Tenant Rentention Plans and Strategies for Commercial and Retail Real Estate

When you work in commercial real estate as a broker or agent, the fact of the matter is that you are serving a number of clients and helping them through the challenges of property performance and liquidity.   Here are some tips from our Newsletter for Commercial Real Estate Agents.

If you are managing a lot of properties at the same time, it becomes a real challenge to administer the issues related to firstly performance and secondly the liquidity in all the different and diverse properties.  Every property owner will have different rules and regulations relating to their lease management, cash flow, and approvals process.

To define both of these important matters:

• Property performance is in how you optimise the result the property.  Performance can be a number of different things including income, reduced expenditure, tenant mix, tenant retention, and market rental.
• The liquidity of the property is the ability to sell it at any particular point in time and the properties attractiveness to the market in general.  Throughout the given year, liquidity will vary given the pressures of the economy, and the rates of enquiry that are coming in from buyers.

Today we have a property market that is under some pressure.  The global economy is creating some difficulty for many local businesses.  That has an immediate flow through to the tenancies in our managed properties.  This is where the leasing manager or property manager can provide a high value service to their clients through a tenant retention plan.

The tenant retention plan is designed to identify the critical tenants within each and every property, and then manage them to optimise rental income and minimize vacancy risk.  Experienced property managers do this very well and will usually have a tenant retention plan as part of their toolbox of services.

To implement a simple tenant retention plan the following rules can be adopted:

1. Take the individual property and look at all the leases for each and every particular tenancy.  Identify the critical dates that will have impact through the term of the leases and look for those dates that will be related to rent review, option, or lease expiry.
2. Given these critical dates, look at the next period of 24 months and track any dates that are inside the ongoing 24 month timeframe.  The dates related to the exercising of option, or the negotiation of lease expiry will require action as early as possible.  There is nothing wrong with negotiating early in each case.
3. Some tenants within the property will be regarded as more important and critical to the tenant mix.  Any negotiations with those tenants should be optimised through attractive terms and conditions that the tenant will find hard to refuse.  Any new lease can pick up the growth of the rent for the landlord subject to a strategy and the required holding strategy.
4. If your property has any anchor tenants, those tenants should be closely monitored for business stability and interaction within the property.  Successful anchor tenants create an immediate flow through to all other tenants and give confidence to the property function and identity.  Support your anchor tenants at each and every opportunity.

Attention to the tenancy mix and the retention plan will help you through difficult times with the performance of a property.  When well maintained and managed, a property will always be saleable and attractive as an investment if a sale has to occur.  Property investors and buyers like to see a stable tenancy mix supported by professional lease and property management.

Need more help with your tenancy mix plans?  You can join our Newsletter for Commercial Agents right here.