Do Not Let Commercial Real Estate Tenants Get Out of Control

In commercial real estate leasing and property management, don’t let your tenants get out of control.  The greater the number of properties that you manage, the harder this requirement will be to satisfy.  The same problem occurs when it comes to the larger retail properties and shopping centres.

It is a fact that the larger properties under management have many pressures when it comes to tenant management and tenancy mix.  A property manager that is overloaded with larger buildings and tenants will find it very hard to keep up with the day to day requirements of leasing and property management.

So why are things so hard? Every lease and every tenant will have unique conditions to monitor including the following:

  • Lease terms and conditions
  • Rental payments and arrears
  • Outgoings categories and recoveries
  • Insurance and risk management
  • Reporting and controls
  • Renovation and refurbishment
  • Make good
  • Critical dates, plus more

In saying all of this, I go back to the point that you cannot let the tenant management process get out of control.  The skills of the property manager need to match the complexities of the property, the landlord requirements, and the tenancy mix.  Somewhere in that equation you have property management and leasing fees.  The fees that you recover for service should be well considered for the work involved.

So exactly what can happen when tenants become difficult and uncontrolled?  Try some of the following:

  • Lease negotiations and factors of lease condition enforcement become really difficult.  When a tenant is uncooperative, every lease negotiation and any lease critical date will be harder to enforce and negotiate.
  • Some difficult tenants will talk to others within the same property.  That then creates instability in the property management structure and the tenant mix.  Soon the property manager will understand that their position and professionalism has been undermined by a number of those uncooperative tenants.
  • Tenants of this ‘difficult’ nature will sometimes talk direct to the landlord on matters of importance to their individual leases and ongoing tenant occupancy.  Soon the landlord will understand that the property manager has little control over the property and the tenancy mix.  When that occurs, it is necessary to change property manager to regain tenant control and landlord confidence.

So it is easy to see how the tenant management process is critical to the performance of the property.  The link between landlord, tenants and property manager will always be critical to property performance.

Some lease situations are strained and difficult, and on that basis the property manager will need to have the professional skills to negotiate with the tenants under difficult circumstances.  If the property manager does not have the respect of the tenant, then the whole process of lease control and negotiation gets a lot harder.

There are differences in tenant interaction and controls when it comes to the different property types.  It could be said that the industrial property type is perhaps the easiest to manage and control from a tenancy perspective.  These factors escalate substantially when it comes to office property, and at the very high end of the equation you have a retail property and shopping centres.

I go back to the point that the skills of the property manager need to be matched to the property type and the client.  The tenants will soon know if the manager does not have the skills required to manage the property correctly and professionally.  The tenants in any commercial or retail property will soon take advantage of the occupancy situation if left uncontrolled.

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