Leasing commercial real estate is something that can provide a good buffer of commission when sales listings and actual sales have slowed. It is also the case that a successful lease transaction can lead to a future property management or sales opportunity. This then says that all top commercial real estate agents should be prepared to lease ‘quality’ local property.
Notice that I said the word ‘quality’ when it comes to property selection. Determine the property size and type that will give you the appropriate fee for a successful lease transaction. Focus locally on quality, the good landlords, and the quality tenants. A lease transaction can take a reasonable amount of time to initiate and complete. On that basis you should only focus on the good deals and the good opportunities. Let some other agent have the small things to lease that have minimal fee results.
Here are some tips for taking enquiries from tenants today when it comes to leasing new premises or relocating:
- Make sure that you’re talking to the decision maker when it comes to the particular tenant. Get the contact details and the identity of the tenant sorted before you provide too much property information.
- Ask them about the property type that they are looking for when it comes to improvements, services and amenities, location, and permitted use. Also find out about the required lease term, the rental budget, and property usage.
- The tenant’s staff and the customers interacting on the property will create certain challenges when it comes to improvements and location. Car parking is a good example and case in point.
- There are big differences when it comes to leasing office, industrial, and retail property. Create checklists for each so you can ask the relevant questions with potential tenants.
- Is the tenant coming to you today from another property location? Are they new to leasing property locally? If they know nothing about the local area, you will need to fill in the gaps when it comes to business demographics, transport, communication, local area profile, and property usage.
- If they are coming to you from another property location, they may have some timeframe to satisfy or a property disposal requirement. Ask the right questions to get the complete picture. You may even find another listing requirement with the property changeover.
- Has the tenant looked at other listings with other local property agents? It is quite likely that they have seen other listings and may have current negotiations underway through other agents. It is good to know if this is the case so you can adjust your strategy accordingly.
Don’t be too eager to take a tenant to a property. Get all of the facts together prior to the inspection process so that you don’t waste your time with the incorrect strategies or listings. Match the tenant to the property before you leave the office; qualify them. If necessary take them to a number of properties to give them a comparison of current market conditions.
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In commercial and retail property today, a tenant retention plan should be part of the services provided by specialist commercial leasing agents and property managers. The retention plan can be a value-add service for the clients that we work for.
It is no secret that the commercial and retail property investment market is under some strain. That is all due to the pressures on the local business community. This will change and improve over time. Up until then, we need to approach the property market with system and focus to help the clients that we work for. The tenant retention plan is one way of doing that.
That’s presume you have a good property to work with and the client to assist when it comes to tenant retention. Here are some tips to help you build the program and the system of retention.
- Review the property comprehensively to determine which tenants are more important to the future of the property. Those high priority tenants should receive special treatment when it comes to lease renegotiation and occupancy. The other tenants in the property may be retained although some form of priority needs to be determined.
- Review all the leases relative to all tenancies. Those leases will contain critical dates and terms and conditions that will have impact on the property function and tenancy mix. Ensure that those dates and factors are allowed for when it comes to tenant negotiation and tenant planning.
- Keep in close contact with all tenants within the building to ensure that any needs of expansion or contraction are fully understood. If you do not do this, it is quite likely that the tenant will look elsewhere to other agencies for assistance and relocation. Before long you will have a vacancy to deal with which could have been avoided?
- To formulate a good retention plan, you need a strategy of rental and lease documentation. The rents for the property can be either gross or net and should be determined based on the trends of the local property industry and the age of the property. The rents should assist the landlord to recover property operational costs (also known as outgoings). Any rent reviews applied to the leases will be based on the rental type and lease term. Strategy is everything with rental choices, so make sure you have the right information to help you with the correct rental choices.
- Lease incentives will vary throughout the year from property to property and with relevance to any new property developments coming up. Incentives will potentially attract your tenants to move elsewhere. For this very reason, your client, the property owner, needs to be quite flexible when it comes to the setting of lease incentives for existing sitting tenants. Failure to provide an incentive to a sitting tenant may very well see them move elsewhere. The cost of a vacancy in a property is significant and most inconvenient at most times.
- As part of the retention plan, review the local area with due regard for competing properties. They will have an impact on your tenancy mix and also market rental. Some of those competing properties will be influencing your tenants to move elsewhere. Be careful and respectful of these competing properties.
So these are some tips and ideas that can apply to the tenant retention program. As a specialized leasing agent, you can establish some real strategy here to help the landlord with their property momentum and property focus. When the property market is slow or tough, the value of a retention program is high. You simply need to structure your fee for service into the appropriate appointment to act.
In today’s property market, your current tenants in your tenancy mix are important to the future of the property. When you create a tenant retention plan, you can optimise the income potential for the property. That being said, a tenant retention program should be part of a professional property management and leasing service provided to landlords by agents. Good commercial property agencies provide this specialised service.
It should be said that tenant retention is not just about lifting the rent for the landlord; in fact, that is probably the wrong strategy to adopt in your plan. It is better to have a few priorities in balance so your retention plan forms a key part of the business plan for the property.
In particular, a good retention plan should include the following as goals:
- Stabilise and minimise the vacancy factor
- Create a group of prospective tenants for the vacancies in the property if and when they arise
- Support the tenant mix so that tenants can occupy in comfort and build their businesses
- Control occupancy costs for the landlord and the tenants within realistic benchmarks
- Underpin the market rental for the property which in turn can support sustained property values for the landlord
- Allow for tenant movements and property refurbishment strategies in parts of the property as planned at the beginning of the business or financial year
- Help keep tenants in occupancy for the long term and in balance with the landlords investment requirements
It should be said that a retention plan is highly important in retail property given that the stability of the tenant mix is required to keep customers coming to the property on a regular basis. Any vacancy in a property is quickly seen and will detract from the image that a successful retail property needs to set.
So how can you establish a plan of this type? Here are a few ideas to help you get started:
- Understand the supply and demand for tenancy space in the local area today. As part of that process get to know what new property developments are coming up that will impact the available space ratio.
- Consider your property as it is today and determine what refurbishment and relocation issues should be merged into your retention plan.
- Split your tenancies into high value tenants and low value tenants when it comes to the future of the property. Some of your tenants you cannot do without and everything must be done to encourage them to stay in a property.
- Anchor tenants will normally be secured on long leases. The instability or change of an anchor tenant can impact all speciality tenants in a major way. Find out when the anchor tenant lease expires and just what the anchor tenant thinks about the property today. Do they intend to stay in the property? When does their lease expire? Can they do more to work in with the other tenants in the specialty areas?
- What levels of trade exist in the retail property and what tenant types are more successful than others? This information will help you find new tenants that suit the customer needs in the property shopping centre or retail property.
- Is your property servicing a particular need? In retail property this could mean ‘convenience’ or ‘destination’ shopping. When you know what works in a property, you can do something more with it.
- Common area use will have impact on special property precincts such as ‘food courts’ and just how customers move through the property. Take a survey of those factors and form and opinion as to how successful they are now. Changes may be required to help in tenant sales and retention.
- Look at all the leases in the property and identify any leases that have market rent reviews, options, or expiry dates in the next 2 years. Those tenants or leases will be a major focus of your retention plan.
You can add to this list based on your property and the overall location. Importantly you should create a tenant retention plan that can help improve the performance of any property in any market. That is why you were engaged by the client in the first place; correct?