In a commercial or retail property today, it is the tenants that provide the backbone and the stability to income and rental performance. On that basis, you really do need to keep your tenants well in control given the prevailing market conditions and the current tenancy mix.
It is notable that a retail property can be highly volatile when it comes to tenant interaction and occupancy. Essentially all retail tenants are essentially small business people that rely on the success of the property and the overall tenancy mix to provide an opportunity for sales growth.
The tenants in a retail property will usually talk between each other on a regular basis. They therefore share information and perceptions relating to the property, the property manager, and the landlord. I go back to the point, that you must not let your tenants get out of control. Encourage good communications and build solid relationships with all of your tenants.
Here are some rules to apply to the tenant communication and connection process in commercial and retail property today:
- The tenant will be assessing their business performance continually during the year and the lease term. This then says that you should meet with your tenants on a monthly basis. This will help you when it comes to understanding shifts and changes relating to their business, customer base, or sales. If you identify any problems early, you can make the necessary adjustments to occupancy or leasing strategy.
- In a large property, it is likely that you will have one or more anchor tenants as part of the tenancy mix. The anchor tenants will usually be in occupancy for the long term with a lease document that extends over a number of years; in most cases the lease for an anchor tenant will be in excess of 10 years and will have options for lengthy renewal terms. Stay close to your anchor tenants so that you can understand how they are integrating into the overall property and any associated specialty tenants. The success of the anchor tenant will have some flow through to the specialty tenants.
- Most leases will have provisions for rent reviews and options as part of occupancy. The critical dates that apply to those lease situations should be carefully watched. Any rent review or lease renewal inside the next 12 months should be negotiated as early as possible. This then will remove the volatility from the property for the landlord.
- Every meeting or conversation with a tenant should be documented as quickly as possible. Whilst a simple situation or discussion today with a tenant may seem unimportant, it is quite common to have more complex issues arise in the future that started from some simple discussion or telephone conversation.
Get to know your tenants as part of the services that you provide for your client the landlord. In this way you can help the client understand the predictable changes that you can see with the tenancy mix and the lease profiles.