Published November 2000

Web, strong market spark service-packed leases

So, you’re moving your business into a new office building or industrial park. You feel good about the lease you negotiated. Just enough space for today, with a little room to grow. The lease included private offices, a conference room, a good heating and ventilation system, enough parking for you and your customers, plus low-cost floral services, dry cleaning pick-up service, event tickets and low-cost office supplies.

What? Flowers, dry cleaning, tickets and office supplies? In a commercial lease?

In many commercial real estate markets today, property owners and managers are bundling much more than the traditional four walls and a roof into leases. Many of the services employees or the company might need while occupying a commercial space are being offered as “part of the deal” in an effort to squeeze additional revenue out of the relationship or just as a tenant-retention tool to keep good commercial tenants in buildings longer.

The Internet and new technology to support it are part of the reason for this phenomenon. A strong market is another.

In weak markets, landlords are more concerned with simply filling their vacancies. Today’s relatively strong commercial property market allows property managers and landlords to think more about other opportunities.

It isn’t clear yet whether there is a revenue-creation opportunity or a tenant-retention tool here. It is probably shaping up to be both.

Mike Burson, Vice President of property management for Atlanta-based Carter & Associates-ONCOR International, sees it as the former.

“In the next few years, probably 25 percent or more of building income will be from sources other than rent,” Burson said.

Tom Halford, Executive Vice President with Chicago-based U.S. Equities Asset Management Inc., has a different point of view: “Retaining existing clients is even more important.”

The Internet is the key to this happening in the first place. Web technology allows the landlord or property manager to bring vendors to the computer screens of their tenants. Just a few years ago, this wasn’t possible.

Interestingly, services you wouldn’t expect seem to be very popular in the early stages of this trend. While online office supplies make sense, florists seem to be doing well selling flowers and gift baskets to tenants. Event tickets are another popular item.

Some property managers invite their tenants to access maintenance and engineering services for their own needs inside their suites. With the Web, property managers can bill back these services to their tenants very easily.

Communication between tenants and a property manager is another opportunity that technology brings, making scheduling of work orders, paying rent, diagnosing heating or ventilation problems, obtaining bids, etc. an online effort with much less labor.

PropertyManagerZ.com, a Seattle-based company, recently launched a Web product that landlords and property managers can use to bring both the utility of the Web and the simplicity of access to vendor services to their properties, providing those services directly to their tenants. There’s a place to log a work order, a page for communicating with the property or building manager, and icons to click for purchasing vendor services.

A byproduct of bringing the Web into the world of investment properties is that property managers often can foster business between tenants in the same complex, thereby supporting a complementary tenant mix and giving tenants one more reason for staying. Putting these concepts onto a property Web site brings efficiency and, as a result, increased business activity.

These are only a few ways that property managers are beginning to weave the efficiencies of the Internet into everyday business, including tenant contracts. Whether for tenant retention or to increase revenue, the marriage of the Web and the commercial lease may be a trend worth watching.

Tom Hoban, president of Coast Management Co. in Everett, can be reached at 425-339-3638 or by e-mail at tomhoban@coastmgt.com.

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