KINGSLEY INSIGHT
>> November 2004
INSIDE THIS ISSUE
The Best Companies to Work for in Real Estate
The best places to work in the real estate industry demonstrate superior growth, higher win percentages, and enhanced profitability. Studies have consistently shown that there is an undeniable link between satisfaction in the workplace and company success.
The connection is particularly strong in the service-based real estate industry. Your employees, from field personnel to portfolio managers, are at the front lines of client and customer service. Satisfied employees act as advocates for your organization and Kingsley Associates’ research shows that employee advocates are:
- 4x more likely to recommend their company’s products and services
- 8x more likely to stick around
In today’s market, it is tough to place money. High prices and low cap rates have many investors on the sidelines.
But organizations are placing money - billions. So how are they doing it? Some are changing their game to address current market conditions. Here are some of the strategies they are employing to get more deals done:
- Lowering expected return hurdles
- Seeking additional discretion or increased discretionary limits
- Conducting proactive due diligence on assets they might like to purchase
- Preemptive bidding on off-market properties
- Increasing use of leverage to meet return hurdles
- Paying all cash to allow for a quicker and more certain closing
- Foregoing certain steps or requirements in the due diligence process
- Using third party services to speed due diligence
- Expanding investment parameters to consider different property types, markets (including foreign), or investment vehicles
- Investing outside of traditional strategy boxes and adopting more of a "shotgun" approach
- Making more entity-level investments and JV arrangements
These changes in investment strategy raise the question, does it make sense? Is it a sign of a permanent shift in market fundamentals as increasing capital flows further legitimize real estate as an asset class or are investment firms, pressured to place money, becoming too aggressive in their acquisition criteria only to face the consequences down the road. There are plenty of people on both sides of the fence, and so, at the risk of sounding trite, only time will tell...
Could the Kingsley Index Have Predicted the World Series?
Well, no. But the Index is a valuable tool in proactively outperforming competitors. While we have found that the Index parallels market fundamentals, our statistics also show that strong customer service can enhance performance under any conditions. Take, for example, Boston and St. Louis, the two cities in the World Series Championship hunt:
Boston - The Beantown market is in a down cycle, with negative net absorption and declining occupancy and lease rates. Furthermore, tenants’ renewal intentions in the Boston MSA, as tracked by the Kingsley Index, have declined in the past year, suggesting that recovery will require more than a reversal of “The Curse.”
St. Louis - In the Gateway to the West, the fundamentals tell a different story. Absorption has been positive, vacancies are falling, and office employment is on the rise. At the same time, Kingsley Associates has seen positive trends in tenant satisfaction and renewal intentions.
While the market fundamentals tell different stories, our data suggests that property managers can directly impact tenant satisfaction and renewal intentions no matter what the phase of the real estate cycle. In fact, according to the Index, renewal intentions among tenants who are more satisfied with the service they receive from management are 17% and 10% higher in Boston and St. Louis, respectively. So while you can’t change the forces of the market, outperformance is always attainable - with the right focus.
