Occupier Satisfaction Study 2009

Occupiers recognise that gradual changes have been taking place within the industry. They believe that the recession has prompted property owners to respond to the changing needs of occupiers, resulting in greater lease flexibility and responsiveness. However, many occupiers are keen to see the pace of change increase even faster.

Improvement in areas such as lease flexibility and responsiveness, however, is offset by increasing concerns about value for money. Occupiers identify cost cutting as their top priority. They want property owners to show empathy for their concerns, listen to their needs and respond swiftly.

Service charges are considered poor value by half of occupiers. Occupiers also feel that progress towards improving transparency is not happening quickly enough.

Flexibility

Many occupiers believe that market conditions are forcing property suppliers to adopt a more flexible approach to leasing. However, some feel that the property industry is not responding quickly enough, while others perceive it not to be responding at all. Occupiers would like greater flexibility, and a more empathetic approach from property owners.

‘The current state of the market has made landlords more flexible. We have seen more monthly rents and the increased availability of break clauses.’

‘Flexibility is changing because there is now more supply than demand. Landlords can no longer dictate as they did before.’

‘I was expecting landlords to become a little more flexible in the current economic situation but because they are under financial pressure they are becoming less flexible and getting tougher.’

Occupiers have fewer opportunities to assign and sub-let in the current market. Landlords are perceived to be unhelpful, the requirements on passing rent are perceived to be restrictive and covenant strength is perceived to be an impediment. The process of assigning and sub-letting is considered frustrating, timely and costly.

‘Landlords need to be more flexible about sub-letting at less than the passing rent. They need to face the market reality.’

‘I think this will get worse as landlords get even more paranoid about covenants and more awkward about who you can assign to.’

‘Landlords now insist on authorised guarantees in order to sub-let and this makes it harder for us to find the appropriate occupiers.’

Some occupiers believe that the property industry is archaic and has its head in the sand. They believe that the industry needs to adopt a more modern, more realistic approach. There is concern that an upturn in the economic climate will result in a return to less favourable, inflexible terms.

‘The system is really designed, only for the landlord. Tenants are second class citizens in the equation. They have been slightly more flexible in the last 12 months, but as soon as the recession is over that will change again.’

‘I don't think that mentally landlords are where they should be. Many of them are not modernising sufficiently.’

‘Flexibility has improved, but the property community haven't yet moved boldly from their dogged views. They are not yet really creative.’

‘The system is archaic, there should be monthly rents and the end of upward only rent reviews.’

‘We have seen increased flexibility of leases because landlords are desperate, not because they have become more broad minded.’

Greater compliance with the Lease Code, but some reluctance and inconsistency

Two in every five occupiers believe that the property industry is moving towards greater compliance with the Lease Code. Larger property owners are perceived to be more likely to comply than smaller independent property owners. Others, however, feel that the property industry is reluctant to comply, paying lip service to the Code.

‘Landlords are taking the Code on board. A couple of times at the landlord's instigation they've done things without being asked. Before we'd have to drive them.’

‘The large property owners do comply but the small independent companies, who form the bulk of the landlords in this country, do not comply and this is a problem. I feel that the Code should become statutory.’

‘In the London area and the major cities there are signs that a large proportion of landlords are signing up.’

‘They might have signed up to it but they are not paying it any attention.’

Partnership

Around a third of occupiers perceive that there has been an improvement in communication since the 2008 study, but others would like more face to face contact and more relationship building. Some occupiers perceive that their relationship with the property industry is adversarial, and they would like property owners to adopt a modern approach to relationships.

‘More contact from landlords would be good. When we do sit down with a landlord it can really improve the relationship.’

‘It is not a partnership in the UK in the way we are led to believe it is in mainland Europe. The landlord's agenda is to maximise returns for investors.’

‘There's a big divide between us and the "men in suits".’

‘I would say that the landlord/tenant relationship is confrontational. Other business relationships are significantly different. Normal business to business relationships are amicable and you can negotiate.’

