Tenant Engagement is Just as Vital in Warehouses - Grace Hill
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Tenant Engagement is Just as Vital in Warehouses

Posted on May 6, 2024 by Andrew J. Nelson

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In today’s challenging real estate markets, property managers must take advantage of every opportunity to retain their tenants. Surveys can be an especially effective tool as part of an engagement strategy. Property managers can reduce tenant turnover and even attract new tenants by using tenant surveys to provide the services and amenities most demanded by building occupants.

Grace Hill explained the importance of conducting employee surveys to help firms gauge the needs and concerns of their workers. Almost every firm can deploy these surveys to not only gain essential insights into what their workforce is thinking but also use them strategically as a means of employee engagement by demonstrating that management cares about what the rank-and-file workers need.

What about in the real estate setting? Their applicability is most easily understood in multi-tenant buildings where there is frequent interaction between the landlord and occupant. Grace Hill outlined how regular tenant surveys are essential for attracting and retaining office building tenants and identifying the amenities that apartment renters most want.

Industrial Buildings Need Attention, Too

But does this importance also extend to light industrial buildings like warehouses and logistics facilities? Absolutely! Many industrial buildings are leased on what’s called a “triple-net” (or “NNN”) basis. That is, the tenant is responsible for all operating expenses: real estate taxes, property insurance, and maintenance, as well as all utilities. Many are single-tenant buildings in which the entire facility is leased and occupied by just one firm. In these situations, the landlord is rarely onsite, and their day-to-day role in managing the facility is limited.

But it would be imprudent to believe that the landlord’s only responsibility is to cash the tenant’s monthly check. True, industrial markets have outperformed other property sectors in recent years with lower vacancy rates and higher rent growth. With such strong market fundamentals, owners and managers might assume – wrongly – that their tenants do not require any attention. However, understanding tenant concerns and needs is no less critical for the long-term success of warehouse owners than it is for landlords in other property sectors.

In this context, tenant surveys can be even more important for industrial property precisely because the landlord otherwise has such limited direct contact with the tenant relative to the situation in other more management-intensive property types like multifamily residential and multi-tenant office buildings.

Hot Topics for Industrial Tenants

There are a host of issues that might be of interest to tenants of light industrial buildings and their managers. As with all property types, warehouse tenants are often highly concerned with energy efficiency, water conservation, and waste management – to reduce both utility expenses and environmental impacts.

If the property is net leased and the tenant is responsible for paying the utilities, why should the property manager care or get involved? At least two reasons. First, tenants seek to minimize their total occupancy cost, including both rent and other expenses such as utilities. If the landlord can keep down utility expenses, they should be able to charge higher rents, all else being equal. How? Many warehouses are situated in business parks housing many facilities. Proactive property managers can coordinate programs such as rainwater harvesting or recycling common warehouse materials for the entire business park that would benefit all the tenants. A tenant survey can be instrumental in identifying or promoting interest in such programs.

Moreover, many tenants seek to be good environmental stewards. Property managers can help tenants track and report on the warehouse’s energy or environmental impact performance. Property managers can also work with tenants to ensure the warehouse adheres to all environmental and safety regulations related to waste disposal, energy usage, and hazardous materials storage. Again, tenant surveys can help build interest in such programs or determine those most of interest.

Another hot topic for tenants is employee well-being. Surveys can help firms attract workers by providing a safer work environment, and surveys are essential for identifying the most crucial building features and amenities.

Providing a More Desirable Community

Why else might a property manager survey tenants? Firstly, to identify the services and amenities most desirable by tenants to make their facilities more marketable. Services might include on-site catering, fitness classes, or daycare, while physical amenities might include indoor or outdoor recreational facilities, a community break room, or a lunchroom. Surveys can also be used to gather feedback on other issues that may be bothering tenants – before they become troublesome issues.

Finally, a well-designed and -executed tenant engagement strategy can help create a sense of community. Beyond the survey instrument itself, property managers can organize social events or networking opportunities for tenants who might otherwise have limited interaction in a spread-out business park. Being responsive to tenants and addressing their concerns promptly further builds a sense of inclusiveness and mutual purpose. 

Taken together, these factors can increase the market appeal of the properties, ultimately reducing turnover and increasing occupancy and rents.

Contact Grace Hill today to learn more about our tenant engagement solutions.

Andrew J. Nelson is a real estate economist and author at Nelson Economics, focusing on property market dynamics and demographic analysis, as well as research methods and modeling. Andrew is the lead writer for the Urban Land Institute’s annual Emerging Trends in Real Estate publication and a contributing writer for Seeking Alpha and Propmodo Before founding Nelson Economics, he served as Chief U.S. Economist for Colliers International, where he led the national research team. He developed the firm’s economic and property market perspectives and served as the firm’s primary U.S. economic spokesperson in the media and at industry events. Prior to Colliers, Andrew worked at Deutsche Asset Management (RREEF) as Director, Research & Strategy in the Americas, where he managed the U.S. research team and was the retail sector and sustainability specialist.  Andrew has also held a variety of other leadership positions in both the public and private sectors, including Vice President of HOK Advance Strategies, where he served as national practice leader of the Portfolio Services service line; managed a construction-lending program for the World Bank in Russia; held a two-year “Community Builder” fellowship with the U.S. Department of Housing and Urban Development; and managed the regional real estate consulting practice at Deloitte & Touche in San Francisco. Andrew earned a Master of City and Regional Planning degree from the Harvard Kennedy School at Harvard University and a Bachelor of Arts in Economics from Harpur College. Learn more about Andrew Nelson’s background and experience on his LinkedIn page.

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