The Importance of Relationship Management in Commercial Real Estate

This week, we are joined by Jeremy, an experienced Chartered Surveyor with over 25 years experience in commercial real estate. 

We discuss the concept of asset management, how to add value to your property, and what a good management company should be doing for you in relation to your commercial tenants. Jeremy comments on relationship management and how important it is to communicate clearly between tenants and landlords. 

He shares his opinion of whether or not the market has been impacted by the latest remote working trends, and the potential impact on city town centers should local businesses choose to operate fully remotely. 

If you would like to learn more about communications between landlords and tenants and what is really important to consider when looking at commercial real estate, join us for this week’s discussion.

As always, we love to hear your feedback and comments. Connect with us on social media or send us an email at ask@londonproperty.co.uk. 

At London Property, we use our experience, expertise, and deep-rooted relationships to connect super-prime property owners and tenants with hand-picked experts. We also aim to inform and entertain Londoners through content across multiple platforms.


Interviewer - Farnaz Fazaipour | Property Investment & Ownership

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Transcript

Unknown Speaker  0:00  
London Property - home of super prime, where you can find informative educational and entertaining content, covering all aspects of property.

Farnaz Fazaipour  0:11  
Hello, and welcome to London Property, the home of super prime. I'm your host Farnaz Fazaipour. And today we're in conversation with Jeremy Grey, who is an expert in commercial real estate. And you're going to educate us on various aspects of this. Welcome to the show.

Unknown Speaker  0:27  
Thank you. That's very kind of you. I like to think I could qualify as a as an expert. But let's see, shall we with your question?

Farnaz Fazaipour  0:35  
So Jeremy, tell us a little bit about yourself and how we got to here today.

Unknown Speaker  0:40  
Okay, I'm a chartered surveyor qualified in 1988. I've worked for James Andrew for 25 years, I've worked up from a relative junior to now the managing director. And I look after the commercial asset management team here. And hopefully, I can teach you a little bit about that aspect of the business.

Farnaz Fazaipour  1:02  
Let's start with what is asset management with respect to commercial real estate,

Unknown Speaker  1:06  
We look after people's real estate for them. So we take a building that they've bought, and we try and keep it occupied and income producing for as long as possible. And we maintain it. And we talk to the tenants on a weekly, monthly, yearly basis, make sure that we can satisfy their needs to keep the building occupied. That's the most important thing. A commercial asset is only valuable if it's got an income stream.

Farnaz Fazaipour  1:32  
Well, obviously, that's an aspect of it. But what else goes into managing these assets? 

Unknown Speaker  1:39  
Well, we produce well, we don't actually produce anything we tend to get the cleaners in, we get the security in, we sought out the utility supplies, the heating the lighting, we don't look after the inside of the space we keep, we look after the common areas and the outside, very similar to residential property management. What what happens inside the building is the tenants responsibility. The landlord looks after the fabric. So we look after that. And we put all the contractors in that need to do that. Making sure we comply with all the health and safety the fire regs everything.

Farnaz Fazaipour  2:22  
So there's a practical sides of of asset management, but as a as an agency or consultancy, that is quite hands on and very much about personal relationships. I suppose you get as as deeply involved as they required you get involved on financial sides, legal size, you know, how long is that piece of thread string?

Unknown Speaker  2:45  
I think it depends on the client. But we have clients where we have their hand through the whole process for we find them the tenants to occupy the building, we get the lawyers working on the staff, we make sure that everything runs smoothly, we report to them we travel to see them. We generally make sure the whole legal process text and then once the tenants in our job is to be their best friend, and make sure that they want to be in the building. So we generally go and see them periodically, we sit down, we talk to them business going well business going badly, we can then report back to our clients and say, Guys, if there's a problem, your tenant isn't going to be able to pay the rent, they're not doing the business. So we have to know exactly what's happening on the ground. We also do market research. So we make sure that we know what's happening in the marketplace. So we can tell when rents are going up, rents are coming down. Obviously, we read the papers like everybody else we know when recessions are on. And we try and relay that to the client so that they can make the right decisions as to what to do with their properties.

Farnaz Fazaipour  4:01  
And do you think the fundamentals have remained the same since you began or do you think that's changed?

Unknown Speaker  4:06  
The emphasis has changed. So we the fundamentals are the same, we got to keep the buildings occupied. But the emphasis is on different things. It's very much more personal relationships now. And the tenants are very keen on sustainability and those aspects. Everyone wants their building to be the greenest building in the country. They want to supply the electricity from green sources. We've got to provide them with recycling, all of those things, things we never thought about when I started in the industry. So we insulate buildings, double glazed them, make sure the air quality is right. We wouldn't have dreamt of half those things back in the 80s when I started in this business.

