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    Multi-Family Tenants

    Jan. 7, 2004
    Embracing customer service (Part 3 of 5)
    In a career spanning 45 years, Edward Kelley, CPM, Emeritus, has had executive management responsibilities for more than 150,000 apartments, hotels, and millions of square feet of office space over 38 states. With a reputation as a turnaround expert, Kelley, Naples, FL, has written numerous articles, texts, and seminar presentations.President of McKenna Management Associates and the Towle McKenna Co., both in Milwaukee, Kathleen McKenna-Harmon manages an impressive portfolio of approximately 3,500 multi-family units and 500,000 square feet of commercial space. McKenna-Harmon has more than 22 years of management and marketing experience, has written three books, and teaches university real estate courses.These two savvy professionals address the secrets to getting and keeping multi-family tenants.Q: Why do building owners place such a strong focus on tenant attraction?McKenna-Harmon: “From Day One, owners have always had a fanatic focus on bringing in the new renter, and because they focus on this, so do their people. In return, you get the behavior that you reward.“It hasn’t been until the last five to seven years the market has begun to awaken [to the fact] that the same thing that is true for retail is true for our business. It costs a lot more to bring in the new customer than it does to retain the old one. It is six times more expensive to bring a customer in than to retain the ones you have. Until recently, the apartment industry has focused solely on commissions for new tenants. Now, the industry has increasingly implemented commissions based on tenant retention.”Q: Why is tenant retention so crucial in multi-family housing?Kelley: “The obvious one is that every person you save is [a unit] you do not have to rent. It is dramatically cheaper to keep someone than to find something new.” Q:  How are building owners responding to tenants’ desires?Kelley: “Finally, apartment owners are coming around to the idea that tenants do not just want a vanilla box. Tenants want volume ceilings, a large bathroom, hard-surface countertops, new windows, and moldings. The apartment industry for years has said, ‘This is what you get: new carpets, nicer cabinets, and that’s it.’ “Most builder-developers are extremely shortsighted and many are not around when renewal time comes. They do their thing, fill it up, and sell it.”Kelley believes these amenities can help extend the tenants’ honeymoon period – the high expectations tenants have when moving into a new home. “If you can keep that guy during that first renewal round, you can save a lot of money,” notes Kelley. Increasingly, multi-family housing is being outfitted with great rooms, dens, bay windows, private patios, and home offices. Relaxation gardens are also a major draw.Q:  How are building owners successfully attracting tenants?Kelley: “I have been seeing extremely creative layouts and multi-floors, whereas in the old days [it was] stacked interiors and cookie cutter [layouts]. Now, apartments are unusual. One apartment will have a balcony, another unit will have a private patio, and another might have a two-story window. You are seeing all of these different varieties and they have personality.”Q:  What are tenants’ major complaints?McKenna-Harmon: “The major issue they [have is] maintenance issues; they are not proud of their buildings. They do not think their landlord kept them clean or kept the promises they made. People who work at properties are very quick to say they will ‘get to that’ … The notion of time has really changed for the American buying public. Right away means something quite different than it did pre-e-mail.Q:  What are the key ways to attract tenants?McKenna-Harmon: “The most important thing is a change in attitude. We are the only business I know of [where] the people we do business with [are] not called customers.“If we had the attitude that we were their partner and we had a relationship with them, we would establish channels of communications and be a whole lot nicer. Having had a management company and [having] gone through the arduous process to create a customer-driven operation, it is one of the most exciting and difficult things I have ever done. Because the pillars on which our industry is built is all about controlling behavior.”McKenna-Harmon encourages building owners to establish a “customer is always right” attitude with tenants instead of the traditional, confrontational landlord-tenant relationship. To retain tenants, building owners have to communicate throughout the leasing period.Q: What are examples of tenant attraction success stories?Kelley: “If you are trying to attract somebody, it breaks down into many components: Location is critical, [as is] curb appeal. Post Properties, Atlanta, puts on a great curb appeal show when you [drive] by: The flowers are right, the layout is right.“The neighborhood and the social environment are also critical to tenant attraction, as well as access to garages and extra storage space and affordability. Flexibility – bedrooms that can easily transform into dens, and great rooms that can serve multiple functions – helps attract today’s savvy tenants.”Q: Where do you see the apartment industry in five years?Kelley: “I think you are going to see an enormous number of apartments torn down. The builders were very slow to offer [customers] anything new and exciting. They’re just getting around to it now.“I saw a thousand apartments in the writing of this book and I have been preaching to [industry players] about the condition of apartments for 45 years. In the past, we bought everything that was the cheapest of the cheap. You do not have to buy an oven with 25 buttons, but renters want nice equipment.”Kelley predicts that the percentage of renters will continue to decrease. Coupled with the difficulty in modernizing apartment buildings, this will result in a substantial shakeout in the industry.Regina Raiford Babcock ([email protected]) is senior editor at Buildings magazine.

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