Most commercial investment properties will have vacancy pressures to deal with from time to time. The larger the property, the greater the potential for vacancy issues to frustrate rental cash flow. If you are involved in the management or lease of any large investment properties, it is essential that you understand the intentions of sitting tenants when it comes to future occupancy. The concept is called tenant retention.
Tenant Retention Plans
In an ideal world, vacancies should be resolved quickly and effectively for any landlords that you act for. The only way to achieve that level of control will be through a mix and match of the following strategies:
- Understanding the intentions of sitting tenants when it comes to lease expiry
- Monitoring the upcoming lease expiry dates approximately 18 months in advance
- Do a lease audit for all existing tenants
- Negotiating any lease expiry’s early so you can deal with the vacancy in a timely way
- Keeping in close contact with all of your sitting tenants within the tenancy mix so you know what they are thinking when it comes to occupancy
- Understanding the local business sentiment applies to rents, relocation, and property requirements
- Keeping in close contact with all local businesses to attract new tenants to your property when required
- Understanding the requirements of the landlord when it comes to market rental, cash flow, outgoings recovery’s, and lease documentation
Any leasing agent providing a specialised leasing service locally should satisfy and engage in all of these mentioned issues. All of these issues can be merged into a tenancy mix plan and a tenant retention plan for a major investment property. Large office buildings, and large retail shopping centres would be suitable for those control processes and plans.
To provide a top-quality leasing service, any vacancies currently or into the future should be controlled and filled. A top leasing agent will stay in contact with the landlord and all the tenants to ensure that vacancy downtime is minimised.
Any vacancy in an investment property can be a significant drain on cash flow over time. Not only is there a loss of rent, but the outgoings for the vacancy will become a landlord cost and therefore not recovered. Any property with a high vacancy factor will find it difficult to negotiate rent reviews and options with sitting tenants. Market rentals will also be hard to establish and maintain because of the high vacancy factor.
If you are involved in the management and leasing of any complex property with multiple tenants, it is essential that you track and control vacancies as they apply to the tenancy mix. Work well in advance to negotiate existing lease options, minimise vacancies, and attract new tenants that could be thinking about coming to the property. Why is your property more attractive than others in the area to tenants? When you know the answer, you have the basis of your lease marketing campaign.