2016
THECONCIERGEEQUATION
Offer ing Concier ge Ser vices = Incr eased Pr ofitability
®
1
"OFFERINGACONCIERGESERVICE
CANHAVEAMOREIMMEDIATEAND
SIGNIFICANTIMPACTONTENANT
SATISFACTIONTHANANYOTHER
AMENITY."
Eser vu s On lin e Con cier ge Ser vices | The Concierge Equation
One of the biggest challenges for pr oper ty m anager s is quantifying the
financial im pact of a tenant ser vice str ategy. M any pr oper ty m anager s
think that a tenant ser vice str ategy is a good idea, but they have a har d
tim e justifying the costs, because the benefits ar e intangible. Or ar e
they?
Using thr ee r esear ch-based studies, I?ll show how a pr oper ty
m anager ?s tenant ser vices str ategy can have a quantifiable im pact on
your bottom line. And m or e specifically, I?ll show how an investm ent
in a concier ge ser vice can save a pr oper ty m anager a lot of m oney,
help dr ive pr ofitability and r esult in a significant r etur n on
investm ent.
Equ at ion #1: Of f er in g Con cier ge Ser vices =
In cr eased Ten an t Sat isf act ion
Accor ding to BOM A Inter national?s sur vey ?W hat Office Tenants
Want,? the one am enity that tenants w er e m ost satisfied w ith w er e
concier ge ser vices, w ith an aver age satisfaction r ating of 4.39 out of 5.
(Concier ge ser vices w er e follow ed by health/hygiene pr ogr am s at 4.27
and secur ed docum ent r em oval at 4.26). The sur vey pointed out that
the availability of concier ge ser vices w er e r epor ted by less than 25% of
the r espondents, indicating that the one am enity that the tenants ar e
m ost satisfied w ith is actually offer ed in a r elatively sm all num ber of
pr oper ties. The BOM A study concludes that ?if executed w ell, the
addition of som e of these am enities could offer an oppor tunity for
pr oper ty ow ner s and m anager s to have ?quick w ins? w ith their
tenants.? And since concier ge ser vices w as the one am enity that
tenants w er e m ost happy w ith, w e can fur ther conclude that offer ing a
concier ge ser vice can have a m or e im m ediate and significant im pact
on tenant satisfaction than any other am enity.
Equ at ion #2: In cr eased Ten an t Sat isf act ion =
In cr eased Ten an t Ret en t ion
So if they have access to a concier ge ser vice, your tenants ar e happier.
W hat differ ence does that m ake? A lot of com panies acr oss all
industr ies spend a lot of tim e ? and m oney ? on custom er ser vice
initiatives in an effor t to m ake their custom er s happier. The theor y is
that a satisfied custom er w ill keep com ing back for m or e, r esulting in
r epeat business that m or e than m akes up for the cost of the things that
ar e keeping the custom er happy. And w e?ve all hear d that it costs a lot
m or e to attr act new custom er s than it does to r etain existing ones.
That sounds logical, but is that tr ue in the w or ld of com m er cial r eal
estate? Do satisfied tenants actually r esult in m or e lease r enew als?
Accor ding to a study conducted by Kingsley Associates, a leading
m ar ket r esear ch fir m that specializes in com m er cial r eal estate, the
answ er is a r esounding YES. Satisfied tenants ar e m or e than thr ee
tim es as likely to r enew their leases than dissatisfied ones. And since
w e?ve show n that concier ge ser vices can have an im m ediate and
significant im pact on tenant satisfaction, w e can conclude that offer ing
concier ge ser vices dir ectly contr ibutes to lease r enew als.
Eser vu s On lin e Con cier ge Ser vices | The Concierge Equation
2
Equ at ion #3: In cr eased Ten an t Ret en t ion =
In cr eased Pr of it abilit y
Okay, now this is r eally w her e the r ubber hits the r oad. We know that
it costs m or e to attr act new tenants than it does to r etain existing ones,
and happy tenants ar e m or e likely to r enew their leases
than unhappy ones. But how m uch should w e spend on keeping our
tenants happy? W hat?s the r etur n on investm ent? Quantifying the
benefit of tenant r etention str ategies has alw ays been a tr icky thing,
but thanks to a study conducted a couple of year s ago by r eal estate
giant Jones Lang LaSalle, w e know that by r etaining a single
10,000-squar e-foot tenant, pr oper ty m anager s stand to save near ly $1
m illion on har d costs like lost r ent, tenant inducem ents, and other
tangible costs. Retain tw o, thr ee or m or e tenants a year and you can
see how the savings ar e going to add up. And since you?r e r educing
expenses, those savings go str aight to the bottom line.
That br ings the entir e concier ge equation into focus:
Con ci er ge ser v i ces = h appy t en an t s = r en ew ed l eases = cost sav i n gs
= i n cr eased pr of i t abi l i t y
So w hat?s the ROI of offer ing concier ge ser vices? For a pr oper ty
m anager w ith, say, 500,000 squar e feet of office space, the cost of
pr oviding an online concier ge ser vice like Eser vus (w w w.eser vus.com )
w or ks out to about $12,000 a year. (Eser vus is about one-quar ter the
cost of a tr aditional lobby-based concier ge, w ith a num ber of
advantages, including 24/7 online access and typically a br oader r ange
of pr oducts.) Looking at the concier ge equation, you can count on
incr easing tenant r etention by offer ing a concier ge ser vice. (Let?s
assum e that concier ge ser vices contr ibute 25% of the im pact of a
pr oper ty m anager ?s over all tenant ser vice str ategy.) So if you r etain
just one 10,000-squar e foot tenant a year as a r esult of your tenant
ser vice str ategy, and concier ge ser vices is r esponsible for 25% of that,
you can attr ibute annual savings of about $250,000 to concier ge
ser vices. At a cost of $12,000 a year , that?s a r etur n on investm ent of
over 20 tim es!
Con clu sion
W ith such an im pr essive ROI, you can expect to see m or e pr oper ty
m anager s tur ning to concier ge ser vices ? especially online concier ge
ser vices ? to pow er fully augm ent their existing tenant ser vice str ategy.
And as w e lear ned fr om the BOM A sur vey ?W hat Office Tenants
Want,? concier ge ser vices ar e offer ed in less than 25% of office
buildings. So not only can offer ing concier ge ser vices r etain tenants
and save you a ton of m oney, they can also pr ovide a com petitive
advantage for year s to com e.
About Eser vus
About t he Aut hor
Eservus has been offering online
concierge services to the
commercial real estate industry for
over 15 years. We provide our
services to 30 different property
manager clients in over 70 million
square feet of office space in major
cities in the U.S. and Canada. Our
customer satisfaction rating exceeds
ecommerce service leader Amazon
and our property manager client
retention rate is over 95%.
Kirk Layton is the president and
founder of Eservus. Before starting
Eservus in 1999, Kirk worked in the
commercial real estate industry for
over 10 years in a variety of
property management and tenant
service roles. He has an MBA from
the University of British Columbia
and lives in Toronto with his wife
Rhea and daughter Sophie.
"NOTONLYCANOFFERING
CONCIERGESERVICESRETAIN
TENANTSANDSAVEYOUA
TONOFMONEY,THEYCAN
ALSOPROVIDEA
COMPETITIVEADVANTAGE
FORYEARSTOCOME."