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CEM OCCASIONAL PAPER SERIES HOW PROPERTY OWNERS CAN HARNESS THE POWER OF OCCUPIER FEEDBACK the logo is intended to bleed off the top left hand corner of the page. the dots should line up with the page edge, allow 3mm bleed and pull in the picture box to hide the dots.

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HOW PROPERTY OWNERS CAN HARNESS THE POWER OF OCCUPIER FEEDBACK

An information paper by Howard Morgan, founder and managing director of RealService – real estate customer service specialists. CEM OCCASIONAL PAPER SERIES October 2012

INTRODUCTION

The relationship between landlord and tenant has traditionally been an adversarial one and fundamentally different to the supplier and client (customer) relationship that exists in most other business dealings. Maximising returns, rather than customer satisfaction, has been the priority. The balance of power between landlord and tenant, however, has shifted. This is reflected in a number of ways, including the availability of shorter lease lengths and more frequent lease breaks. This has encouraged more forward-thinking landlords to focus on customer retention and reputation management.

The last 10 years has witnessed a mini revolution in the world of property. An example of this is the emergence of a group of ‘pioneers’ and ‘early-adopters’ – including several major listed property owners – of the customer- focused approach to property management.

This paper will use case studies to explore how the UK property industry is using occupier feedback to improve customer service – not for altruistic reasons, but to boost the three Rs of real estate – revenue, retention and reputation. We will look at the survey methods used and examine how the results are measured and benchmarked to improve business performance.

One of the pioneering ‘early-adopters’ is Land Securities, the UK’s largest real estate investment trust and owner/ manager of some of the UK’s major shopping centres and commercial developments. Land Securities began measuring customer satisfaction as a driver for change nine years ago. Former CEO Francis Salway made ‘customer service’ one of the core values of the business because he believed that loyal occupier customers are good for business since they stay longer and are more likely to be repeat customers. He also broadened the company’s focus to include ‘occupier satisfaction’ levels in senior managers’ personal targets, an initiative which has resulted in 98% occupier satisfaction (Land Securities, 2012).

Land Securities, along with a number of notable others such as SEGRO (formerly Slough Estates plc) and British Land, has set customer satisfaction as a strategic goal and has fully embraced the notion that treating tenants as valued customers makes good business sense in terms of faster leasing, stronger retention and industry recognition.

This has been actively encouraged by trade bodies like the British Property Federation (BPF), who view this approach as a way of proactively improving the industry’s profile and reducing the risk of regulation.

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SURVEY METHODS

The technique is available to property owners to retailers and provided a catalyst for change within measure occupier satisfaction are well tried and the organisation. tested. Another of the early pioneers of the customer- Internet surveys have replaced mail questionnaires focused management approach was SEGRO as they both lower costs and, in terms of which, in 1999, took the forward-thinking step administration, are a simpler way of gathering of asking an independent research agency to feedback. approach the occupiers of Slough Trading Estate (the largest business estate of its kind under private While internet surveys can be an effective way to ownership in Europe) to measure how satisfied they gather quantitative data, they are not as effective were with their experiences of dealing with SEGRO. as using personal interviews to secure valuable The facts revealed that the company needed to qualitative insights. work in closer partnership with its customers in order to retain its position as a landlord of choice. Personal interview – both by telephone and face-to- face – or focus group methodologies are far more With regard to British Land, the success of its effective ways of getting beneath the surface of customer-focused strategy can be measured issues that arise and they have the potential to yield through occupier audits and industry recognition. far more valuable information. Last year, for example, independent customer satisfaction studies conducted using personal Occupiers of all property types – office, industrial, telephone interviews showed that 85% of UK retail retail, residential, rural and mixed use – can occupiers and 83% of UK office occupiers rated be questioned about their level of customer the service they receive from British Land as ‘good’ satisfaction at various stages, including after or ‘excellent’. In 2009 British Land was voted ‘key events’, such as after taking occupation, ‘landlord of the year’ by retailers for their aggressive refurbishment, lease reviews, lease breaks and approach to reducing service charges. lease expiry.

