Selecting a tenant in a commercial or retail property can be a challenge. Vacancies can occur within the property from time to time throughout the year. Some of those vacancies will be expected, whilst others will be the result of a tenancy default.
When you manage or lease a commercial or retail property, it is wise to incorporate a lease management and tenancy mix strategy into the property business plan for the property each year. The lease management plan will help you when it comes to finding and negotiating with new tenants to the property.
Given that each particular property is unique, and every landlord has special priorities relating to their property investment, the selection of a tenant to fill a vacancy is quite important. Here are some tips that can be applied to selecting a new tenant for your commercial or retail property:
- In an ideal world, you want the tenant to be of good quality and high profile. The tenant of this type will bring stability and benefits to the overall tenancy mix. Other tenants in the property can benefit from a new high profile tenant entering the property precinct. For this very reason, franchise tenants and the associated branding they take with them will be quite desirable in the tenant selection process.
- The landlord for the property should be encouraged to establish a standard lease that matches their property intentions and property investment. This lease can then be easily used when you negotiate with a new tenant. It should be noted that many solicitors acting on behalf of property clients do not understand the property, its location, or its functionality. Encourage the client’s solicitor to visit the property first before any standard lease is put together.
- The age of the property and the intentions of the landlord will have impact on the refurbishment and renovation activities to occur. The lease for the tenancy should be prepared with due regard to tenancy renovation, and property refurbishment. It is not unusual to ask the tenant to renovate their tenancy every three or four years as part of occupancy. A condition can be placed in the lease to this effect.
- Any tenant seeking to occupy vacant premises should be able to provide some history occupancy in another property. It is desirable to talk to other landlords or property managers to ensure that your intending tenant is of high quality. If on the other hand the tenant is a new business, then you will need to satisfy yourself when it comes to business stability and long term occupancy. When that is the case, the form of guarantee or bond that you use in the leasing arrangements will be quite important.
- The prevailing market conditions will have impact on market rentals, rent reviews, and lease options. It may also be the case that a lease incentive will need to be provided to attract a tenant to the vacancy. Assessing market conditions will therefore be critical to the leasing negotiation and finalization.
- Every commercial or retail property will have standards that apply to hours of trade, and terms of occupancy. They in turn will have impact on property access, security, customer access, and operational costs. Any property that is closely geared to higher traffic flow such as that in a retail shopping centre, will have higher property operating costs to consider and structure into the lease rental.
When you create a good lease for a property and the landlord, it strengthens the overall investment for the long term and helps the property sell if and when that is to occur. Taking shortcuts when it comes to lease documentation will reflect badly when it comes to property performance and tenancy mix stability.
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