Part One of a Three Part Article

Commercial landlords build or purchase buildings in the hopes of successfully leasing them to quality rent-paying companies; improve those buildings in order to attract tenants; carry the buildings (sometimes for years!) while they search for tenants; deal with changing government regulations about everything from environmental issues to surface water run-off; invest significant amounts of capital to construct custom tenant spaces; pay for advertising, commissions, legal, and administrative costs;

Andrew B. Zezas, SIOR Relationship Manager, Strategist, President (908) 245-5999 x11 andrew.zezas@realstrat.com

But, even with all of this, let's go back to the beginning and ask our first question: "Mr. Landlord, what business are you REALLY in?" What many landlords fail to realize is that in order for them to generate cash-flow and build wealth for themselves and for their investors, they must first be in another business, that of Tenant Customer Service.

How often have we heard negative stereotypes of landlords being uncaring, impersonal, and only interested in a monthly rent check? Like in any industry, those who don't fit the negative stereotype are unfortunately viewed along with those who do. And, many commercial landlords don't fit that negative stereotype.

The best and most successful landlords recognize that the business they're really in, the source of their cash-flow, the very foundation of their business and the means for their ultimate success rests squarely on the tenants (the landlords' customers!) who provide that cash-flow. Successful landlords know that their ability to achieve their objectives of positive cash-flow and wealth creation depends largely on their ability to select quality tenants and then build long-lasting relationships with those tenants by providing them with outstanding customer service.

True Story

I recently heard a story about a commercial office tenant that informed their landlord, an accounting firm that owned the building and occupied the top floor, that the building's common restrooms typically ran out of supplies, like soap, hand towels, and paper, around the third week of each month and were not typically re-supplied until the first of the following month, often leaving a gap of at least a week with insufficient quantities of restroom supplies and sometimes none at all!

In a meeting between landlord and tenant, the tenant explained the obvious difficulty the situation presented and the fact that tenants were forced to bring-in their own supplies, despite paying market rental rates and having a lease structure where such supplies were supposed to be provided by the landlord. The accountant-landlord replied that the supplies ran out because the tenants regularly exceeded their monthly allotment as determined by the landlord's operating cost model, that providing additional supplies would not be economically viable, and therefore, the landlord would not change its re-supply process. You've got to be kidding!

Another One for the Record Books!

In representing a tenant who was eager to lease a large block of space in a particular office building, we approached the landlord and requested that she make a series of improvements to her building in order to support our client's operational needs and to secure their tenancy. In multiple conversations, she said "No" to numerous requests, despite our client's attempts to achieve a fair and reasonable compromise. So, eventually our client chose to say "No" to the landlord and moved into another nearby building.

When we received an angry call from the nay-saying landlord we informed her that our client was originally very excited about her building, but became dissatisfied with her negative approach, and chose to complete their transaction with a more positive and tenant-focused landlord. She replied that she would have gladly provided the improvements our client requested, except that she didn't want to have to pay for them. How silly was that?

During negotiations, our client had offered to pay for the costs of the improvements they requested. Yet, the landlord was caught-up in her own world and wasn't the least bit focused on finding a viable solution to accommodate our client's needs, let along just practicing poor judgment and bad business. Where was the word "gladly" when she said "no" in each discussion? Where was the "customer-service" approach to securing a relationship with this tenant that would have accomplished her cash-flow and wealth creation objectives?

We informed the landlord that had she taken a more collaborative, tenant-focused approach to negotiating, her building might be full right now. Her self-centered approach and unclear method of communications resulted in her loss of a large and highly qualified long-term tenant, and the resulting cash-flow and wealth building opportunity she sought.

Next month we’ll discuss the Tenant Service Business.

Andrew B. Zezas, SIOR, is Relationship Manager, Strategist, and President & CEO of Real Estate Strategies Corporation, Publisher of "Business, Profits and Strategy", a monthly online publication read by thousands of business, financial, and real estate executives nationally, and, is the author of two new real estate books, The CFO's Guide to Understanding Corporate Real Estate Transactions and The CFO's Guide to Hiring the "Right" Real Estate Service Provider, both of which will be available shortly at www.thecfosguide.com.

Mr. Zezas is well-known for his ease and informative style of public speaking, and has given talks, presentations, and has lead educational programs for business, professional, government, and trade associations, including the Building Owners and Managers Association, American Management Association, the U.S. Postal Service, RealComm, Society of Industrial and Office Realtors (SIOR), and others. Andrew is National Chairman of the SIOR Tenant Representation Specialty Practice Board, and is a licensed real estate instructor in Texas and Indiana. He can be reached at 908 245 5999 or via email.

Real Estate Strategies Corporation, located in Kenilworth, New Jersey, and serving clients throughout the country, helps companies create and execute Business DRIVEN Real Estate Solutions...and Opportunities, faster and with less risk. Visit www.realstrat.com.

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