Interviews can take place at property and/or head office (i.e. director) level depending on the nature of the study and should ideally be repeated annually to monitor and measure progress. Land Securities, for example, commissioned its first perception study of retail property directors in 2006. This pioneering study – using face-to-face personal interviews – highlighted a number of ways in which Land Securities could enhance its relationships with

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INDEPENDENCE AND TRANSPARENCY

As well as deciding the most appropriate method to ‘The survey gave us our first in-depth occupier use for surveys, property organisations must also feedback affirming the areas where we are decide who is going to carry out the study. doing all the right things and has given us valuable information with which to manage British Land, Land Securities and SEGRO have all the park day to day going forwards and for the chosen to use an independent agency to conduct strategic management planning. Crucially, it was their surveys in order to win the confidence of independent feedback from the occupier, the interviewees and to demonstrate that they are person who pays the rent.’ measuring responses accurately and without bias. Many of the companies mentioned in this paper While it is sometimes perceived to be more costly are now also publishing the results of their to employ independent measurers the payback independent customer satisfaction research significantly outweighs the costs. All too often in their annual reports and on their websites, organisations that measure themselves develop a as well as making it directly available to their culture of delivering the results that management occupiers. SEGRO’s new website is to include wants to hear rather than the message that a customer experiences section that will give customers want to convey. The survey process can potential occupiers a flavour of what it is like to be become self-serving and there are instances where a SEGRO customer. in-house measurement has been abandoned when the results begin to lose credibility. The result is improved transparency and accountability. The manager of one of the UK’s biggest business parks says that using an independent agency was crucial when they decided to survey occupiers for the first time, in 2011:

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POWER OF OCCUPIER FEEDBACK

There is little point in deploying resources to global companies which have since chosen to obtain occupier feedback if it is left on a shelf locate their UK and European headquarters on the to gather dust and is totally ignored. Occupier estate, including world leading businesses such as feedback can be an immensely powerful Blackberry, O², Ferrari and LG Electronics. management tool if it is used to its full potential. In 2008 SEGRO started using the same customer- One company that has made full use of occupier focused approach to survey occupiers of its feedback is SEGRO. Since it started measuring business parks and offices across continental occupier satisfaction 13 years ago, the company Europe. Interviews were conducted among has undergone a dramatic change in the way that occupiers in seven countries – Belgium, France, that it conducts its business, resulting in a process Germany, Netherlands, Poland, the Czech of cultural change – the success of which can be Republic and Italy – to determine their levels of measured through rising customer feedback scores. satisfaction with SEGRO in a number of key areas, including communication, responsiveness and This has not been achieved through some form understanding needs. of charm offensive but by using feedback from surveys to improve SEGRO’s relationship with The study provided a baseline measurement of customers and ensuring that their needs are met. customer satisfaction and identified a number of important management actions that needed to be Take, for example, the issue of security at the taken to have the greatest impact on customer Slough Trading Estate. When first surveyed in 1999 satisfaction, leasing and retention. Repeat studies a number of occupiers rated their satisfaction with were conducted in 2009 and 2011 that enabled security poorly. SEGRO had already begun to review SEGRO to identify the effectiveness of its actions its security services at the estate and these results and to identify further priorities for improvement reinforced the company’s view that the perception going forwards. of crime levels was a serious consideration for both existing and future occupiers. In 2011 Capital Shopping Centres (CSC) completed its third annual retailer satisfaction As a result of both the survey and previous measurement programme across its UK portfolio assessments, SEGRO instigated what was to of shopping centres. CSC Operations Director become an award-winning business watch Trevor Pereira says: security initiative, dedicated to maintaining a safe environment for businesses and visitors. ‘The programme has helped us to drive our customer service agenda and ensure that our The impact of the initiative has been significant activities are targeted towards the changes that and also measurable, as evidenced both through our customers most value.’ independent surveys and the large number of

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Last year Derwent London commissioned its first ‘The exercise was an excellent opportunity to customer satisfaction study of six office buildings reinforce our understanding of our performance with the aim of identifying management priorities on customer service and to illustrate our for the year ahead and to provide a new baseline shortcomings. It has enabled us to come up with a for setting targets for improvement. Head of Asset strategy for innovation and improvement.’ Management Simon Taylor says:

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MEASUREMENT

The ability to track changes in occupiers’ satisfaction The Land Securities’ programme also gives its is an essential part of any management programme retailers and office occupiers the opportunity, on a to improve business relationships, service standards rolling basis, to give feedback about their levels of and business performance. satisfaction. By measuring occupier satisfaction at an individual property level, the company has been Organisations that introduce and run annual able to identify which actions can win support from programmes to measure customer satisfaction occupiers, as well as those which frustrate them. are able to drive their business performance, keep focused and motivate their staff. It is a similar story for retailer occupiers of CSC. Here is what one CSC shopping centre manager said after In simple terms, property owners who do not have his retail occupiers were independently surveyed accurate service performance measures are ‘flying in 2011: blind’ and without accurate feedback they cannot track progress and drive improvement. ‘We really appreciate the tangible measured feedback the study gives us. It tells us where we Land Securities carried out a second study among are doing well and where we need to work harder. retail property directors three years after the first. When we get the results we can hardly wait to dive The 2009 study revealed that the action taken in and rip it to pieces so we can start taking action. by Land Securities was having a measurable The report is a massive tool for the management impact on retailer satisfaction as evidenced by team to use to improve performance. I get everyone the levels of satisfaction in the important areas of together so we can go through the results together, communication, understanding retailers’ needs and share our successes and learn from the less positive overall performance as a landlord. A third study comments.’1 in April 2011 showed that Land Securities had established a market-leading position in terms of satisfaction among retail property directors. 1 Paul Francis, General Manager for CSC’s The Potteries, Stoke on Trent, in an interview with Real Service in 2012.

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BENCHMARKING AND BEST PRACTICE

Benchmarking stretches ambition and discourages to set improvement targets for its European complacency. Property organisations that know operations going forwards. how they compare with their external and internal peers can keep their teams motivated and share The results have also enabled performance best practice. comparisons to be made between the different countries and the UK and highlighted clear Benchmarking opens up new methods, ideas and opportunities for improvement. tools that can improve effectiveness for organisations. It helps break through resistance to change by At the vanguard of developing measures and demonstrating new methods of solving problems. benchmarks are the 20 leading owner and property manager members of the RealService Benchmarking customer satisfaction can enable Best Practice Group (RSBPG) – a not-for-profit property owners to understand the current relative benchmarking and best practice group. Members strengths and weaknesses of their service to currently include Ashville Asset Management, occupiers, which is crucial to targeting areas British Land, Broadgate Estates, Capital Shopping for improvement and deploying management Centres, CityWest Homes Ltd, Cushman & resources effectively. Wakefield, DTZ, EMCOR Facilities Services, Gatwick Airport, GVA, Highcross, Lambert Smith By benchmarking the results of one shopping Hampton, Land Securities, MAG Developments, centre against another, Land Securities has been Marchday, PRUPIM, SEGRO, Soho Housing able to highlight best practices – for example, Association, Stow, The Portman Estate and in the way that security is managed at shopping Transport for London. centres – and to encourage sharing these practices. Backed by the British Property Federation and founded in 2004, the group’s mission is to The three pan-European studies conducted improve customer service to occupiers through by SEGRO in recent years have enabled it to benchmarking and sharing best practice and in benchmark standards of customer service delivery so doing to gain a better understanding of the between the different countries in mainland link between improved customer service and Europe and the UK. performance.

In recent years British Land has also started to The RSBPG’s lead initiative is the RealService independently measure satisfaction levels among Best Practice Index (BPI), a scorecard that retail occupiers in France, Spain and Portugal, measures the extent to which each member with the aim of maximising the performance of organisation is complying with the RealService its European portfolio. The research has provided Best Practice Framework. The Framework defines British Land with a baseline measure from which best practice in property management in six

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key areas: service strategy; customer solutions; Each member receives a confidential report people and leadership; supply chain and client and personal debriefing on the findings of the management; operations; measurement. evaluation. This highlights the strengths and weaknesses of the organisation in comparison to The study is conducted annually by way of an its peer group, and recommends opportunities for online self-assessment which is reviewed by an improvement. It also identifies the organisation’s independent verifier. ranking against those of its peers.

