KINGLSEY INSIGHT
March 2007
INSIDE THIS ISSUE
- Investors Raise Target Allocations to Real Estate
- Delivering "WOW" Service
- Where the Message Gets Lost
Investors Raise Target Allocations to Real Estate
According to the Institutional Real Estate, Inc. 2007 Plan Sponsor Survey conducted by Kingsley Associates, real estate returns continue to outperform investor expectations, as well as most other asset classes. Given another year of strong real estate returns, it is not surprising that domestic, tax-exempt investors have raised their target real estate allocations from 7.9% to 8.7% in 2007.
Investors and their managers have largely succeeded in investing the tremendous volume of new capital commitments observed in past years, with the gap between target and actual real estate holdings shrinking from 150 basis points in 2005 to only 40 basis points in 2007. This trend toward portfolio balance is the main reason investors will commit less new capital to real estate this year. Accordingly, there will be increased competition for new capital in 2007. Managers will need to differentiate themselves to succeed.
Copies of the full report will be available for purchase on IREI.com in April.
Delivering "WOW" Service
Loyalty is a two-way relationship, and tenants often receive something (space in a prime location, for example) in exchange for their tenure and promotion of your properties. But research shows that the ultimate reward for loyalty is a sense of feeling special. Some everyday examples of this extra special “wow” service include:
- Your favorite coffee house recognizes you and gives you a hot cocoa on the house here and there.
- A hotel concierge notices that you've stayed at their hotel many times this year and upgrades your room when they're not full.
- A property manager arranges a "haul away" day for all their tenants in the building to get rid of unused and broken furniture and equipment.
- A leasing manager stops by a suite right after move-in day just to see if there are any questions and if everything has gone okay. They leave behind a list of numbers to call in case something comes up.
So, after you meet your tenants’ basic needs (safety, cleanliness, functionality), what do you do to reward your tenants' loyalty? How do you make them feel special?
Where the Message Gets Lost
Perspectives from KA Principal John Falco
In over 20 years of working with real estate firms, John Falco, Principal of Kingsley Associates' Atlanta office, has observed two major obstacles in the way of service excellence. First, property managers too often yield to the temptation of avoiding "problem" tenants, rather than engaging them. This only makes things worse. "We consistently see that resolving problems and proactively communicating with tenants leads to stronger relationships, which leads to success," he says. "People in customer-focused positions have to understand that response time and well-defined communication plans are the nuts and bolts of service; what they do day-to-day is bigger than it seems."
Even when a property manager understands what needs to be done, there is a second hurdle. There are budgets to write, variances to investigate, toilets to fix, walls to paint, suites to renovate, and leases to sign. According to John, "If you want someone to be customer focused, you have to provide the proper incentives for customer-oriented behaviors." In other words, it has to be worth it to the property manager to set aside other issues and deal with that frustrated tenant. The "problem" then becomes an opportunity to build a stronger relationship.
The message of service is not complicated. Putting it into action requires the right knowledge and the right incentives. "You'd be amazed at how quickly some of our clients' satisfaction scores improve once they commit themselves to a program of excellence," relates John. And the impact of that improvement does not get lost on the way to the bottom line.