Abstract/Summary

The motivation for this research was to investigate whether both parties benefit if landlords treat tenants as valued customers. Are satisfied occupiers more likely to renew their lease and recommend the landlord to others? Does this, in turn, improve the financial performance of commercial properties? This research analyses data from 4500 interviews with occupiers of UK commercial property to determine which factors affect occupiers’ satisfaction with the property management service they receive. Various statistical techniques are employed, including Structural Equation Modelling, Ordinary Least Squares Regression and Logistic Regression. Results are presented for four sectors of commercial property – retailers in Shopping Centres, managers of retail warehouses on Retail Parks, occupiers of Office buildings, and occupiers of light industrial units on Industrial Estates. Although the precise determinants of occupiers’ overall satisfaction are found to differ between the sectors, the most important factor for all occupiers is satisfaction with property management. The key determinant of lease renewal intentions is the perception of receiving value-for-money for rent, whilst ‘Empathy’ and ‘Assurance’ are particularly relevant to occupiers’ willingness to recommend their landlord. Perception of receiving value for money is largely influenced by the reliability of the property management service. Following this part of the research, occupier satisfaction ratings and property returns are analysed for 273 properties over an 11-year period, to explore the relationship for the different sectors of commercial property. Positive correlations are found between the satisfaction of occupiers at a property and the risk-adjusted financial returns at that property, measured by reference to IPD benchmarks. The relationship is found to be particularly strong for the retail sector. It also appears stronger during the Global Financial Crisis, indicating that attention to satisfying the needs of occupiers might reduce void periods and maintain rental income when property supply exceeds demand.