Commercial Real Estate Leasing – How to Achieve Occupancy Goals with a Tenant Retention Plan

city buildings at sunrise

Like it or not, tenants have plenty of choices in a commercial investment property when it comes to lease renewal time.  When you lose a tenant at the end of a lease you lose rent and outgoings recovery.  That then stresses the landlord in so many different ways.

In a property market and city that contains a number of vacant properties it can take months if not years to replace a lost tenant; the ‘global financial crisis’ did a lot of financial damage to many buildings and landlord assets however distressed clients and properties from that period are largely resolved.  The facts of the matter today are that any landlord has to be realistic at the time of lease renewal and set their targeted rents based on true market conditions.

A good way to control and resolve these issues is through a tenant retention plan.  The plan is a formal document based on the particular property with its pressures; those pressures are merged into the existing market conditions.

Format Your Tenant Retention Plan with Real Facts

The retention plan is created for a landlord and a property with due regard for many crucial things impacting cash flow including all of the following:

  • Lease duration
  • Option abilities
  • Lease terms and conditions
  • Supply and demand for local leased space
  • New properties coming into the market locally
  • Vacancies in the property now and time on market to re-let
  • Incentive levels for any new tenant taking up space
  • Make good provisions in a lease
  • Tenant mix requirements for the property overall
  • Hi value tenants in the mix
  • Expansion of the property or premises
  • Contraction or movement requirements for existing tenants
  • Landlord investment targets in rent and outgoings
  • Market rents for the property type and the location
  • Outgoings recoveries for the current year from existing leases
  • Renovation or refurbishment intentions

So the plan is a good thing.  Any quality property and investor should have a plan of this type active in their properties and portfolio; that’s where a skilled leasing agent can help.  Every year the plan is reviewed and changed based on upcoming vacancies or lease options and terminations.   The landlord is thereby encouraged to think about the way in which they want to negotiate leases with existing tenants and new tenants for any property.

The message here is simple.  A tenant retention plan will help a landlord make critical lease decisions prior to the lease event or vacancy occurring.  From that point onwards there will be targets that the leasing agent can pursue for the client in a realistic and market driven way.

 

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