Accurate Methods to Renew Commercial Real Estate Leases Early

Many commercial and retail properties will be under pressure from time to time with vacancies and rental levels.  That’s where we can step in as professional investment experts to provide solutions in tenant retention.  The strength that we can bring to the equation includes tenant placement, relocation, rent improvement, outgoings recovery, and renovation integration to the lease renewal.

It stands to reason that an astute property investor should do everything possible to protect rent collections and outgoings recoveries.  The only way to do that is through a process of renewing leases early with priority tenants and anchor tenants.  A lease renewal diary or ‘tenant watch program’ will be of great help.

Whats the Tenant Plan?

So how can you do this with some control and long term benefit?  Everything should be done to a plan, and that plan is called a ‘tenant retention plan’.  In large office buildings and shopping centers the process happens all the time.  Any uncertainties are thereby lessened from an investment perspective.

Professional property managers and leasing managers do this all the time and it’s also a good source of fees over time.  They look for matters of change coming up within the property and then they work to a strategy.  The following rules should apply in those cases:

 

  • Understand the differences between your high quality tenants and other tenants. You are likely to have different standards of lease rental and lease documentation with high quality tenants to encourage ongoing shop or premises occupancy.
  • Some areas of the property will be impacted by renovation and refurbishment so those changes will come into lease discussion as well.
  • Market rents will be underpinned by careful lease negotiation. Compare your market rents to those in the local area.
  • In a property with lots of tenants (e.g. a shopping center), the tenant retention plan should be prepared at the beginning of every financial year taking into account the known lease changes and vacancy factors expected. On a monthly basis through that financial year, updates would be complied to help the parties involved in leasing and management optimize the rental and cash flow for the landlord.
  • To renew leases early, watch ahead in lease events and critical dates for a period of 18 months. In that way there will be no surprises to worry about.  Ultimately that means a better cash flow for the landlord.
  • Outgoings recovery will come into the property leasing strategy. Like it or not the outgoings recovery for the property will impact rent types and rental levels.  Gross and net rents should be set in the budget sense for all upcoming lease negotiations.  As the lease negotiation starts, all parties to the lease process know what the targets are and where things could head.

 

All your VIP leasing clients should be provided with a leasing and tenant mix strategy that includes the above factors.  Simple things like these are valuable in helping you as the agent stand out competitively as an industry professional.  That sounds really good when you are building leasing market share.

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