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Review: Occupier Loyalty - Fact or Fiction?

2 October 2008 at Winter Garden Rooms, Cardinal Gardens, Cardinal Place, London SW1.

Introduced by: Louise Freethy, Real Service, Ian Smith, VP Programmes

Speakers: Sarah Mather, Kingsley Lipsey Morgan, Vernon Blunt, Ericsson, Glenn Blake, Legal & General, Paul Dickenson, Land Securities, Paul Harding, DTZ

This Breakfast Forum was held in the Gallery at Land Securities’ Cardinal Place and billed as bringing together property owners, managers and occupiers with an interest in improving customer satisfaction.

Louise Freethy introduced Real Service to the CoreNet members and guests.   Launched in 2004, it brings together property owners, fund managers and managing agents in a bid to improve standards, providing a mix of information on latest trends, study tours and visits.     

Sarah Mather reported on the results of the 2008 Occupier Satisfaction Index a cross-industry study from retail to offices sponsored by the Property Industry Alliance and CoreNet Global’s UK Chapter.   251 occupiers have been interviewed by phone - on leases, landlord communication, sustainability etc and this year the Satisfaction Index is up by two percentage points to 57%.   Larger occupiers appear more satisfied than smaller ones and larger landlords are leading the way on the five key industry challenges:  Flexibility, Partnership, Responsiveness, Sustainability and Value for Money, underlying all of which is the Pace of Change.  See www.occupier-satisfaction.co.uk for further information.

Howard Morgan, Real Service, as moderator, then introduced the first of four protagonists.

Vernon Blunt, Ericsson for premises in the UK and Ireland remarked that on signing a contract there were plenty of flowers, and some again 8 years or so later  - but in between almost silence from most landlords other than when the lease dictated it.   Generally it seems the landlord is only interested in yield and rent, while to him as an occupier property is an essential factor of production for housing people and for storage of data.   In the case of the best buildings there are better relationships, but occupiers want to act faster than the landlord, so, for example, small works are done by occupiers before the paperwork is completed.  Loyalty from landlords plays some part in decision making (for short term space he always goes to the same supplier) but quality of space is more important.   In the telecoms world, key relationships are also long term, but customer relationship management is more effective, to the benefit of both parties.                                                                                                                                                       

Glenn Blake, Legal & General (Corporate Real Estate) noted first that L&G doesn’t occupy any of its own investment property so his experience is all of other landlords.   As a tenant L&G signed 15, 20 or 25 year contracts and in that time can experience a high turnover of landlords.   He asked if landlords are loyal to their own buildings.   He thought there were some exceptions eg Land Securities and British Land., but mostly, as buildings age, they are traded down the food chain.   Finally, he concluded, in the case of smaller landlords some are good, most just want the money

Paul Dickenson, Land Sec as a landlord has five core values: Integrity, excellence, customer service, innovation and respect or trust.   Trust he believes is a key element, sustainability of a building is a good guide to the quality of a landlord and as an organisation LandSec works with key customers to create a good and lasting relationship.

Paul Harding, DTZ spoke as a managing agent with a mix of clients which gives him a different perspective  - that of the third hand in the partnership.   He sees the full spectrum of owners and spends time and effort in pushing service levels upwards.   A test of loyalty is to retain occupiers and have low void rates, the best test is when a property changes ownership and occupiers insist on keeping the managing agent.   ‘Owners change and some are so off-shore no-one knows who they really are’.                                                             

That the subject rouses passion on all sides was evident from what followed.   Speakers from the floor pointed out that :

• Landlords should include building specific occupier satisfaction surveys in marketing packs
• Service charges should make better buildings not more money
• Good managing agents flex with the client
• Lease contracts are still too restrictive and need to be changed
• Most industrial occupiers just want to run a factory, not to have to deal with the property minutiae
• Service expectations should be made clear in leases
• Landlords should carry out their own customer surveys on a regular basis and compare these with the UK Occupier Satisfaction Index
• Licenses for alterations could be simpler
• Key is the sort of relationship tenants enter into with a landlord