Who's Going to Capture Your Tenants' Expenditures?

Is Your Landlord Smarter Than Amazon.com? (Continued) ... This will be the last word (for now) on building web sites and their e-commerce potential. The question is, "Will landlords develop portals that successfully capture a meaningful share of expenditures for telecommunications and other goods and services?"

David Pickles, the developer of TenantTools.com, believes that owners do have the ability to derive meaningful revenue from e-commerce. Pickles' research suggests that office-building tenants spend about $65 per square foot per year on non-production goods and services. "Even a small slice of this $65/sf, which can typically be captured with little no outlay by the owner, is of enormous value to the owner. Consider the following very conservative example. Tenant spends $65/sf. Owner's receives a commission of 3%, or $1.95/yr. At a 10% cap, this translates into an increase of $19.50, or 16% -- assuming a property value of $120/sf [in Dallas]."

Chuck Smiler heard Michael Sheinkop of Equity Office describe Equity Office Access at PikeNet 2000. He writes, "Ask Michael Sheinkop where the money is. EOP is invested in both ARC and Broadband Office. Because of the private letter ruling they obtained from the IRS, they can take revenue as a percent of income... Essentially, they are renting the riser space on a percentage rent basis just like a retail landlord might rent space to a startup local tenant. Sheinkop answered a question in his presentation that had been puzzling me, which is why they were actually housing more than one of these capabilities in each building. He noted the overlap and the desirability of offering tenants competitive choice. Wow! The landlord gets a piece of gross whether the service provider makes money or not and creates a competitive environment for the tenants. Pretty nice." ... Keep your comments coming to me at ppike@pikenet.com.

News Flash: According to the WSJ (April 26) CB, Jones Lang LaSalle and Trammell Crow are creating an online purchasing alliance -- Octane. Last year the three bought more than $5 billion of goods and services to help manage office properties. There's more. "The group also will develop Web-based services to assist brokers with deals and Internet portals for the 1.2 billion square feet of office buildings they control." ... Stay tuned.

--Peter