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8 Ways to Improve Investment Property Performance When Leasing Vacant Premises

I get really annoyed when I see a leasing person marketing, negotiating and closing on a property lease with little regard to broader lease strategies that could improve the greater property performance.   Top agents don’t do that!

Far too many leasing agents just negotiate a lease deal on a ‘singular’ basis; that is one tenant, one landlord, one premises and one negotiation. 

What happens when a tenancy is part of a tenant mix and larger property performance?  Invariably the single deal is still negotiated with little or no regard for other cash flow and occupancy issues in the property.

Strategic Facts

The logic here is that a top leasing agent can add considerable strategy to a single leasing deal that can then allow the whole property to benefit from a new occupancy.  Here are some ideas to illustrate the concept:

  1. Tenant selection – Look at the larger tenant mix in the property and determine the ideal business types as targets that could be new occupants in the vacancy. You can then market the vacancy into those tenant categories.
  2. Existing tenants give valuable feedback – When you have a vacancy in a property with multiple occupants, approach all other tenants to understand what they think would be an ideal occupant for the vacant area.
  3. Expansion and contraction – Some of your existing tenants are likely to need more space at some stage. Always check with them first to see if the vacancy can be absorbed into other businesses in the same property.
  4. Lease duration – A new lease should be negotiated with due regard to the expiry of other leases in the same building. What you should prevent in doing that is a situation where multiple leases are expiring too close together in time.  You don’t want the landlord to suffer undue cash flow and rental pressure with many leases expiring at the same time.
  5. Outgoings recovery – Understand the outgoings figures in the property and how they can be recovered from the various tenants. The differences of gross and net rent should be considered as alternatives in the lease vacancy marketing.
  6. Tenant retention plans – Review the tenants within a property on an annual basis so you can identify where expiry dates are coming up. You can then make some decisions regards the pending vacancy and negotiate a new lease early with the sitting tenant (assuming they are a tenant that matches property performance targets for the long term).
  7. Make good strategies – Every lease will have unique challenges to be considered in the make good requirements at end of occupancy. Review each lease well in advance to see how the make good could be structured and implemented at lease end.
  8. Lease options and rent reviews – What targets would the landlord have when it comes to rent and options? At the start of the financial year, review all tenants to determine how rent reviews and options should be negotiated on behalf of your client (the landlord).  Make the right choices as part of the property performance plan each year.  When it comes to the time of negotiation with each tenant, the bigger lease decisions have already been made and can be implemented immediately.

So there are some good ideas here; they allow a single premises vacancy to be ‘globally’ negotiated with due regard to and for the total property tenant mix, and its strengths and weaknesses.  Isn’t that a better way to tackle the property performance question in leasing a vacancy?

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