Landlords Can't Forget Their Customers

Despite all of this grim news, landlords need to persevere and remember that they need to serve the tenants that are their customers. The lesson to be gleaned from the Sunday General Session at the Building Owners and Managers Assoc.'s annual conference is that building owners must concentrate on service.

"That's where the game is going to be won and lost," said John Akridge, chairman of Washington, DC-based real estate services firm Akridge, speaking here at the town hall discussion titled, "Searching for Value in All the Right Places."

One of the best ways to accomplish this is open communication with tenants. Transparency in this environment can go a long way. "Be proactive," said Patrick Duncan, chairman and chief executive officer of USAA Real Estate, based in San Antonio. "Getting in front of the tenant is very helpful."

To that end, working with other entities, such as brokerage firms, can help asset owners as well. "Today the broker is your friend," said William Hankosky, chairman, president and chief executive officer of Malvern, PA-based Liberty Property Trust. "They are starving."

Continuing education and staying on top of tenants' changing needs won't hurt either. "This is the inflection point, and everyone's got to change their skills," said Perry Schonfeld, a principal at LBA Realty LLC, of Los Angeles. "A whole lot of new people are going to enter this industry. The people who have been here a while need to change."

According to Hankowsky, the future is more attuned to management than development. "Development is going to be frozen for a long time. The math is pretty brutal," he said, adding that the industry will likely see some "massive defaults."

On the bright side, multifamily assets seem like a good bet right now. Akridge is getting into that space. "The rental stock has not been built up very well," the company's chairman says. Hankowsky likes mixed-use industrial right now.

But whatever the property, there will always be buildings and the need for good operators, the panelists agreed. "This is not an evaporating asset," Akridge said. "These buildings are going to be here, and they need people to operate them. The owners and lenders of these properties need us more than ever."