Tenant Retention a Challenge Amid Slow Recovery

As companies in the greater San Fernando Valley region continue to consolidate during the slow economic recovery, property managers are working harder to keep tenants. So companies on the Business Journal’s list of Largest Property Management Firms say when it comes down to convincing office users stay put, it’s a good thing to make sure some amenities are available. Diana Wyant, senior director for CBRE Inc., the firm headquartered in downtown Los Angeles that ranks No. 2 with 8.5 million square feet under management, mentioned Internet technology as one of the extras tenants especially like. “Wi-Fi in the common areas, websites for the building – owners are taking a look at having those added-value items,” she said. “It’s having those amenities that keep tenants happy.” The 20 companies on the list are ranked by square footage of office, industrial and retail space managed in the Business Journal’s coverage area. And many agree that small technology upgrades are now de rigueur for top office buildings in the area. Another draw is conveniences for employees who work long or late hours. Whether it’s a dry cleaners, shops or on-site restaurants, property managers say such services keep employees happy and make it more likely a company will stay in a building. “It’s really the Google model, whether it’s a car wash nearby or babysitting services,” said Michael Prabhu, property management director of the Southwest region for Chicago-headquartered Jones Lang La Salle Inc., which ranks No. 1 with 13 million square feet under management. “We’re seeing the technology needs, too.” Of course, the slow economy bites both ways. Given the costs of moving, many tenants prefer not to. “Even with consolidation, we’re seeing companies trying to keep their operations in the same buildings,” Prabhu said. “We’re just trying to make sure we provide them with the value they want and they’re likely to stay with us.” Several new buildings to manage kept Jones Lang LaSalle at the top of this year’s list for the third consecutive year. Prabhu pointed to one assignment, 611 Brand Blvd. in Glendale, as a major addition to the firm’s portfolio. “That’s one that is a big one for us,” he said, referring to the 14-story Class A building acquired by LNR Property Corp. for $65 million after MPG Office Trust Inc. lost the property in an August foreclosure. Retail recovery Retail leasing continued to pick up this year as shop owners and restaurateurs looked for prime central Valley space. “Good real estate is good real estate,” said Dave O’Connell, director of the San Fernando Valley region for Centers Business Management Inc., headquartered in downtown Los Angeles. The company ranks No. 10 on this year’s list, managing 1.8 million square feet of retail space in the Valley. But even so, tenants are looking to get more bang for their buck, even if that means moving into a space and putting little original improvements into it. “We’ve seen people really looking along Ventura Boulevard for restaurant spaces that are already built out. They want to be able to save and turn that around into their own space.” Todd Nathanson, president of Encino firm illi Commercial Real Estate, the No. 4 company with 6.2 million square feet of retail space under management, also noted that in less-trafficked shopping centers, tenants are asking for concessions prior to move-in, including abated rents and tenant improvement dollars. Still, he noted, the retail market as a whole was not hit as hard as the office sector by the recession, and it has been picking up faster. His company added 3.7 million square feet of new contracts this year. “It’s definitely going in the right direction. I can tell just by the way the phones are ringing in the office,” he said, adding that some tenants with substantial capital are making big investments in properties with their own money. “I’ve been surprised at how much investments tenants are making in those areas,” he said. And with retail sales picking up, O’Connell said, prospective tenants in mixed-use properties along Ventura Boulevard are concerned about a lack of parking for their customers. Brokers often have to allay these fears in order to lock in deals. Download the 2013 PROPERTY MANAGEMENT FIRMS list (pdf)