Tenant Retention Plans and Strategies in Retail Real Estate Today

woman with shopping bag
Tenant retention plans will help you grow your retail tenant mix in the correct way.

Tenant retention today has become an important strategy in property performance, particularly with retail shopping centres and retail investment properties.  Every commercial and retail leasing agent should provide a comprehensive and detailed tenant retention strategy to those property owners that need the service, or own the larger properties.

A good retention plan will give you as the retail leasing specialist opportunities for future leasing, renewal negotiations, tenancy relocations, and property changes.  All of that means better commissions.

A leasing expert in this market is of high value to any landlord with a high quality retail property.  This leasing churn produces fee opportunity and market intelligence.  Most property owners and landlords will not have the tools or the market intelligence to design their own tenant retention strategy in this regard.

So a good tenant plan will have particular factors to help property performance, and strengthen the tenant profile for the landlord.  Ultimately this will encourage rental income and lower the vacancy factors.

Here are some factors to help you establish the retention plan in properties and listings of suitable size and complexity.

  1. Get to know the existing tenants within the property.  This will normally involve meeting with those tenants to talk about customer activity, customer trade, and property requirements.  In most circumstances, the tenants within a retail property can give you significant and valuable feedback to help your plan creation and consolidation.
  2. Get professional surveys undertaken of shoppers using the property on various days of the week.  In medium to larger shopping centres, it is quite common for the survey to occur on a quarterly basis.  The survey would normally take two weeks to implement so that you cover the necessary variables in daily shopping.  The results of the survey will tell you what customers are looking for and what they think about the property today.
  3. Visit the local council or planning approvals office to understand the activity of other property developments coming into the market soon.  Obviously you should look for new property developments that could destabilise the balance of supply and demand when it comes to tenancy leasing.
  4. Review other properties in the local area to understand their factors of vacancy, market rental, and customer base.  You can also selectively talk to some of their tenants to get feedback regards shopping trends and property performance.  Obviously it should be said that this approach should be suitably confidential and sensitively handled.  Many other property managers and property owners may feel threatened if you make this process too public or obvious.  Simple questions asked in a creative way as you purchase a newspaper or an ice cream can give you some good tenant feedback to work with.
  5. Given your existing retail property, determine the tenants that are more attractive and less attractive to the future of the asset.  The attractive tenants will feature in the retention plan differently and more intensely.  Some of the less attractive tenants will disappear from the plan when you can find better ones.
  6. If you have an anchor tenant or perhaps a few anchor tenants in your retail property, it pays to talk with them regards property trends and sales.  They will give you valuable feedback from their perspective as a major retailer.  Most leases with anchor tenants go for many years.  Make sure that the tenant is locked in for the longer term and that they are well integrated into the overall tenancy mix activity.

So these are some of the foundational factors that will help you move towards a good tenant retention plan.  Over time you can consolidate our real strategy across the entire tenancy mix.

3 Tips for Leasing Commercial Property Today

Commercial Office Building Leasing
Lease more commercial buildings the right way. Use a checklist approach.

When it comes to leasing commercial property you really do need to know what is going on in the local property market.  In only this way can you match your marketing activities to the levels of enquiry that currently exist.

Three tips to help you with the leasing process centre on market evidence and market activity.  Here they are:

1)      Assess the levels of net and gross rent for comparable properties nearby before you start your leasing process.  Your property will need to have asking rentals that are similar to the other properties because the tenants that you attract through marketing will already know what the rental levels are in the market today.  The differences between net and gross rent will also be of interest to tenants and centre on the levels of outgoings that apply to the asset.  Most tenants will be concerned regards any extra rental payments that need to be made beyond the base rent.  This is where the levels of outgoings can frustrate the leasing process.  Make sure that your outgoings are in parity to properties of a similar type nearby.  If they are an extra payment to be made by the tenants, ensure that the outgoings are realistically structured and charged.

2)      Choose a lease format that covers all the activities and uses of the property.  The use of generic leases today is far too common.  In most cases generic leases are only relevant on the most basic of property (such as an industrial shed).  It is interesting to note that many landlords take the generic lease process because it is way cheaper than a specific lease; when things go wrong with the property or tenant they then have troubles in solving issues given that the lease is just too basic.  The message here is for the lease to be drawn up by a good commercial property experienced solicitor.

3)      Get a good rental guarantee to boost your landlord’s position and protection in the case of lease default.  Tenant default is a common problem today, and the traditional ‘Directors Guarantee’ is not much value in the scheme of things.  The landlord must be able to get easily their hands on ‘real money’ if the tenant defaults; that will normally be only through a bank guarantee or cash bond.  As to the amount of what should be asked for and held as part of this process, the answer is usually ‘the most you can get’.  That should be between 3 and 6 months rental (all types of rent including outgoings and any taxes paid) depending on just how difficult the property could be in the reletting process.

There is no doubt that the leasing process and activity is high in many locations today.  When sales opportunity slows, the leasing activity tends to lift.  Good agents can handle leasing as well as sales and they adjust their activities depending on what the property market requires.

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