August Customer Service. What do tenants want? - Insights from Jones Lang LaSalles annual Property Performance Survey

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1 August 2012 Customer Service What do tenants want? - Insights from Jones Lang LaSalles annual Property Performance Survey

2 2 Advance Executive Summary The annual Jones Lang LaSalle Property Performance Survey is a valuable tool that enables our clients and property management teams to gain insight to our tenants occupation experience within our properties. The experiences, drivers and satisfaction of our tenants are benchmarked across our managed portfolio. With six years of survey results now available, we analyse and mine this rich and extensive base of data to closely examine trends of sentiment, issues of importance and satisfaction amongst this tenant base. The key observations that we have drawn from the analysis of this data can be summarised as follows: Whilst the attributes and amenities available in a property have become increasingly important to tenants over time, the fundamental requirement of providing a clean, well-maintained and secure property to support a tenant s business and aid its market image remains vitally important. The relationship with tenants is changing from the traditional tenant landlord model to that of customer service provider. Thus, increasing importance is placed on customer service by tenants. Satisfaction in this regard has improved, as owners and managers respond with programs and initiatives with greater customer service focus. Tenant perceptions of the things that matter most to them have heightened, reflecting their ever-increasing expectations of a property, its amenities and the services provided by the extended property management and support team. Levels of tenant satisfaction have also increased over the period of the survey, providing a vindication of the process of seeking feedback on tenants experience of our properties and then following through in a tangible manner. On average, customer satisfaction across all issues on a portfolio basis was rated at 78% in 2011, increasing from 70% in Environmental sustainability has transitioned from being aspired to being expected over the period of the survey. Most tenants place great importance on sustainability, but are not prepared to contribute financially as they view sustainability as a property owner s responsibility and an intrinsic amenity of the property.

3 Customer Service 3 Introduction Setting the Scene Jones Lang LaSalle is the dominant manager of prime-grade property in the outsourced management space with over 70% market share. Since 2006, Jones Lang LaSalle has undertaken an annual Property Performance Survey of tenants in our clients prime-grade properties across our Asset Management Services and Premium Asset Group portfolios. The survey seeks feedback within the broad categories of building services, sustainability, amenities, facilities, customer service and building management. Figure 1: What is Important to tenants? Average score out of 5 (where 5 is highest) This provides the opportunity to not only assess overall customer satisfaction, but also gain a valuable insight into the tenants experience, which can challenge and/or validate the management and ownership philosophies enacted within a property. The Property Performance Survey is published as an online forum that is undertaken in the Q3 of each year, targeting a cross section of representatives from within each tenant organisation. Across a range of criteria, respondents rate both the importance of various issues (Figure 1) and their degree of satisfaction (Figure 2) in relation to each issue. The gap between importance and satisfaction (Figure 3) identifies the priority areas of focus for clients and management teams. Customer service Working conditions Security Sustainability Building maintence Figure 2: Tenant Satisfaction Over Time Average score out of 5 (where 5 is highest) Building quality and presentation Cleaning service Tenants also have the opportunity to provide free form comments that allow for greater detail for the context of their responses. Respondents can complete the survey anonymously with respect to their property, but are encouraged to identify themselves for the opportunity to win a prize. Tenants also provide details of their size and tenure within the property, and their core business market segment Customer service Working conditions Building quality and presentation Security Sustainability Cleaning service Building maintence

4 4 Advance Tenant survey responses are collated for each specific property. These are analysed and assessed in comparison to the aggregated portfolio performance results. Reports are prepared and issued to the client and the Property Management team for each property, and these include an assessment against the portfolio as a whole and the detail of all individual tenant responses. Following the detailed review of the property survey results, the Property Management team develops a targeted action plan, which, with client endorsement, will be enacted to drive continuous improvement in the tenant experience. The gaps between a tenant s rating of importance of an issue and their satisfaction clearly identify the areas of focus for the client and the Property Management teams. The gaps are not indicators of dissatisfaction, but rather, are opportunities for improvement. The bigger the gap, the greater the opportunity to improve. As Figure 3 depicts, the greatest opportunities for improvement have traditionally been: the provision of cleaning services; the working conditions (air quality/conditioning, natural light, health and safety); the quality of amenities and property presentation; and the sustainable performance of a property. In our experience, participation rates have varied between properties depending on property age, location and facilities, yet participation levels exceeding 70% have been consistently achieved. This fact, coupled with anecdotal tenant feedback, confirms the value tenants place in this annual survey process. Sustainability Credentials The good sustainable performance of a property has transitioned from once being an aspiration in considering accommodation to now being an expectation. Tenant sentiment, as represented through our survey results, supports the view of property valuers that there is no significant evidence of a Green Premium for high-performing properties, but there is a definite Brown Discount for poor-performing properties. Figure 3: Importance vs. Satisfaction Average score out of 5 (where 5 is highest) - based on average scores between 2006 and Suitability of fit-out # Working conditions Cleaning Service Building Maintenance Building's reflection on branding # Building quality and presentation Security Customer Service Sustainability Importance Satisfaction # New categories introduced in the 2010 survey

