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.
In commercial real estate agency, the property management division is a key part of the agency performance. In real terms the successful division can bring in significant and stable income to the agency on a regular monthly basis. That being said, a good commercial or retail property manager is highly skilled and should be selected for the property management role based on key performance criteria and hands on experience.
Far too many real estate agencies have average or poor performing property managers. In real terms this is a real threat to the stability of the division income, and the quality of the service provided to the landlords. Unskilled property managers do not last in commercial or retail property; it’s that simple.
Cadets and Training Processes
There is a place for ‘cadets’ that learn the roles and the skills of complex property management. The process itself takes a couple of years during which time the person should be exposed to all property types and situations under the guidance of an experienced manager.
So what does a good commercial or retail property manager look like and what skills will they have? To a large degree they will need to bring to you as agency principal, the skills needed for the managed property type and local area.
If the property manager does not know much about managing the required property type, then do not let them manage it; the errors made can destroy your relationship with the landlord and ultimately the management appointment.
Different Skill Sets
There is a large difference in management style and skill required between retail, office, and industrial property; industrial property being the easiest to manage and retail being the most intense and difficult. The skills required in a retail property manager is diverse and deep; they are the best in the industry.
Generally speaking, retail shopping centre managers today are also the busiest in the industry. The role is very hands on and unrelenting in intensity. Here are some core skills of a well skilled and placed property manager:
- The ability to read and understand leases and occupancy documentation for all property types.
- The marketing of the property to the local community and customers will be a factor that is critical to retail property. It this way sales are encouraged for the tenants; this underpins the rental for the landlord.
- Sound skills in financial analysis and reconciliation so a property performance tracking process can be set up for all managed properties.
- Good communication skills are essential. Property managers must be accurate, confident, and decisive, in keeping with laws, legislation, and the instructions of the clients that they act for.
- Attention to detail is required in all property negotiations and tenancy matters. Without good records and accurate information, the ‘wheels fall off’ the division and its services. Landlords soon see through mistakes and inaccuracy.
- Marketing of vacancies happens all the time in larger properties; importantly the frequency of vacant space is minimised and the times without a tenant are lessened.
- Income optimisation and expenditure controls are at the centre of property financial performance. The manager must know what is happening and why in all managed properties, when it comes to the cash flow and reporting to the landlord.
- All reporting processes and communications to the landlords we act for today must be detailed and accurate. Property compliance and maintenance, energy consumption, lease and vacancy matters, tenant and landlord lease covenants, outgoings performance, and environmental matters are just some of the factors that are controlled and reported on each month.
- Computer technology needs are increasing in the available property performance and management systems today. The property manager must be familiar with, and comfortable learning more about all the software and computer based technology that is used in the industry.
- Work hard and with focus each and every day. The hours that a manager will put in the job are long and intense; however they are the experts and should recognise the value that they bring to the job.
- Maintenance decisions and controls are made daily and should encompass the instructions of the client and the laws of property ownership and function. The manager needs to know what is required and should competently handle the decisions and communications with contractors, tenants, landlords, and fellow employees.
So how do you find one of these highly skilled people? They are out there and should be carefully sourced. They will be an asset to your agency function and performance.