To answer that question, we must first understand the importance of renewing our existing leases. I call these reasons “RBIs”, or Retaining Businesses Incentives. In baseball, all managers watch RBI production closely and realize its importance. Well, you need to act like a baseball manager and understand how RBIs are cost effective and how they maintain or increase your net operating income.

RBI #1: It is cheaper to retain tenants than to bring in new ones. Tenant improvement dollars are lower on a renewal than for a new tenant. Commissions are higher for procuring a new business for your building.

RBI #2: Vacated space may remain unoccupied for many months, causing a cash flow drop.

RBI #3: Existing tenants in your building may expand.

RBI #4: Tenants may see that others have been leaving the building and begin wondering if they should look elsewhere as well. Also, space that does not re-lease in a short timeframe looks bad for the building. Your tenants are sure to notice and will possibly use this knowledge to negotiate lower rates and concessions when their leases come up for renewal.

So what can you do to retain your existing tenant base? In baseball, the manager decides who gets to play, what position and what the batting order will be. Take the role of a baseball manager to develop and field a lineup that will score hits with your current tenants, your fans. Outlined below is a batting lineup that you as manager may wish to field to win games (retain tenants).

Leading off is maintenance. A sure-fire way to commit costly errors (losing tenants) is not responding to maintenance requests in a timely manner. Tenants expect to have air conditioning, heating, light bulbs and other repair or replacement requests handled quickly, without having to ask twice. Not executing their requests is sure to lead to frustration and dissatisfaction with you and the building. If you want to try for extra bases, follow up with a personal visit to make sure the tenant is happy with the work done by maintenance.

Batting second is tenant relations. Always a big hit is visiting your tenants on a periodic basis, and not just to collect the rent. A simple hello followed by a “How is everything?” goes a long way to develop a relationship with your tenant. A tenant will appreciate being thought of and will remember come renewal time. Get to know your tenants’ businesses by talking with them regularly. People love to talk about what they do. Everybody’s favorite subject is themselves.

Batting third is tenant referral. A key player, and a sure double play, is rewarding your tenants with either money or a short vacation trip for referring a prospect to you. The second part of the double play: you obtain a new tenant, thereby increasing your cash flow. By actively promoting a tenant referral program, you are sure to win every time.

In the cleanup position is marketing week. Twice a year, have the entire lobby used for companies in your building to promote their businesses. Tables can be set up for your tenants to leave business cards, brochures and other promotional materials for other tenants and visitors. Tenants will be highly indebted to your going out of your way to help them to promote their products and services.

Batting fifth is tenant party. Once a year, in the spring or in December, hold a party for all your tenants. It does not have to be expensive. You can provide the main entree and the tenants can bring side items like desserts, salads, pastas or cheeses. Not only does this cut down on your expense but develops a sense of community where everyone participates. A get-together will help companies feel that you value and appreciate them for choosing to have their offices in your building. This party will also allow them to meet others and possibly build business relationships.

Batting sixth is a seasoned veteran, building appearance. Pay close attention to the cleanliness of your parking lot, landscaping and common areas such as hallways, lobbies and rest rooms. Make sure that the bathrooms have plenty of paper towels and soap. Insist that the cleaning crew do a consistent and quality cleaning of every suite. If the building is not well maintained, kept clean and void of debris, your tenants will not be happy and will be embarrassed for clients and other visitors to associate them with the building. A slipup in keeping the building appearance topnotch is a sure way to make an out an lose tenants.

In the seventh position is tenant directory. A true utility player that is used in conjunction with other players will surely help you win over some tenants. You simply compile a listing of the names of all the companies in your building with a contact person’s name, phone number, address, suite number and a description of their type of business. This directory is then handed out to all the companies.

In many instances, companies will use the directory to solicit business or to find a company that has a product or service that they need. Another useful purpose of this directory is that it allows you to contact the company after hours if there is an emergency. Again, tenants will be thankful for the effort and thoughtfulness. You will also be perceived as a professional.

