Leveraging Efficiency to Avoid Tenant Churn

There’s a strong correlation between energy efficiency and tenant retention. If you think about the benefits of energy efficiency from a non-financial perspective, it makes perfect sense that an efficient building would yield happy tenants – and ones that would be less eager to get out of their leases. Efficient buildings are simply more comfortable and attractive. If the tenants are paying their share of the utility bill, then there’s also a financial benefit that they would likely lose by moving to a less efficient building.

Today, I’d like to share an article with you that succinctly and effectively conveys the value of tenant retention. This article, written in 1992 by Richard C. Mallory and Anton N. Natsis, is titled “Tenant Retention in the ‘90s.” At the time this was written, the real estate business was so terrible that the mantra of developers was, “Stay Alive 'Til ‘95.” 1992 was right in that real estate recession and the cost of tenant turnover at that time was truly shocking.

According to the article, you could actually get the same return from an existing tenant receiving 95 cents per rentable square foot per month as you could from a new tenant paying $2.35 for the same square foot per month. Why? Because there were so many costs involved with tenant turnover.

The real estate climate has obviously changed in the last twenty years; however, tenant turnover is still very costly for a building owner or landlord. If you’re selling efficiency products in the commercial real estate environment, be sure to drive home this idea – and back it up with facts – in your value proposition.

Click HERE to read the article.

 

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