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THE FUTURE

These case studies demonstrate forward-thinking Take TripAdvisor and eBay – two of the world’s commitment but the majority of landlords and most successful new economy businesses property managers are yet to adopt the customer- that are founded on the power of independent focused approach to ownership and management. testimonial and satisfaction scores. In 2012 The real estate industry still has a long way to personal recommendations are made via go to catch up with the rest of business in its the Internet and success can be measured approach to the customer. by the volume of endorsements, potentially instantaneously and on a massive scale. This is borne out by the Occupier Satisfaction Survey 2011, published by the Property Industry At eBay, each vendor and purchaser is awarded Alliance and CoreNet Global UK, which revealed a customer score by the actual parties that made that the average UK occupier rates their level of the transaction, reflecting all their past dealings satisfaction at just 54%. Imagine the outcry if our big on the site .The eBay world, where vendor and supermarkets offered such a poor level of service! purchaser never meet in person, is founded on transparent feedback. Similarly, at TripAdvisor There appears to be reluctance within some customer testimonials enable the purchaser to organisations to invest in the tools necessary to make an informed decision about whether to stay make the shift in approach without seeing hard at a hotel or leisure destination. (i.e. financial) evidence and a clear business case for it. At present there is no easy way for analysts There can be no doubt that the property industry’s to measure the impact of customer service customers of the future will be more empowered investment on financial performance. through having information at their fingertips that helps them make informed decisions about which This may change with the launch of a pioneering landlord is best. PhD research project at the School of Real Estate and Planning at the Henley Business School, part This is already starting to be the case in the US of the University of Reading, to help the property where ApartmentRatings.com (available at: www. industry better understand the link between apartmentratings.com) is rewriting the rules for customer service and property performance. It is customer feedback in the residential sector. hoped that the research will provide hard objective Moves are afoot to launch a similar kind of website and quantitative evidence and a clear business in the UK. case for investing in customer service.

Today customer feedback is driving purchasing decisions in all walks of life, whether buying for business or the home, in-store or online. Why should property be any different?

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CONCLUSION

The case studies mentioned in this paper a ‘nice-to-have’ extra. Today, however, it is fast demonstrate that occupier feedback can be a becoming a boardroom issue. Chief executives, powerful catalyst for improving services to occupiers. in the major property companies at least, now understand customer service and the financial and The exact link between improved customer reputational benefits it can bring; they are now service and performance has yet to be proven, but putting customer satisfaction at the core of their there is strong anecdotal evidence to demonstrate business strategies. that an obsessively customer-focused approach to property management can improve revenue, The customer service revolution that began a retention and reputation. decade ago is gaining momentum. Customer service in the UK property industry is no longer Only a few years ago, the UK property industry a luxury extra – it is a boardroom issue that is viewed customer service as ‘soft and fluffy’ – receiving the attention it deserves.

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about the author

Howard Morgan is the founder and managing A Member of the Royal Institution of Chartered director of the London-based consulting business Surveyors (RICS), Howard was chairman of the RealService Ltd – international real estate customer judges panel for the RICS Property Management service specialists. Awards from 2005–2007.

Howard is an expert in the development of occupier Howard is a judge for the SCEPTRE Awards and retention and leasing strategies in the property for the BCSC ‘Achieving Customer Excellence’ industry. RealService counts names like British shopping centre awards. He is a regular contributor Land, Cadogan, PRUPIM and Hammerson among to journals and a speaker at conferences and in- its clients. house seminars on the themes of customer service and business ethics in the property industry. Prior to forming RealService 14 years ago, Howard was a director of property company BAA Lynton Howard won the Property Week RESI Conference Ltd where he was the architect of BAA plc’s prize in 2011. ‘property challenge’ programme, an award-winning strategy to grow the company’s property business For more information visit www.real-service.co.uk through treating tenants as valued customers.

Howard contributed to the book Property REFERENCES Management: A Customer Focused Approach by Gordon Edington, a former group property director Land Securities Annual Report, 2012, of BAA and past president of the British Property Federation (BPF). http://annualreport2012.landsecurities.com/ media/56165/Group%20business%20review.pdf

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