There is recognition that certain sectors within the industry are showing a greater understanding of occupiers’ business needs, though some feel that this is market driven. Many occupiers would like more contact with property owners, and for them to show more interest, empathy and understanding. The institutional landlords are perceived to be leading the way in raising customer service standards.

‘The property industry has had to become more flexible and attuned to individual requirements because the market place is more difficult and people have to try harder.’

‘The impact of the current climate is that we're under more pressure to save costs and there has been no response from the property industry.’

‘There is little, if any, interest in understanding our needs. They just don't care.’

Over a third of occupiers feel valued by the property industry, with some saying that they now feel more valued, attributing this improvement in large part to the recession. However, many occupiers feel that property owners do not value their custom, with some suggesting that the property industry continues to adopt an overly short-term approach to relationship building.

‘I think that other supply chains are more likely to look long-term at the relationship. In property, we are viewed as cash flow providers and this makes me feel that I’m not valued as a customer.’

‘Though there is more flexibility it has been on a needs-must basis, not because landlords have genuinely wanted to become more flexible. It's a short-term strategy only.’

‘The style of communication is too sales-like. "We can do this for you, we can do that", but always with a view to making money not genuinely listening to our needs.’

‘When they're courting us we are valued. When we've signed, we're not.’

The property industry has a long way to go to catch up with other service industries. Relatively few occupiers feel that their relationship with the property industry is closer than their relationship with other suppliers. Many believe that with other service industries there is more contact, greater customer focus and more room for negotiation.

‘My relationship with my suppliers is far better because I have more contact with them. I am dealing with them everyday and as a result it's far more personal.’

‘With other business relationships there is more interaction and more customer care. In the property industry it's a one way street.’

‘Virtually all other relationships are better. There's a mediaeval structure to the relationship. It needs modernising.’

Responsiveness

There has been an improvement in responsiveness, with some occupiers attributing this to the greater effort being made by property owners and managing agents in the current economic climate. However, occupiers perceive inconsistency in the standard of responsiveness and customer care provided by the industry, and many mention having to chase to get things done. Occupiers express frustration over the lack of contact, the lack of urgency and the lack of interest shown by property owners. In particular they would like the industry to ease the approvals process.

‘Owners are more worried about losing their tenants so responsiveness has improved.’

‘Responsiveness is very mixed, depending on the landlord. There are examples of both institutional and private landlords that could be a lot more responsive to requests.’

‘We get a better response when we're dealing directly with landlords as opposed to managing agents.’

‘Approvals for alterations are dealt with very slowly on the basis that the landlord is doing us a favour. They don't understand the impact this has on our business.’

There is considerable variation in the standard of facilities services provided by the industry. Just under a third of occupiers are satisfied with the services provided, but many find the services expensive. Some say that services are over specified. Many would like to receive better service standards and better value for money.

‘They go overboard getting good services, with no incentive to keep costs down.’

‘Property suppliers need to offer more complex, bespoke facilities packages.’

‘We are entering a period where landlords are trying to keep costs down in shopping centres and this will have to get better over the next few months. They need to make sure that they get more firms on board that can provide value for money for occupiers.’

Satisfaction with professionals, but occupiers want a more efficient and cost-effective service

Almost half of the occupiers interviewed are satisfied with standard of service they receive from professionals acting on behalf of the property industry, and there is a perception amongst some that the economic downturn has stimulated better service. However, others believe that professionals should offer a more efficient, more cost-effective and more flexible service to occupiers.

‘Landlords employ well-known, reputable professionals; we try to ensure we engage even better ones!’

‘Historically they have been difficult and intransigent, but now they are behaving in a more flexible manner. It's a function of supply and demand.’

‘Solicitors tend to be slow and expensive. My feeling is that they try to make work for themselves because there is actually so little work around.’

