KINGSLEY INSIGHT
>> September 2004
INSIDE THIS ISSUE
We're sending you this newsletter because we want to share our insights and experience with the leaders of the industry. We want to stay in the flow and keep you in the know. If you would prefer not to receive this newsletter in the future, you can unsubscribe -- but we think you'll be missing out on some great insights if you do!
The One Number You Need to Know (For Real Estate)
You may have read the Harvard Business Review article "The One Number you Need to Grow", which focused on customers' likelihood of recommendation as a leading indicator of long-term business performance. While that number may be appropriate for consumer goods and services, unique aspects of the real estate industry such as the long purchase cycle and the large financial implications to tenant businesses, make this number less predictive of actual tenant behavior.
Kingsley Associates has found the one number you need to know for your portfolio -- tenants' renewal intentions. Our research has found renewal intentions to be highly predictive of actual renewal behavior. Knowing the intentions of your tenants can help you predict retention rates, forecast more accurately, and develop customized retention strategies on a tenant-by-tenant basis. Retaining just one more 10,000 square foot tenant can mean saving over $200,000. For the money, knowing that one number is the best deal in real estate -- and you thought all the deals out there were overpriced! Interested in learning more about the KA renewability index?
A Pulse on the Industry -- Doing More with Less
Fact: the real estate industry as a whole is doing more with less these days, and it's a trend that is pervasive throughout every level of the industry. Case in point, Kingsley Associates has seen the average value of assets overseen by an Asset Manager increase by nearly 50% -- from $400 million in 2001 to almost $600 million in 2003. That's a pretty big increase in just two years.
Advances in technology help explain part of the increase, but shifting workloads have also fueled the productivity gains. Service provider organizations and property-level personnel are being asked to do more and more. Some of the responsibilities that were traditionally within the Asset Manager realm are being pushed to the property-level, where, despite this, fees continue to be pressured lower. What are the implications of this trend, both long- and short-term? How dramatically does this affect time spent with tenants? Where are opportunities being lost, and how much has been gained? Have questions about your firm's productivity or the industry at large?
Millions of dollars can quickly disappear into the black-hole world of systems implementation. The systems promise a world of efficiency and productivity gains, but Kingsley Associates believes that many of the systems in place throughout the industry are being underutilized. They may be used as an AR/AP tool, or to log lease abstracts and track critical dates, but are they really being used to their full potential?
Real estate business intelligence systems can be used much more efficiently to proactively manage real estate portfolios and the value creation process. Instead of just knowing that XYZ Corporation's lease expires twelve months from now, the systems could be leveraged in developing a customized retention strategy for the tenant. How likely is the customer to defect? What are the key criteria in their lease renewal decision? How satisfied are they with the service they are receiving? What complaints have they raised in the past 24 months, and how have they been resolved? What is their lease rate? How does it compare to market? What are their renewal options?
Data is captured in so many different places throughout real estate organizations, but aggregated in very few. Why not put it all in one place and use that power to outperform your peers? In a market where everyone and their brother (and his friend) are chasing every deal, smart systems utilization can help create and sustain competitive advantage. Interested in unlocking value for your organization through business intelligence?