Most commercial office towers today are quite complex when it comes to tenancy mix and property performance. They require specific performance plans to be implemented across income, occupancy, expenditure, and maintenance. That is where the commercial property manager can add considerable value and control to the overall property strategy and ongoing asset plan.
The right skills and knowledge
It should be said that any commercial property manager should have the necessary skills to match the challenges of the property, the landlord, and the existing property market. Some landlords can be particularly challenging when it comes to cash flow growth and stability, and the direction of the asset as an investment. The property manager has to have the skills to extract property performance from the existing asset model.
Here are some ideas to help you consolidate property performance on any office tower of moderate to large size:
- Tenancy mix – take the time to understand the tenants currently in occupancy within the building. There will be changes and opportunities existing within the tenancy mix when you look at the upcoming rent reviews, lease expiry dates, and lease options. Some tenants will require occupancy adjustment due to the pressures of business expansion or contraction, so it pays to meet with all tenants regularly to understand what’s happening for them within their business and within the property.
- Good quality tenants – the good tenants within the tenancy mix should be encouraged to stay in occupancy for the long term. The question then arises as to how you can move them productively into a new location to help them improve business performance and configuration. In moving a tenant to another location within the building, there has to be a net benefit for the landlord. Perhaps you can consolidate a number of tenants into locations that improve their business model and hence their ability to pay market rentals.
- Market rentals – look at the market rentals for the location and in other local properties to identify any imbalance that may occur within the managed asset. A property can be balanced to the prevailing market conditions through defined lease strategies and deliberate rental negotiations. Each year the property manager and or leasing manager for the asset should be structuring a business plan to improve lease structure and income opportunity across the tenancy mix.
- Tenant retention planning – when you look at all the tenants in a tenancy mix in a moderate to large property, you can see where some tenants should be encouraged to remain in occupancy, whilst others should be encouraged to leave when leases expire. That is where the tenant retention plan will always be of high value to the landlord and to the property manager as part of the business asset plan created for the property each year. A tenant retention plan will allow choices and decisions to be made across rentals, lease terms, rent review negotiations, and the exercising of any option for an extended term.
So these four factors focus in on tenancy planning and income generation for a commercial office tower; they are just the start of the property control process. When the income is optimized, the property expenditure and maintenance requirements get a little bit easier. Over time the performance of the asset can be improved and optimized for the landlord.