5 Customer Service 5 The importance of green initiatives to tenants (Figure 4) has been consistent over time, but the expectations for delivery have increasingly shifted to the property owner. Consistently, over 85% of tenants have rated environmental sustainability as either important or very important, collectively equalling a peak of 94% in Tenants are overwhelmingly unprepared to bear the financial burden of property sustainability programs and initiatives. Since 2008, less than 10% of tenants have been prepared annually to contribute financially, via operating expenses, to sustainable programs. As Figure 2 attests, the interest, involvement and investment of owners and property managers in sustainability has provided a definite increase in satisfaction over time. Tenants themselves are also supporting these efforts with programs of their own (Figure 5). Anecdotal evidence of tenant sentiment, in support of the survey results, reflects the importance of driving green initiatives to aid a firm s projection to its own personnel base. In the unrelenting war for talent, firms understand that their Corporate Social Responsibility platform can be a vital aid to increase their appeal. Thus, within our tenant base: More than 70% have active waste management and recycling programs. Less than 30% have active water reduction programs. More than 50% have energy reduction programs. Carbon reduction programs are in place for 34% of tenants in 2011, increasing only slightly from 27% in The focus on energy reduction is likely to be driven principally by cost considerations, more so than by pure environmental drivers. Figure 4: The Importance of Environmental Sustainability % Very important Figure 5: Tenant s Sustainability Initiatives % Energy reduction Unsure No Yes % Important Not important Unsure Water reduction Carbon reduction Recycling % % Unsure Unsure Unsure No No Yes No Yes Yes

6 6 Advance Insight to Tenant Demand The survey has been used over time to prompt tenants for insights into demand for property amenities and features. This insight has enabled property owners to consider the re-allocation of limited resources between tenants; for example, storage space and car spaces as well as the demand for commuter amenities (bicycle spaces and showers) and office space. The trend in tenant demand, as shown in Figure 6, provides the following insights: Tenant sentiment, as indicated by demand, not surprisingly reflects broader sentiment in the economy at large, rising and falling in line with confidence in the economy. During the period of the GFC, tenant s clearly signalled that they did not require more space, yet nor did they indicate an intention to relinquish space. This accords with the view of the Jones Lang LaSalle Research team through this period, with no significant increase in sublease activity. The demand for increased commuter amenities increased over time, peaking in 2010 and is now subsiding. This may reflect the widespread focus on improving and increasing capacity of bicycles and shower facilities over recent years by property owners, thus meeting this demand. The demand for Childcare Facilities remains significant. Despite this, it is an area in which owners are reluctant to invest given the volatility of this market and the failure of operators in this space. Figure 6: Tenant Demand Over Time % (based on the proportion of tenants requiring more in the following catergories) Car space Office space Childcare facilities Common area showers Storage space Motorcycle spaces Secure bicycle areas

7 Customer Service 7 From Tenant to Customer Putting on a Show-stopping Performance Long gone are the days of the conventional office simply being regarded as just the place we go to work. Times are changing, with a whole new era for the common workplace emerging. Increasingly, occupiers of property are seen as our customers and not just our tenants. The nature of the traditional tenant landlord relationship is evolving and driving changes in tenant expectations. More and more, tenants are expecting great levels of customer service in all interactions within the property. This is setting new challenges for property teams and owners to meet the expectation of a superior customer service experience the new norm. Quality customer service benefits not only the tenants direct experience and that of their personnel, but also projects further to their own clients and customers, aiding and supporting the tenants business image. Tenants want quality customer service starting at the property front door, not just at their individual reception area. The Fluffy Stuff? Property owners and managers could traditionally be accused of undervaluing customer service and brushing it aside as the fluffy stuff. Yet now, the collective pennies have dropped, and everyone is waking up to the realisation that creatively adding value and delivering first-class customer service can be a significant point of difference in the property environment. This now involves delivering an engaging and convenient experience at each touch point, across the entire work environment and property. The challenge for property owners and teams is to engage with each individual at a personal level, broadening the focus from just the key decision makers within the tenancy base. Ratings of the importance of customer service have been tracked since our survey s inception. As depicted in Figure 1, customer service has progressively increased since In response, greater focus has been placed by property owners and managers on the customer experience, and it is pleasing to see that satisfaction levels have improved markedly over time. However, this remains our challenge, and we believe we have only just started scratching the surface with the potential and the opportunity to deliver a new industry standard of Superior Customer Service.

