Tenant Satisfaction and Commercial Building Performance

In this study, we examine the role of tenant satisfaction in predicting tenant leasing decisions and evaluate the financial performance of commercial properties. We compile a unique dataset, combining a widely used tenant satisfaction survey on office tenants with rental contracts to estimate how tenant satisfaction shapes demand for office space. We document that a 1-point increase in tenant satisfaction (on a Likert scale from 1 to 5) is associated with an 8.6% greater willingness to renew the lease; an 11.5% higher likelihood to recommend the property to prospective tenants; and, a 23.1% lower probability of moving out of the property. Importantly, the financial performance of assets is also affected by tenant satisfaction. A 10% higher level of satisfaction with the building among the tenants is associated with a 0.2% higher growth in gross rent, a 0.9% higher growth in effective gross rent, and a 0.3% drop in the vacancy rate. Our research has implications for customer relationship management across the real estate sector, and shows the potential effectiveness of incorporating surveys in the monitoring and prediction of commercial real estate financial performance.