Batting eighth, and always a true champion, is tenant welcome. When a new company moves in, make them feel like they are in their own home ball park. You personally, not your maintenance staff, give them the keys to their suite. Give them a personal tour of the building to ensure they know where the mail room and the overnight express boxes are located. If you have conference rooms, show them how to sign up and where to get the keys. Furthermore, have a welcome package ready the first day your tenant opens for business. Include a handwritten personal thank you note communicating your appreciation of their choosing to open an office in your building. At this time you may also want to include a form for them to be included in the tenant directory.

Rounding out the lineup is tenant profile. This one is always good for extra bases. After a new company moves in, do a profile on that company’s business. Then, have it nicely printed and distribute the one page profile to all the other tenants. Again, you are making the company feel a part of the family.

Finally, in the bullpen to seal the victory (tenants renewing) is special favors. You and your maintenance staff should do whatever is necessary to do those little special favors for your tenants. If a tenant’s car battery is dead, offer a jump start. If a tenant’s car lights are left on, go notify them.If a tenant needs a lock changed quickly for security purposes (due to an employee’s leaving), have maintenance do so immediately.

To play the game right and to score runs easily and often with your tenants, you must have a talented lineup to put on the field every day. Remember, making tenants feel special, responding to their needs and treating your office building like your home are the three areas that will score a triple play every time.

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6. Thou Shalt Know Thy Owner. Demand to know who owns the building. Is the building for sale? You want to make sure that the owner has the capacity to continue providing the services spelled out in the lease agreement. A building can deteriorate quickly if an owner or new owner begins cutting spending. Landscaping beings to suffer, repairs are neglected and heating and air conditioning systems begin to fail more frequently. In general, the entire building, including the overall appearance, suffers; and the first ones to notice will be your employees and customers who visit your office.

7. Thou Shalt Covet Your Future Neighbor’s Opinion. Demand of yourself to spend time polling existing tenants in the building. Ask them if they are happy. Is the owner responsive to their needs? Are repairs made on a timely basis? Are the management and maintenance personnel friendly? Have there been security and stolen property problems? So many times a company feels it obtained a great deal but failed to find out that other tenants are unhappy and are planning to leave the building when their leases expire. Moving expenses can be extremely costly and disrupting to the normal operations of a company. Thus, look before you leap so that when you make a move to a new location, you can feel comfortable knowing you will be there for an extended period of time. Do not put yourself in a position to be forced to move prematurely and incur new moving costs.

8. Thou Shalt Know the True Measurements of a Particular Office. Demand to know up front how much square footage you are actually being charged for your office. Be careful and suspicious when you are quoted a price per square foot. There are two methods for quoting the amount of square footage for a particular office.

There is the usable method, which is the one to which you should pay particular attention. It measures the actual amount of square footage that people and furniture can fit into.

However, in many instances, you will be quoted and charged for what is called the rentable method. Basically, the rentable method is a vehicle where each tenant pays the pro rata share of the common areas of the building. Common areas include hallways, lobbies, bathrooms and other areas of a building that are not leasable.

This rental method is sometimes called the “loss factor” in that it is a percentage of the building that is not leasable. Thus a building may have 7 to 20 percent of non-leasable space. As a result, if you find a space that measures 1,150 rentable square feet and the building has a 15% loss factor, you actually have only a 1,000 usable square foot office.

Bottom line: Pay attention to the square footage size to ensure you have sufficient space for you and your employees. Also, when comparing square footage rates, be sure to compare apples to apples, rentable to rentable and usable to usable.

9. Thou Shalt Know the True Cost of Leasing Office Space.Demand that you know exactly how much your rentals will be year after year. Know your rent escalation costs before you sign a lease. Too many companies have escalation clauses that are tied to the operating expenses of the building. In this scenario, any increases of a building’s operating expenses from year to year are passed through to the tenant.

So what’s the problem? The problem is you expose your company to large and sudden increases in rent. Property taxes are always subject to increase or buildings are assessed at higher rates. Repairs frequently cost more year after year. Utility costs in the form of water, sewer and electricity frequently escalate.

It is only fair for your rent to escalate to help the owner continue to provide and maintain services to its tenants. But a rent escalation tied to the Consumer Price Index is more equitable for all parties. Another option is to agree to a fixed increase per year and include it in your original lease document. Any concessions such as free rent or moving expenses should be factored in as well.

10. Thou Shalt Use the Services of an Attorney. Demand that your attorney look over the lease document before signing. To be sure, a lawyer costs some money, but not nearly as much as the cost of agreeing to terms and conditions that are not necessary or may be costly to your business.

