"You cut your overhead, you go out and get business that other companies would like to have, and you keep checking your pulse of your customers," Hefner says. "We've simply got to cut out what we don't need. It's not unrealistic to think we can get 10% to 15% efficiencies here."

Hefner is quick to add the knife can cut too deep. "What we won't do is what some in corporate America did--cut overhead while taking our eye off the top line," he says, adding that corporations realized they had cut too much when revenues began falling off.

Despite his company's healthy 12.3% increase in funds from operations in 2000, Duke-Weeks has seen business slow in the early weeks of 2001. "There's no doubt there's been a slowdown in the velocity in the build-to-suit transactions," Hefner says. "The good news is the slowdown is off the frantic pace of '98 and '99. Transactions are still taking place, but at a slower pace." However, a slowdown could mean acquisition opportunities, Hefner notes.

Meanwhile, Great Lakes has hired a tenant relations manager to help boost occupancy levels, a main goal of the office REIT in a 2001 that promises to see "a soft landing in the Midwest. We're very closely monitoring occupancy levels," says Chairman and CEO Richard A. May. "We don't want to be too aggressive in pushing our rental rates because that could lead to lower profitability as we head into an economic slowdown."

The year will see a back-to-basics approach at retail REIT General Growth Properties Inc., which will employ a "cautious but opportunistic approach to acquisitions. 2001 will be the year profitability is sustained by good business sense and good business principles," CEO John Bucksbaum notes.

Instant Insights /

Focus Is on Expenses, Occupancy as Economy Slows Down

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