8 But the Basics Really Matter Too! The most important issues to tenants have and continue to be those that directly affect their daily property experience. Tenants have traditionally remained most satisfied with property management and the customer service offerings, whilst being less satisfied with cleaning that remains a perennial problem. Across the scope of cleaning in which responses are sought, the lowest levels of satisfaction have always been with the on-floor bathroom facilities. These areas evoke the harshest criticism and emotive responses. They are also the area on most properties that are most harshly rated for the level of amenity they offer. We note that increasingly, occupier decisionmakers are considering not only the work space features, but also the professional and lifestyle needs of their people in making accommodation decisions. Whilst amenities, on-site food and beverage, fitness and lifestyle services provide an important edge, it s still the basics that matter most and must be satisfied first. Also consistent in our survey results and feedback is the performance of lifts. It is always rated as highly important by tenants, with satisfaction harshly marked if performance does not meet expectations. Lift travel times, door opening and closing speeds and ride quality matter the most. Tenants want to eliminate distractions for their people to ensure they can focus on business needs. The environment needs to support their business, not detract from their core mission. As satisfaction trends in Figure 2 demonstrate, tenants want and expect a problem-free environment, be it in terms of office space temperatures, speed of lifts or cleanliness of bathrooms. First Impressions Perceptions of issues like substandard cleanliness or lift performance drive highly emotive responses and are a huge distraction to people. As we all know, and as is reinforced to us constantly, we rarely get a second chance to make a good first impression! For instance, whilst external areas and landscaping rarely appear on a must-have list of property needs, a potential property accommodation option can drop straight out of favour if the plants and gardens are poorly maintained and entry points are littered with cigarette butts. It s these little things that may provide a valuable insight into the management priorities and standards of a property. A poor impression can be costly when a tenant is generally spoilt for accommodation choice.

9 Customer Service 9 So What s Next for Customer Service? Whilst Figure 7 paints a positive and encouraging picture of satisfaction with on-site property management teams, we believe that the future of delivering great service, in fact, lies outside of these boundaries. Great customer service will only be produced by bringing together the extended property services team together as one. It s All About Everyone Working as One Team From providing a warm welcome to the office, morning newspapers in the lobby and greeting customers by name each day, to providing an efficient face-to-face service, we believe this is the future of the office environment treating tenants as customers with a consistently positive and engaging experience every time. Creating a culture of teamwork that extends throughout all service partners and contractors, making one unified team, may seem like an impossible task. But once fully established, it produces the very best end results. Everyone has their role to play, as part of the team, to make our customers and guests feel special. By embracing this common sense of purpose with a true One Team approach, an industry-leading customer service culture will flourish and grow. Just the same as a quality hotel environment, it is this strength of employee engagement and team spirit that makes the difference. Conversely, one bad isolated experience can tarnish the image of all. Feel the Difference A number of premium properties have sought to present a hotel-style concierge service in recent Figure 7: Tenant Satisfaction With Their On-site Management Team % 2% 20% 24% 78% 73% Satisfied Extremely Satisfied Dissatisfied Extremely Dissatisfied years. The role of concierge has frequently been assumed as part of the property s security deployment with mixed results. In line with the rising expectations of the customer experience within our properties, and the owners focus on meeting this challenge, the deployment of bespoke concierge solutions is gaining momentum. Security in a suit is no longer adequate and, instead, is replaced by hand-picked concierge professionals. In addition to providing a true hotel-style concierge presence in property lobby spaces, the opportunity to deliver a personal concierge service offering to the occupants of our properties is now available. People are short of time nowadays, and even running simple errands can often be one of the hardest and most frustrating challenges we encounter on a daily basis. The era of the property concierge helping to meet these personal needs is upon us.

