In commercial and retail property today, the tenant mix analysis process is a recipe for success in property performance. It allows you to improve occupancy and income. From a landlords perspective that is a good thing.
The mix analysis should be done by the property owner and or the property manager each year and the results or decisions should be formulated into the property business plan. On a quarterly basis the business plan for the asset should be checked and updated as required. Given that the trends of the market are always changing, the plan will require similar adjustment.
So the tenant mix decisions allow you to take action with vacancies, new tenants, existing tenants, and rent reviews. Setting standards in this way makes the property performance a lot clearer for monitoring.
Let’s say you have a number of tenants in occupancy in a retail property. I will use ‘retail property’ as an example due to the high level of customer, tenant, and landlord interaction. Here are some things that you can merge into your tenancy review and decision process:
- Lease documentation should be checked for critical dates and current terms and conditions that will have an impact on income or occupancy.
- Check the tenancy schedule to ensure that it matches the lease and tenant profiles. It is remarkable just how many errors occur in a tenancy schedule. In all cases go back to the original lease or licence document to check property facts and information.
- Look for 3rd Income opportunities. They will come from ‘supplementary’ occupancy situations such as licences, casual rents, signage, expansion, and contraction.
- Tenant movement requirements will vary throughout the year. Understand the pressures that your tenants are experiencing in occupation. Don’t let them move to another property to solve their ‘pressure’ problem.
- Clustering is a factor of balance. What you are doing here is considering the matching and placement of tenants in a group, and thereby improving income for the landlord. If you can create more sales for a tenant group, the market rental strengthens.
- Customer service and access in and around tenants should be direct and comfortable. In a retail property this is very important. You want the customers to come back to shop and purchase goods or services. Convenience and car parking will also be key factors of consideration for your shoppers.
- Look at market rentals around the property. How do they compare across locations and tenant types? How do they compare with your competing properties? Are those rentals growing or static?
- Key locations in the property will produce better sales. On that basis tenant placement with due regard to the specialty tenants and the anchor tenants will be very important.
So you can do a lot with a good tenant mix analysis and property performance plan. Understand your property and the trends of the market today. Take the required steps in tenant lease negotiation and placement.