Remember, there are two ways to increase the viability and profitability of your business. You can increase revenues, or you can decrease expenses. But why not do both? Continue to concentrate on the four P’s to increase your bottom line, but do not lose sight of the direct and indirect sosts of leasing office space.

Abide by the 10 Demandments. Choosing the right building at the right price for your office can significantly affect your profits.

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What are those areas of concern? In Marketing 101, we learned the four P’s of marketing: price, promotion, product and place. Well, if we spend so much time and effort using the four P’s to maintain or increase revenues, should we not pay attention to the cost of our offices, which also affects our profits?

To help us make decisions about our office space leases we need a vehicle similar to the Four P’s. I call it “The 10 Demandments”.

1. Thou Shalt Not Overpay. Demand a reasonable and marketable rent for your office. Demand of yourself to look at various buildings. Square footage costs vary widely from building to building. By looking at a host of possibilities, you will invariably become intimately familiar with the market and know exactly what is a fair price to pay. If you do not have the time or energy to handle the space search and negotiations, use the services of a knowledgeable broker, whose commissions is paid by the owner of the building where you eventually lease space.

2. Thou Shalt Not Agree to Unfavorable Terms and Conditions. Demand special terms and conditions that provide you the most flexibility in case of unforeseen changes in your company’s situation. For example, negotiate up front early-out clauses, expansion rights and rights of first refusal on adjacent space. Try to negotiate option clauses that will allow you to renew the lease for a set amount of time at a predetermined rental amount. Do not sign a lease with a passive renewal clause. This type of lease automatically renews 60 days before the original lease expires. Many companies have been caught off guard by not notifying the landlord of their intention not to renew their lease.

3. Thou Shalt Not Disregard Amenities. Demand of your location amenities that take into account the needs of you, the owner, and also your employees. Look for locations that provide easy access for your employees to travel to work and back to their homes. Does the building have an on-site sandwich shop? What about on-site maintenance? Owners who have leased office space for even just a few years have come to realize the importance of prompt response to maintenance problems. If your heat or air conditioning fails, you need quick response. Those who lease in buildings with no on-site maintenance staff some times suffer 24 hours before a maintenance person is dispatched to rectify the problem. What about on-site management? With a manager on the pemises, you will have constant access to a person who can handle any problems quickly and efficiently. What about security? Does your prospective building have a security patrol which makes periodic rounds both on the grounds and in the building? Will the security personnel escort tenants to their cars after normal working hours and the sun has already set?

What about the use of conference rooms at no additional charge? Many companies need conference room time periodically but their usage requirements are not enough to necessitate the inclusion of a conference room in their leased space. Companies can save substantial amounts of money by having their meetings, sales presentations and training events in the building’s conference room facilities. Does the building provide free jantorial service? Ask if there is an additional charge for after-hours use of heating and air conditioning.

4.Thou Shalt Not Exclude Certain Types of Buildings. Demand of yourself to incorporate various types of buildings into your list of potential office sites. We all know that Class A buildings are the most beautiful and lavish. But we also know that these wonderful looking buildings are costly and may not make sense when you consider their cost to your bottom line.

Do yourself a favor: Take the time consider so-called Class B buildings. In many instances, their impression from both the outside and the building’s interior still makes a favorable impression not only on your employees but also on your clients and other visitors. Many of these Class B buildings are conveniently located and extensively renovated. But most of all, these buildings are attractively priced, enabling a company to significantly reduce overhead.

Part 2 of “The 10 Demandments” coming soon…

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If you are having a retina problem, you don’t just see an ophthalmologist, you engage the services of a retina specialist.  Should you tear your ACL in a pickup basketball game, you bypass the orthopedist and immediately see a doctor specializing in sports injuries of the knee.  If you want to assist your parents in estate planning, not only do you seek out the services of an estate planning attorney, but you need one that specializes in elder care law as well.  Even professional baseball is in on the act.  Teams pay for relief pitchers that specialize in getting out left handed batters.  Usually, they pitch to one batter and they are done.  In the American league, they have the designated hitter and their only job is to hit — no fielding required.

