Office building owners and managers are in a tough situation, facing low occupancy rates and fewer tenants to cover operating costs. The two factors influence each other, and property owners who try to recoup some of their sunk operating costs from the tenants in an underoccupied building may find themselves with a worsening occupancy problem as tenants leave for more favorable buildings. What’s a building owner to do?
Amanda Heismann Gray, senior real estate manager for AW Property Co., will tackle this thorny topic at the 2023 BOMA International Conference & Expo in her session “Recession Proofing Your Property.” She’ll cover ways to make occupancy more stable and how to market your building if you do have vacant space.
4 Tips for Better Office Building Management
You can’t force tenants to lease more space—or their employees to return to the office, thus justifying additional space—but there are a few things you can do to keep the current tenants happy and ensure you can cover your mortgage.
1. Proactively reach out. “When I come in and take over new properties, people might say ‘We never saw our property manager. We haven’t heard from them,’” Gray said. “A lot of people tend to let the quiet tenants rest. It’s easy if they never call, never have work orders and never fuss. It’s easy to let that tenant ride, and then you find out they’re moving out.” Instead, talk to them periodically to see how things are going and whether there’s anything they need from you.
2. Understand tenant behaviors. Gray once managed a medical office building that had a lot of vacancies because the associated hospital was relocating. “We had to be flexible and have the knowledge of what was driving those individual tenant practices and where their customers were coming from to understand how we could best tailor lease deals and extensions to extend that tenancy as long as possible,” Gray explained. “The longer you can extend that tenant, you increase your chances of being able to keep them long-term.”
3. Stagger leases. It’s easier to keep track of renewals if everything ends on the same date, but in a worst-case scenario, that can mean everyone leaves at the same time.
4. Diversify income streams. This doesn’t just mean diverse types of tenants—it also means rethinking how your property makes money. Think about “things that add value to your property, whether that’s vending income, parking revenue, application fees or chargebacks,” Gray advised. “There are some companies that will do advertising in your buildings and pay you for them. Offer storage space. I’ve also seen higher-end buildings with laundry services or concierge services that can also generate revenue.”
“When it comes to thinking about recessions and the financial health of properties, it really is a cycle,” Gray added. “We’re going to have times when things are booming and space is practically leasing itself, and we’re going to have times where things get a little leaner. Understanding that, especially for people who are new to the industry and haven’t been through a downturn before, is really key. Knowing some of the levers you can pull and key things to do for your property can help you have long-term success as a property manager.”
Make the Most of Educational Sessions
Gray, whose 2023 presentation will be her fourth to BOMA audiences, plans to head to other sessions as an attendee. The conference has “something for everyone,” she said, so the key to maximizing the value of the educational sessions is to think about what topics are most likely to deliver something you can bring back.
“Whenever I leave the BOMA event, I always come back with some sort of new knowledge, product or different way of thinking that reinvigorates me in my day job,” Gray said. “That’s why I love these conferences—the ability to share knowledge with each other.”
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