Farnaz Fazaipour  4:55  
And others the main issues that property owners and tenants occupies facing or is there more?

Unknown Speaker  5:02  
I think like, the sustainability piece is the number one thing. And I think that when you're marketing a building, now you've got to have the best in class building. People don't want the second hand stock, they want the best space because it attracts the best people. And now we're in this throwback to the work from home, getting people back to the office can only be done by delivering the best office space, if people are coming in and going, Wow, this is fantastic. They're going to want to come to work. If they come in and get us the same old place we were in 20 years ago, it's not got the same cache. And the you know, the, there's no attraction to keep coming into the office.

Farnaz Fazaipour  5:45  
So it's a little bit parallel to what's going on in the residential market whereby people just won't accept anything but the best quality. And you know, in commercial, I guess it's the same for I'm going to come to work, and you're going to do my laundry down in the lobby, and I can go to the gym here. And there's a room where I'm getting a massage, I'm going to come to work a lot more often.

Unknown Speaker  6:04  
Correct, absolutely. You know, those add on services are what everybody's after. I mean, it's interesting, we actually had a request from a member of staff, do we have showers in the building, because with the energy crisis, they wanted to share in the office, rather than use their own hot water at home, you know, those sorts of things are going to sort of start coming into their own. As we move into this energy crisis.

Farnaz Fazaipour  6:26  
That is actually something that I had never thought about. I mean, I thought about the fact that giving our age, we're here, but since since 2007, when they had those attacks of the tube, I almost noticed overnight, everybody was on their bicycles. Yes. And then suddenly, it's like, hang on, is this just me? Or is that loads of people cycling? And then that's why I thought people want to showers. But now you can add another layer to that.

Unknown Speaker  6:49  
Correct? Correct. Definitely, that that is a whole new layer. And it's the electric charges, which we see banks have power banks on desks now, where people are charging up their power banks. Young people can't afford to live anymore. So they're using the office as a hub for other things.

Farnaz Fazaipour  7:09  
So actually, these kinds of things are going to play a part in attracting people back to the workspace. Yeah, definitely. Where do you see the problems or the future when it comes to commercial real estate?

Unknown Speaker  7:22  
Well, the real big problem we got is the sustainability piece, our building stock is old, it was net with most of our listed buildings, you cannot make them comply with the regulations as they are, it's going to be incredibly difficult. And all landlords are facing the same thing, we're going to have to hit a BP C by 2030. That is incredibly difficult to do with an occupied building. And it's going to involve a huge amount of investment. And I don't know where that money is coming from today. If you go to the bank and want to borrow money for a development, you're going to find it really difficult because the interest rate is gone through the roof after the events of the last few weeks.

Farnaz Fazaipour  8:06  
And how would you advise your clients to try and become future proof.

Unknown Speaker  8:11  
We have been writing reports to clients about these minimum energy efficiency standards for the last five years saying we need to focus on this, we need to put in place the plans, you don't have to do it all at once. You can slowly slowly do these things to build up your layers. But there are things that when you get to a building of 30 years old, you're going to have to go almost back to the framework. You can't reuse the pipe work, you got to replace it, the drainage and all of those things. They're all old, the lift shafts will be okay. But the lift machinery, it's old, the air conditioning plant, we need different types of air conditioning now to what we needed back in the 80s and 90s. The outside air temperature this summer was absolutely unbelievable. You know, we couldn't we couldn't believe that we were dealing with 40 degree temperatures. That's unheard of in London. And in order to actually deal with that outside air temperature, you've got to lessen the air, the fresh air coming into the building. That's not right, either. And, you know, but we've got to come up with a way of dealing with these temperatures in the future.

Farnaz Fazaipour  9:24  
That's a very good point. Are you finding that the office spaces that exist are being used by less people? Or are you finding that people are actually taking less space to begin with?

Unknown Speaker  9:40  
We have both. So we have tenants that are looking to reduce their footprint from 150,000 square foot down to 100,000 square foot, whether using the work from home model as a soak up of that extra space. We're also seeing clients that are saying well actually, we as staff coming in from the regions, we can put regional hubs in, and then just rent a meeting hub with a very small number of desks around it. So that then when they want to meeting with clients, they come into town, the rest of the time they work at the hubs, and then the the other the traders, the stockbrokers, they still want the same amount of space, they might split the desks out slightly, but they want the same amount of space.

Farnaz Fazaipour  10:24  
The things to watch out for in the future are really mainly sustainability related.