The world of commercial real estate is not immune to specialization.  Instead of an investment broker that represents buyers or sellers of various types of real estate, we now see brokers that deal only in land or multifamily with a minimum number of units or office buildings with a minimum of 75,000 square feet.

One segment of our industry that has not ridden the wave of specialization is property management.  The property manager, sometimes known as the project manager, is typically required to handle a multitude of tasks all in the same day.  If real estate were a pin ball machine, property managers would be the silver ball, property owners are the flippers, tenants are the bumpers, and contractors, vendors, service providers, city authorities, asset managers, leasing agents, etc., are the bells and lights.  The typical property manager pinball bounces around throughout each and every day attempting to provide the services and performances demanded by tenants and owners.

But to truly perform as a professional, a property manager must not be a pinball careening from side to side, up and down, day in and day out.  So the solution is to reduce a number of secondary functions that many of today’s property managers have assumed. Actually, by off loading some of these functions, tenants will be served more effectively and may actually thank you for being more focused.

The day has arrived for property management companies to place their rafts in the ocean and catch the waves that will give them a ride all the way to the specialization shore where all the other specialists are sunning themselves and thriving.  Managers that specialize will provide better service to their tenants and owners, and, if they are doing their job properly, will save money for these same tenants and owners.

Specialized property managers not only concentrate on the meeting the needs of the tenant and building but they can build better relationships with tenants and make each one feel special.

There are several areas that stretch the time and capabilities of the property manager.  Tenant improvement projects and associated construction management duties are services that draw property managers away from their daily management duties.  Our firm has successfully created a construction/facility management group that can be more responsive, contain costs and can deliver the improved space in a timelier basis.  By handing over this function to another set of specialists, the tenant receives prompt and direct attention and micromanagement of the project.  A tenant’s suite is built-out to the tenants exact specifications and is always finished on time and on budget.  Owners are ensured that the construction cost is competitive, up to code and all permitting is completed properly.  The bottom line is that a new tenant moves into their space very satisfied with the services provided.  Thus, on the first day of occupancy the property manager inherits a very satisfied new tenant and they are given more time to devote to other tenants and building(s) during this process.

In a full service lease, the landlord is responsible for the operation of the building along with the maintenance within the tenant’s suite such as lights, cleaning, and HVAC operation.  However, there are many facility issues and needs that tenants incur during the normal operation of their business, to include: electrical, relocation or addition of phone and data ports, relocation, installation and purchase of cubicles and cubicle repair, research and purchase of a security or card access system for the tenant’s space.  Other areas include furniture procurement and repair, redesign and build-out to accommodate the changing needs of the company or the management of a vending machine program in the company breakroom, among many other responsibilities.

By creating a construction/facility management arm of your company to relieve the tenant of these facility burdens, you enhance your relationship with the tenant and increase the value of your property management firm to building ownership.  The tenant can maintain employee productivity by taking facility issues off their shoulders.  In addition, the work will be achieved faster and at less cost.  Why?  Because your management firm has specialists that can scope out the best solutions and the best prices because this is what they do every day.  The tenant can reap the benefits of your expertise, versatility and vendor relationships.  Once again, you increase the percentages that a renewal will be accomplished.

Ultimately, your goal is to create the perception that the tenant feels your property management company is an extension of their company.  The tenant will consider you as a reliable resource as though you worked in an in-house capacity.

The most important objective for any property manager or owner is tenant retention.  The cost savings are huge when a space remains leased.  A vacant space means decrease in cash flow and a guarantee of a large future tenant improvement cost and higher commission expense to release the space.

By offering these and other similar services, property managers are free to handle the crucial day-to-day needs of the building and its tenants and concentrate on the initiatives and goals of the owner.  Ownership goals, such as managing expenses and maximizing the value of the asset, are crucial.  In this era of e-mail and voice mail, we have become quite impersonal.  Enabling a property manager to have the time to personally visit tenants on a regular basis also enhances the relationship and will differentiate your firm and personnel from most of the competition.

Tenants and owners want proactive service not reactive responses.  Being the pinball means you are reacting to the action of the bumpers and flippers, having no control as to the direction you are heading.  Property management firms can be proactive by enlisting specialists to handle some of these time-consuming services, so managers can focus on servicing tenants and owners.

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