10 10 Advance Conclusions The annual Jones Lang LaSalle Property Performance Survey results are recognised by property owners and management teams as a valuable resource to help guide investment and management focus. The survey enables a property to be benchmarked across an extensive portfolio, as well as to develop and deliver a targeted response that effectively addresses the feedback from property tenants. The survey is well accepted and supported by the portfolio tenant base, which appreciates the communications channel the forum provides. Future renditions of the survey will retain the core suite of questions to support trend monitoring, whilst supporting an expanded ability to seek responses to issues, customised for each participating property. The Art of Anticipation Tenants are increasingly looking to landlords to anticipate their requirements, ranging anywhere from ensuring secure environments and a variety of dining options, to keeping clean and comfortable workplaces. Above all else, tenants want us to solve their problems as quickly as possible. We all know that often, it s the little things that make the biggest difference. Quality customer service not only benefits the tenants direct experience and that of their employees, but also projects their own business image with clients and customers. With this in mind, we believe it is crucial to take the time to walk in our customers shoes, to objectively experience exactly what it feels like to visit or work in our properties, to get a sense of the spirit of the whole on-site team and to experience the day-to-day touch points as a customer. But, it is the basics that have always, and will continue, to matter most. A property can have the fanciest fixtures and fittings, the best energy efficiency programmes, with more than sufficient commuter facilities; however, if the toilets aren t perceived as clean, well-attended and wellmaintained, the perception of the property will be undermined in the eyes of our customers. When visiting five-star hotels and top restaurants, we often hear people say, You can always tell a place by the toilets! So why should the office environment be any different? We all value good service and enjoy being treated as customers. This is also true for our tenants and their personnel. Embracing the challenge to drive a change of mindset and, thus, positively influence the ownership and management of our properties for us to deliver quality customer service, will produce increasingly significant outcomes. Those owners and managers who believe in focusing on the customer experience and who walk the walk will gain great leverage in the battle to retain and attract tenants, ultimately mitigating their commercial risk.

11 Authors Peter Merrett National Head of Customer Service Property and Asset Management, Jones Lang LaSalle, Australia Peter Merrett has a career that features the leadership of some of the most successful country house hotels in the UK, twice winning the national Hotel of the Year awards. More recently, he pioneered the transfer and adaption of luxury hotel and hospitality methodology into the commercial office environment at the iconic, high-profile London office estate, Tower 42, one of the most successful property industry case studies in the UK. The property went on to become the first in Europe to win the prestigious International Office Building of the Year Award with BOMA International (Building Owners and Managers Association, North America) in 2008, setting a new international benchmark for customer service. Peter currently leads and coordinates the customer experience across one of the most prestigious commercial office portfolios in Australia for Jones Lang LaSalle. Mike George Head of Premium Asset Group Property and Asset Management, Jones Lang LaSalle, Australia With over 13 years experience in the property industry, following an extensive career in engineering, Mike George has an intimate knowledge and understanding of the management of prime-grade property. Mike has held property engineering and general management roles before assuming portfolio leadership responsibilities. Mike is responsible for providing premium asset and property management services for some of the most iconic prime-grade commercial properties in Australia. He leads a group of over 120 property professionals located across the principal Australian capital cities, supporting over 900,000 sqm of commercial property.

12 Adelaide Level 22, Grenfell Centre 25 Grenfell Street Adelaide SA 5000 tel Brisbane Level 33, Central Plaza One 345 Queen Street Brisbane QLD 4000 tel Brookvale 1 Dale Street Brookvale NSW 2100 tel Canberra Level 7, 121 Marcus Clarke Street Canberra, ACT, 2601 tel Glen Waverley Building Springvale Road Glen Waverley VIC 3150 tel Liverpool Level Northumberland St Liverpool NSW 2170 tel Mascot Level 3, Sydney Airport Centre 15 Bourke Road Mascot, NSW, 2020 tel Melbourne Level 21, Bourke Place 600 Bourke Street Melbourne VIC 3000 tel North Sydney Level 27, North Point 100 Miller Street North Sydney NSW 2060 tel Parramatta Level 8, 79 George Street Parramatta NSW 2150 tel Perth Level 29, Central Park St Georges Terrace Perth WA 6000 tel Sydney Level 25, 420 George Street Sydney NSW 2000 tel COPYRIGHT JONES LANG LASALLE 2012 All rights reserved. No part of this publication may be published without prior written permission from Jones Lang LaSalle. The information in this publication should be regarded solely as a general guide. Whilst care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions regarding numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw your attention to this factor.