Finding Out What Tenants Really Want
GlobeSt.com: What research have you done with tenants to find out their specific wants and needs with regard to amenities for value-add projects?
Shopoff: There are two or three ways we go about it. It depends on how many tenants we are repositioning. If there’s little to no tenancy, it’s a little more difficult. If it’s a largely occupied property, then it’s a straightforward process: we go and talk to the tenants. More frequently, it’s a high-touch process, a sit-down interview with them. Sometimes it’s a questionnaire, asking them what they like, what would they want in their space.
Another other method is to look in the market—not necessarily our direct market, but markets that look like ours, and see what has been successful. Innovation is great, but imitation works pretty well, too. We see what others have had success with in similar markets.
Then, if we’re going to try to do something a little more groundbreaking, we will do focus groups. You identify who your target audience is, refine a plan, define what you want to do and decide what the best product will be. You can either buy for less or deliver more. Sometimes you just have to deliver more in value and hopefully that will translate into tenants signing leases for it.
GlobeSt.com: What have tenants told you when you’ve done this research?
Shopoff: It depends on the product type, of course. In office, for example, we’re acquiring a vacant building right now, and the tenants wanted general meeting space and they’re contemplating a common kitchen rather than a kitchen/lunchroom in each suite—a central kitchen to which all of the tenants in the building will have access. This is a common-area kitchen where people can use that space and not have a dedicated space they’re only using for a few hours or minutes a day.
There’s a retail project we’re working on now in the Phoenix metro area, and they asked for carport decks under which customers can park, so we’re going to incorporate that. That’s important in a market where the temperatures get so high.
Aside from that, we attack the basics: getting the property up, executing basic upgrades and modernizations to lighting, lobbies and public spaces, and adding some socialization element, which has become key. In multifamily, tenants want a recreation facility with pool decks—there is significant space being dedicated to recreation in these properties. People want to get together and gather. In one building we’re working on in Southern California, there are two buildings facing each other with spectacular pool decks overlooking each other and connected by a bridge structure. We’re giving up 25 units to get that, but it has more value. In another project, we’re mixing in the right retail and having the retail be more of an amenity for the residents than getting the highest value for that retail. There’s more of a focus on getting the best value for our residents and giving them the lifestyle they want. It’s worth more to us than getting another nickel a foot in rent.
GlobeSt.com: What is your strategy with research? How often do you do it, and how do you approach it?
Shopoff: As soon as we start doing due diligence, we interview our tenants. In an office park, we want to talk to everybody. We want to understand their expectations—what they’ll tell you and what they won’t. It takes man hours to accomplish it, but you need to have great rapport with your tenants—if you’re going to raise rents, but for other things, too. If you give people value, they don’t mind paying for it. For the most part, we have no problem meshing what the tenants want with what we can give them. We can’t always give tenants everything they want at the price they want, but we give them the highest value and maximum number of things that equate with our economic plan and their economic wherewithal.
Link to the original Article here: http://www.globest.com/news/12_980/orangecounty/development/Finding-Out-What-Tenants-Really-Want-352112.html