Like it or not some commercial investment buildings will age and factors of change consequently occur in property appearance and performance. When that happens, tenants are commonly attracted to newer properties in the same location. Landlords can be under threat of a declining tenant mix and marketing rental.
Local property developers
It is a fact that property developers for any new project are likely to be offering incentives and relocation strategies to pull across tenants and businesses to boost their project cash flow and occupancy. If you are a leasing expert or property manager for your location, you will need some real strategies to underpin property performance for your clients.
Maintain the mix and the rent cash flow
As any investment property ages, a renovation strategy is a wise solution to maintain tenant occupancy and net income. Such a plan should be incorporated into the annual business strategy for the property and the associated capital works programme. The leasing and or property manager for the asset should be part of that assessment process.
Property performance strategies
So the message here is quite clear for any property owner and or property manager. To sustain reasonable levels of property performance within any investment building, a real initiative needs to apply when it comes to property upkeep and occupancy.
There is a balance to consider here between the incomes achieved or achievable for the property, the regular maintenance required within the asset, the prevailing market conditions, the cash flow requirements of the landlord, and the demands of the occupants. Are you ready to balance the equation?
Why does this happen?
It is worth understanding why these problems evolve and then taking action accordingly. Some of the older investment buildings struggle for a number of reasons such as:
- POOR SPENDING: Insufficient spending on property upkeep over a period of time can be a real challenge. Some landlords are too tight when it comes to property cash flow and maintenance costs. They hold back on discretionary issues relating to maintenance. Over time the property then degrades and the visual appearance suffers. As tenancies move towards lease expiry, they are quite likely to reconsider occupancy costs, and look after moving into other more modern assets locally. Protect your tenancy mix and lease income. Understand what the tenants require to run a successful business. Understand the needs that they have when it comes to staff, customers, occupancy, and business activities.
- LACK OF MAINTENANCE: Poor quality maintenance routines and poorly selected contractors are an all too common problem. Building design and layout will dictate particular standards of property maintenance and upkeep. The plant and equipment will also have maintenance upkeep requirements. Establish a routine of property maintenance review and risk controls. On a quarterly basis assess property performance and degradation. The larger remediation items of a capital expenditure nature can be programmed into the property cash flow and budget process. If
- NEWER COMPETITION: An abundance of newer properties coming into the market can change future supply and demand; the older properties are likely to suffer. Property developers will always study market conditions and the opportunities for a new project. They will predict occupancy into the future.
All of these issues are simply structured around asset positioning. If you are working with the property owner in a regular and ongoing way, and you understand the opportunities within the property tenancy mix, you can make the right choices when it comes to property rehabilitation and upkeep.
When you optimise the net rental income and the tenancy mix, monies are usually available to sustain property presentation and maintenance. It is a fine balance but it does work. Get involved with the assets that you lease and manage.
You can get more commercial property management tips in our eCourse ‘Snapshot’ right here.
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