Around a quarter of occupiers believe that the timeliness of management information has improved. However, others report that timeliness varies considerably across the industry. Some feel frustrated over the delays in reconciliation, and there is a perception that some managing agents in particular provide a poor service.

‘Preparation of budgets is improving, but there's still a massive delay between end of year and service charge reconciliations. There's no reason, with modern technology, why they can't be much quicker.’

‘The Code says we have to be given a draft budget at least two months before the start of the financial year, but I have just received a six-line draft budget saying there will be a 17% increase, with no apology and no breakdown.’

‘There are often mistakes and I often wonder if landlords realise what poor service their agents are giving.’

Sustainability

‘Suddenly everyone has woken up to the importance of sustainability. Last year, people knew about it, now they KNOW about it. It's in mission statements.’

‘I have been looking at a number of new builds and everyone is much more aware of the energy performance of the building and how environmentally friendly the construction is.’

‘We've seen EPCs come in. There is a much greater awareness and desire in the property industry for environmental performance.’

‘Things that save money and are easy are done. Things with a long term pay back are not considered.’

‘Private sector landlords aren't particularly interested in making the investment and I don't think there's any push from tenants either. In the current economic climate these marginal issues are going to be excluded.’

Value for money

‘The market is beginning to catch up with the economic reality. Rents generally are fairer because they are market driven and negotiable.’

‘Our rent has been steadily climbing whilst the High Street is steadily emptying!’

‘They haven't taken any notice of the current economic climate. The landlord wants a 37% increase in rent which is ridiculous.’

‘Everyone has properties that are over-rented. Rent reviews don't allow reductions so you are stuck with a lease for five or ten years with no downward movement.’

Occupiers believe that property costs in the UK are high in comparison to costs abroad, and therefore offer poor value for money. Property costs in London are perceived to be particularly high.

‘The UK is more expensive than elsewhere in the world for rent and service charge.’

‘It does depend on the location. In London they are asking for trouble with the level of rents being asked, it is just greed.’

Whilst a few occupiers recognise that some of the larger landlords have made a commitment to reduce costs, occupiers generally do not believe that they are receiving good value for money for the service charge. They would like property suppliers to place greater emphasis on reducing costs, progress with transparency and consult with them more. Some believe that the procurement process should be improved, while others feel that the service charge should not be profit-making.

‘The Prudential are operating a trial to reduce service charge by 20% so we will be interested to see how this goes.’

‘There is concern that service charges are not transparent and for that reason there is always going to be tension.’

‘Service charges are a big cost. I'd like to see more attention paid to bringing them down and getting better value for money by, for instance, allowing occupiers some say in the selecting of competitive tenders.’

‘There is no incentive for managing agents to reduce costs, it's usually the opposite. It's in their interests to push as high as they can. They are not incentivised to attack costs.’

Just under a third of occupiers are satisfied with industry compliance with the Service Charge Code, with some reporting an improvement, particularly amongst larger landlords. However, many feel that property owners are not complying sufficiently, and that the Code lacks teeth. Service charge transparency remains a major concern for occupiers.

‘Managing agents are becoming more aware of the need to adhere to the Code. It's an improving scenario, it's an improving trend.’

‘The larger landlords seek to comply. A lot of the smaller ones, and the managing agents too, seem to have no idea.’

‘Most landlords are reluctant to comply, they will at a push. We've recently appointed a service charge consultant to look into two centres where we have major concerns.’

‘I don't rate the RICS Code; it's too lightweight and lacks teeth. It allows some of the poor behaviour to continue.’

‘There is nowhere near enough transparency or accountability when it comes to service charges. We should get full access to final accounts but we don't, we only get access to the summary accounts which can be manipulated.’

UK OCCUPIER SATISFACTION INDEX 2009	PROPERTY INDUSTRY ALLIANCE AND CORENET GLOBAL UK
Home : Qualitative Findings : What occupiers want

What do Occupiers want from the Property Industry in 2009?

Flexibility

Partnership

Responsiveness

Sustainability

Value for money