Unknown Speaker  10:30  
I think sustainability. I mean, we've got to get around this work from home, we got to change our town centres from a place you've just come in to work. And if we don't move back to a five day week, I think we're going to lose so many of our shops, cafes, bars, restaurants, they can't survive on three days a week, they really can't, I mean, it's not just the rental, would you work for just three days a week as person working in a cafe? You can't afford to London's too expensive, or, in fact, any major city is too expensive. And what we really don't want is it just becoming a nighttime economy, because that means it's even less attractive for the people that do come to work. So I think we got to find this balance where people come back to work more often than they are. And I don't think we should necessarily go for just Friday not being a workday. When we have a workforce we need to say right? Well, some of you are going to take Monday, some of you Tuesday, some of you Wednesday, some of you thirsty some of you, because then we actually end up with an even spread of people coming into town and even spreader people for the shops and cafes, they can cater for that. What they can't cater for is that completely unknown. Today, there might be nobody coming into town the next day, we're up to the old levels that we were at pre 2019 really difficult.

Farnaz Fazaipour  11:48  
And before we say thank you, and goodbye to you, can you tell us when your asset managing, you could do that, both for the landlord and tenant because sometimes tenants take on these leases that are fully responsible, you have to educate me.

Unknown Speaker  12:06  
Asset Management is normally done for the landlord, facilities management where we would manage the internal space can be done for the tenant, and a tenant may take too much space and decide to undelete space, then they might need a kind of asset management. But it's a it's a lower level. They're not dealing with the bricks and mortar in the same way. So I would say it's mostly for landlords. But tenants may wish to come along and ask us can we get rid of surplus space? Can we look after the surplus space for them and make sure that the tenant that they put in is going to pay the rent, they're going to maintain the building properly, and generally comply with their lease terms? Because if they breached their lease, then they're going to find themselves without promises to operate from.

Farnaz Fazaipour  12:56  
If somebody required your services, and they wanted you to onboard them. What is that process look like? So when you go into a building, and you say, Okay, we need to look after this building. So we need to know X, Y, and Zed first.

Unknown Speaker  13:09  
So we have a shopping list of things information that we require, we have a booklet that we provide them with that tells them what we need. And if they don't have it, how we can deliver that package to them, so that they do have it for the future. And it's reasonably straightforward stuff. We need copy leases, title deeds, we have a shopping list of things that we yet we ask people for, and we provide that to them what they can't provide, we'll deliver them with a shopping list of how we deliver that. There are services, we obviously don't deliver ourselves, but we know who can deliver them. And we will tell them that this is the approximate cost and provide them with quotations to get that done. It's a reasonably straightforward process. Like everybody else, we have to go through the anti money laundering situations that we have to have copy passports and everything else. I don't think anybody can get away with not doing that anymore. But once you pass that level, we can take over reasonably quickly.

Farnaz Fazaipour  14:16  
So one final question. I know I said we're just about to say thank you and goodbye. Oh, one final question. What have you seen as trends of things that office buildings can offer that are unusual, that is attracting the workers back to work?

Unknown Speaker  14:36  
Well, interestingly, we went round 22, Bishopsgate, with Stuart Lipton. That building operates on a completely touch free basis. It recognises you when you come in the building. If you're a member of staff, and when you walk up to the lift, it knows what floor you're going to it's so clever. Maybe that's the way forward this But the only problem with that is if there's a power cut. What happens? If the I suppose the lifts aren't going to work anyway by now.

Farnaz Fazaipour  15:08  
because you're asset managing, you've already put a spare generator somewhere, right? Of course.

Unknown Speaker  15:12  
of course, several generators that run the lifts. Yeah. But it is that kind of thing. I think the technology that we can put into buildings today make things so different to how it used to be, you know, but I don't think that we should go away from having a concierge on the desk, because that person provides that human interaction, the very thing we were talking about that you don't get when you work from home, human contact.

Farnaz Fazaipour  15:41  
Yes, well, and all the mentoring that goes with that. So thank you so much for talking to us and giving us a glimpse into the world of your asset management services. And should any of our listeners need your help? Then they will know where to go and find you in our access directory.

Unknown Speaker  15:57  
So we look forward to hearing from you.

Farnaz Fazaipour  15:59  
Thank you very much. Thank you for listening. And in order to find experts like Jeremy, head over to our experts directory where you can get in contact with them directly and ask your questions and engage.

Unknown Speaker  16:10  
Thanks for listening to the London property podcast, head over to London property.co.uk And subscribe to our newsletter to receive latest updates.