In retail and commercial property today, it is the tenant mix that is quite important to the performance of the property itself. Good tenants within the mix need to be retained, and low quality tenants need to be replaced. This is a strategy and part of a tenant retention plan.
The suggestion here is that every vacant tenancy should be looked at with relevance to the property and the surrounding tenants. Whilst the landlord may require only the vacancy to be filled, the replacement strategy should be to find the right tenant that encourages more trade to the property and eventually sales to all the tenants.
Here are some ideas to help you with establishing the right tenant profile across the property and improving the tenancy mix.
- Every medium to large size property should have a business plan designed to support property performance. Within that business plan there will be specific strategies relating to income, expenditure, vacant tenancies, new leases, tenancy movement, renovation, and refurbishment. A tenant retention plan will be part of this process and will include a tenant mix analysis.
- Look at the particular property in question with regard to its location, and customer base. This is highly relevant when it comes to retail property. Is the customer base under any pressures of change, expansion, or contraction? These factors will need to be identified and built into the property performance plan.
- Look at the existing tenancy mix to identify the desirable and undesirable tenants. In most cases you will want to keep the desirable tenants for the long term. Strategies will need to be developed allowing you to offer those tenants ongoing lease opportunities. Standards will need to be set regards market rental, incentives, rent reviews, and options to be used in each case.
- Any undesirable tenants and the property should be assessed for the chances of replacement. The leases with these tenants will need to be reviewed for expiry dates, make good provisions, options, and lead times to allow replacement tenants to be found.
- Every six months the market rental in the local area should be assessed. The assessment will take into account the changes in market rental with the competing properties in the close proximity.
- A regular ongoing assessment of vacancy trends should occur monthly with different property types. In this way you can prepare landlords for the required adjustments to lease incentives and lease terms and conditions.
- The supply and demand for leased space in the local area will change throughout the year. Any oversupply should be identified as early as possible as it will have some impact on market rentals. Check out the new property developments that are going through the local planning office. Whilst there is always a lead time to construction and property occupancy, any new leasing project will place pressure on existing nearby properties.
As the local real estate specialist it is important for you to understand exactly what the property market is doing with market rentals, incentives, prices, and vacancies. Stay ahead of the property market keeping in contact with landlords, tenants, and property developers.