When you manage or lease commercial or retail investment property, the threat of vacancy is ever present. In this business environment tenants are under a high degree of pressure and are looking for savings and adjustments to help them with ongoing occupancy. Aggressive rentals and unrealistic landlords will pressure a tenant to move.
Regardless of how special the landlord thinks their property is in today’s market, the vacancy factor will have a major impact. Loss of rent also includes other costs like outgoings, lease incentives, documentation costs, and commissions for letting the premises.
This then says that any vacancy should be avoided if the tenant and their business are of benefit to the property. Landlords should be informed of the supply and demand factors that apply in their local area together with the levels of rental that a new lease requires to be attractive to the tenants of today.
When times are tough in the property market it is wise to establish a tenant retention plan to direct and focus the lease occupancy in the property towards stability. The parts of the retention plan are similar to the following (and you can add some more relative to your local property market and the requirements of the landlord).
- Lease expiry profile
- Lease rent review profile
- Benchmarks on market rental
- Incentive profiles that can be used in any new lease
- Competing properties that threaten your tenant mix and could attract your tenants to move
- Supply and demand for space to lease in the property market
- New property developments under consideration
- Anchor tenant details that impact the property tenant mix
- Tenants by grouping in the tenant mix (food, fashion, men’s wear, Shoes, Ladies fashion, sportswear, discount goods, etc.)
- Sale figures on a MAT basis to track the best retailers and the best products in the property
- Demographics of the shopper and the shopping patterns
These factors can be incorporated into your retention plan and help the negotiations that are made with your sitting tenants today. Your successful sitting tenants are of high value to the property income and overall value.
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