are working for them, working to meet their needs.
Are tenants taking more ownership over their spaces?
Nergard: Yes. Especially in our office portfolio, we see tenants who want to draft their office-improvement plans without a lot of oversight from their landlords. They are open to feedback and oversight, but a greater number are self-performing. They want to tell landlords what they want to see, and they want their landlords and property management teams to deliver.
It comes down to how badly landlords want the work. What are you as a landlord willing to do to get that deal done? Tenants might have specific requests relating to HVAC or lighting. They might be focused on the adaptability of document storage or of using storage space in a different way. Landlords and property managers need to work with tenants to meet these needs.
Want are tenants looking for today from their property management teams and landlords?
Nergard: Because it is a tenants’ market, they can largely call the shots. The property manager has to ensure that everyone knows what an individual tenant wants from the building. Whether we are managing an A, B or C building, that is key. Some tenants want to pay extra for all the amenities and services, including fitness centers, outdoor spaces and conference rooms. They expect a certain level of service from their building’s landlord and property management team. Others just want to be in a building that offers free parking. They don’t care as much about those other amenities.
For a property manager, it’s important to understand the driving factors that motivate tenants to stay in a space. That is the focus I see from the best property management teams. They understand what tenants want and work to deliver that. It’s the specificity of managing the available dollars down to the penny so that tenants get the best bang for their buck. They want tenants to be happy with what the cost is at the end of the year.
I know that a strong property management team is an important amenity for any building. What makes a property management team a strong one?
Nergard: It’s about understanding the goal of the ownership group of a particular building. What is the goal to attract and retain tenants? Once a team understands that its members can focus on delivering. The efficiency and quality of the management team can develop from there.
Is it more difficult for building owns to retain tenants today?
Nergard: It boils down to what the tenants need out of the building. Can they grow in that building? A tenant might need a certain amount of square footage today but might want to grow into more space in a year or two. Are we able to write the lease with that kind of looseness in mind? Or maybe we aren’t heavily marketing space next door so that one day that tenant can move into it. That might keep that tenant in place.
It really is about understanding what tenants need and desire. If we see a small business that is in growth mode in one of our buildings, we will do whatever we can to retain them. That includes trying to help them plan for their future.
How closely do strong property management teams work with landlords?
Nergard: Very closely. For instance, some tenants went dark during COVID. They didn’t have policies in place saying that workers needed to be in the office at least two or three days a week. We are aware that those spaces might be available soon. We are watching those leases. We are planning from a landlord’s perspective: What if those tenants are not going to renew their leases? What will be a good fit for that space?
We are having conversations with our landlord like this sometimes on a weekly basis. It’s about being proactive.
How has evolving technology changed the job of property management teams?
Nergard: It is so important. But it can also be tempting to invest in technology just to say that you’ve invested in it, even if your building doesn’t need it. If you buy into every platform out there, it gets to the point where you are being inefficient with your dollars. We do buy into certain platforms, though, that we know help us manage our properties more efficiently.
For instance, platforms that allow tenants to easily pay their rent each month boost efficiency. Those are more of a standard today. Technology that improves a building’s security is important today.
The more tenants we get who pay their bills automatically online, the more efficient we can be. We are not investing our managers’ time in collecting rents. I’d say we have 60% to 70% of our tenants on online payment systems. We would like to see it even higher. Some businesses just prefer to physically write that check each month. They might never change. We, though, want to make it easier for tenants should they want to skip that step.
How about green issues? Are more tenants and building owners interested in more energy-efficient properties?
Nergard: It depends on the tenant and their business. We do, though, focus on how we can lower the utility costs in a building. We encourage tenants to take the steps necessary to lower a building’s utility bills. It’s the same with recycling. We encourage tenants to increase their recycling efforts naturally. It’s about educating the tenants. It’s important that we provide the education and communication necessary so that tenants now how they can boost the efficiency of the buildings.
Mel Schultz
Manager
Clarity Commercial
St. Louis Park, Minnesota
How has property management evolved during your time in the business?
Mel Schultz: Communication has become more and more important. It’s so important to be in regular communication with building owners and tenants about their concerns and needs. For instance, tenants today are very concerned about their rental costs going up. Building owners are worried about insurance costs. Insurance premiums are going up in Minnesota and across the country.
You need to be in contact with tenants and building owners about the issues they are facing. Coming out of COVID, there is a really strong sense of needing to be more communicative and in touch with your tenants. By doing this, we can help building owners build their relationships with their tenants. We can help owners and tenants understand what is going on, let them know that we are taking care of the issues that matter to them. We can communicate with them about the steps we are taking to help the buildings they own or occupy.
I like this. It’s how we have always run our business. That strong communication helps build a relationship. Ultimately, when that happens, tenants stay longer in a building.
Does a strong property management team make a building seem more attractive to tenants?
Schultz: It does. Remember, we also work with our tenants and owners on security issues. That is an important topic in Minneapolis today. There is a bigger push from tenants for cameras and access systems. They are concerned about the safety of their workers. When a new tenant moves in, it’s important for us to quickly let everyone in the building know who they are. If we know that a vehicle is going to be left overnight in the parking lot, we need to communicate that information to tenants. It’s about making sure that everyone in a building knows what is going on in that property.
How have the expectations of tenants changed over the years?
Schultz: Tenants are more involved today. It’s great. There is not so much of a gap between tenants and property managers. I think that the global pandemic created such a need for everybody to communicate better with each other. During COVID, everyone wanted to know what property managers and building owners were doing to keep things clean, to keep people six feet away from each other, to keep everyone safe. That expectation of increased communication hasn’t gone away. COVID was a bit like a global reset for everyone. There is good and bad that comes with that. One of the good things? We all communicate with each other on a more consistent basis now.
How does Clarity set itself apart from other property management firms?
Schultz: We are a lot more hands-on. We try to keep our portfolio size as manageable as we can. If we don’t overextend ourselves, it is easier for us to have those touchpoints with our tenants. We want to make sure that our tenants and building owners can get in touch with a live person. There is always a live person on-call who answers calls. People won’t get a recording. People like that. People want to talk to people.
We are blessed with our clients. We have awesome clients. They appreciate the communication and education that we provide them. They feel good that someone is taking care of their investment.
How do you communicate with your clients?
Schultz: We don’t do a lot of surveys. But we are often on site and talking to tenants. We’ll talk about projects and lease renewals. We’ll talk about community events. We’re often there during fire drills. If you have enough of these activities at a property, and you do it right, you can have those touchpoints without sending everyone a newsletter. I always find that in-person contact is so much stronger than sending newsletters or emails. It helps build rapport and relationships.
How important has evolving technology been to property management?
Schultz: It’s been so important. You have building automation systems and security systems that so many tenants want today. You have technology to help monitor buildings’ energy usage. You can remotely check to make sure the trash was picked up on time. You can put security systems in place that make your tenants feel safer.
Energy efficiency is an important issue, too. There are some new efficiency requirements coming down the line concerning benchmarking where your building is when it comes to its carbon footprint.
Systems that monitor the temperature and energy use in a building can be important to us when we receive calls from tenants. A tenant might call saying that a worker feels hot or cold. If we have the temperature set at 68 to 72 degrees in a building, we can go that tenant with facts, instant facts, and say that the temperature is OK, that is outside of any reasonable expectation to tweak it further. The person who is uncomfortable either has to wear a jacket or shorts.
That comes back to communication. The more sophisticated systems with online controls that allow you to remotely monitor and access them? It’s a huge improvement over what we had to do in the past.