Any commercial property landlord today will have concerns of tenancy mix and occupancy. The landlord will not usually want a vacancy to occur in a property, or suffer a substantial loss of income from a protracted vacancy. So what can you do with this problem? You can establish a tenant retention plan for the property, and it can become part of the annual business plan for the asset.
Tenant retention is simply the process of retaining your good tenants and removing your underperforming tenants from a managed property investment. When done correctly the process can enhance the income for the property and the overall investment for the long term. This then helps the sale of the property if and when it is to occur.
How Do You Get Started?
So how can you set up a tenant retention plan and what are the rules? Over time you can set up your specific plan for your property and landlord, but to get things going here are some tips to build the first tenant plan and start the process.
- Tenant retention is a specific process of a quality commercial or retail property management process. It is necessary that you look at all your tenants in the property today and decide just who the good ones are and who are the ones that you really do not want over the long term. What are your reasons for selecting tenants in either group? You will need some rules to help you choose.
- Respecting the terms and conditions of the existing leases you can manage the poor tenants out of the property at end of their leases; the object being here to offer the space to other existing good tenants in the property, or find new tenants to fill the void. Given that this is a critical process that will impact the income for the property, it should be a factor of consideration each year as you revisit the business plan for the asset and the landlord.
- Set some target market rentals that should be used with new tenants to the property and or existing tenants when they renew their occupancy. Get a property valuer to help with the setting of the right market rental benchmarks. Give due regard to gross and net rentals, plus required incentives to encourage a tenant to take out a new lease.
- Establish a standard lease for the property to control the terms and conditions for the property each time you do a new lease. The standard lease should match the specifications of the property and the investment needs of the landlord. A solicitor should help the landlord with this document.
- Monitor all existing leases that are coming up for rent review or expiry inside of the next two years. As the dates draw nearer, the negotiations can start based on the tenant retention plan and the property decisions already made.
- Check with all your good tenants frequently to ensure that they are happy in occupancy and that they are not under pressure for expansion or contraction. If they are, then you want to be working with them on that as early as possible before another landlord offers them another tenancy space elsewhere.
A tenant retention plan is a good strategy for any landlord or property manager. It sets the scene for a controlled growth of property performance for the landlord.