As part of a comprehensive commercial property management service, you should be providing a quality tenant retention program and service. In simple terms, the good tenants in a property should be part of a retention strategy, whilst the other weaker tenants should be part of a replacement strategy.
Here are some issues to help you establish a professional tenant retention plan in a managed commercial or retail property.
- Review all the competing properties in the local area to understand their vacancy factors, and tenant mix profiles. Look for any strengths and weaknesses in each of those properties. Understand how those properties can relate to the function of your property. Could those properties be attracting your tenants to move? Make sure you understand this fact.
- Check out the local municipal council regards upcoming future property developments. Understand if any of those property developments could have impact on the supply and demand ratio for occupied space. If you do have new local property developments coming up, check out the timing of the property release, and the potential rentals that could apply to attract new tenants. Expect that those properties will also offer large incentives as part of the property release strategy. Those properties could soften the effective market rental due to incentives offered.
- Review your existing property as to tenancy mix and lease profiles. Identify those leases that will soon to expire. That will normally be leases to expire inside the next two years. Those leases will be of immediate concern given that you will need a strategy to handle the expiry and or tenancy replacement. Planning and preparation is everything.
- Split your tenancies in your managed property into desirable and undesirable tenants. It is the desirable tenants that you will be encouraging to remain in occupancy. You will need a standard set of rentals and lease conditions to apply as part of negotiating with existing tenants. You will need to set market rentals that apply to existing tenants. The market rentals that you choose should be carefully considered with regard to recoverable outgoings and property expenses. You may choose gross or net market rentals but in each case the recovery of outgoings needs to be optimized for the landlord.
- The undesirable tenants should be identified and monitored as they get closer to the end of their lease. When the expiry of the lease is less than 12 months away, you will need a replacement tenant strategy. That will include target market rental, incentive allowance, landlord works, and permitted use.
- If your property contains one or more anchor tenants, pay special attention to the existence of the anchor tenant and how they are interacting with the specialty tenants across the property. A productive and proactive anchor tenant will encourage customers to the property and underpin the rental overall. A good anchor tenant helps the property to be successful.
So these are some of the issues to consider as part of preparing for your tenant retention strategy and tenancy mix plan. The property ownership requirements of the landlord should also be considered in balance to the decisions that you make with regard to leases. The rental for the property will also be set with relevance to the prevailing property market conditions through the local area.