COMMENT: With rental arrears at a record high and occupancy rates in the retail and office sectors heading for record lows, the industry is finally waking up and smelling the coffee. The basic forces of commerce – supply and demand – are now irresistible, and customer centricity is finally on the agenda.
Recessions – and we’re still heading into the “mother of all” in my opinion – generally shift the balance of power to the buyer. I’ve seen these shifts fiercely defended by the industry, and even after the 2008 financial crisis there seemed to be a sense of denial from owners and their representatives that asset values could or should ever fall, or that the customer should be getting a better deal.
As demand drops and supply increases, tenants will have more choice and landlords are going to have to differentiate their building from the competition. Cosmetic improvements, plug and play offerings and investment in technology are logical tactics, but customer service and user experience will fast become pivotal aspects.
Some of the larger players, such as British Land, Landsec and Hammerson, are already focusing on customer centricity and leading the way for the market to change its attitudes. Simply using the word “customer” rather than tenant or occupier is a step in the right direction. But there needs to be systemic change across the industry to make this shift sustainable.
Shock to the system
While landlords will inevitably need to listen to the needs and demands of clients, how will building managers deal with the pincer movement? Sandwiched between their employers’ need to deliver a better experience and the newly entitled audience expecting the same, building managers will need a lobotomy to remove the old ways of operating.
Gone are the days of a property manager simply keeping a building operating in order to sweat the asset. Instead, the realisation that they are now in the hospitality business is going to be a shock to the system.
The mindset has always been geared around landlord obligations within the lease and not around delighting or retaining the customer. The captive audience that has signed for a 10-year lease with a five-year break is going nowhere and will accept whatever levels of service that the landlord decides to pay for, delivered in a manner that the property managers decide on the day. So how will this attitude change?
Until the one-sided lease obligations – which are generally detailed and punitive on the customer while woefully inadequate in terms of any kind of service level agreement from the landlord – are amended, we’re going to be wholly dependent upon individual landlords’ and property managers’ interpretation of customer service.
Equally, customer service will need to be paid for, and landlords that demonstrate that this is in their DNA should be able to maintain rental levels in order to afford this. Alternatively, there may be a new line in the service charge schedule entitled “other”.
Paradigm shift
Ultimately, the focus will be on the ability to monitor customer satisfaction and the effectiveness of new investments and how the all-new property manager or customer service agent performs.
If asset owners are really going to start caring about how happy their customers are, then they need to know what’s going on and find ways for the fare-paying passengers to review and comment on their experience.
Imagine another paradigm shift in the way things work – landlords being able to hear directly what their clients are saying. That would certainly sharpen up the industry and hopefully change the relationship between all parties, rectifying what has historically been fractious and undermined without a customer-focused middleman.
Peter Bell is founder of the Commercial Tenants Association
