Commercial Property Managers: Tenant Retention Plans Are Beneficial in the Long Run
As part of a comprehensive commercial property management service, you must provide a quality tenant retention program and service. In simple terms, the good tenants in a property should be part of a retention strategy, while the other weak tenants should be part of a replacement strategy.
Here are some topics to help you set up a professional tenant retention plan in a managed retail or commercial property.
- Review all of the competing properties in the local area to understand their availability factors and tenant mix profiles. Look for the strengths and weaknesses in each of those properties. Understand how those properties can be related to the function of your property. Could those properties be attractive for their tenants to move into? Make sure you understand this fact.
- Check out your local city council regarding any upcoming real estate developments. Understand if any of those real estate developments could have an impact on the supply and demand relationship of occupied space. If new local real estate developments are coming up, check the timing of the property’s release and potential rents that could apply to attract new tenants. Expect those properties to offer great incentives as part of the property release strategy as well. Those properties could soften the effective market rent due to the incentives offered.
- Review your existing property for the tenancy mix and lease profiles. Identify soon-to-be-expired leases. These will typically be leases that will expire within the next two years. Those leases will be an immediate concern since you’ll need a strategy for handling lease expiration or replacement. Planning and preparation is everything.
- Divide your leases on your managed property into desirable and undesirable tenants. They are the desirable tenants you will encourage to stay in occupancy. You will need a standard set of rents and lease terms to apply as part of negotiating with existing tenants. You will need to establish market rents that apply to existing tenants. The market rents you choose must be carefully considered with respect to recoverable expenses and property expenses. You can choose gross or net market rents, but in each case, cost recovery must be optimized for the landlord.
- Undesirable tenants must be identified and monitored as they near the end of their lease. When your lease is less than 12 months away, you’ll need a replacement tenant strategy. That will include target market rent, incentive allowance, owner works, and permitted use.
- If your property contains one or more primary tenants, pay special attention to the existence of the primary tenant and how they interact with special tenants throughout the property. A productive and proactive anchor tenant will encourage clients to own the property and support the overall rental. A good anchor tenant helps the property succeed.
Here are some of the issues to consider as part of preparing your tenant retention strategy and tenancy mix plan. The landlord’s property ownership requirements must also be considered in balance with the decisions it makes regarding leases. The rent for the property will also be set taking into account the prevailing real estate market conditions in the local area.
