Tenant retention plans are essential to the performance of a Retail Property today. They help stabilise the existing tenancy mix and help you optimise the market rental across the entire site.
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A tenant retention plan can be a specific strategy to adopt as part of your retail property management processes and leasing support. It should be said that the tenant retention plan should have a suitable fee structure as part of your appointment to act as an agent.
Know Your Current Tenant Mix
Most of the tenants that you are negotiating with as part of the plan can be tenants in situ. For this reason, the normal leasing fee-base would not apply, but a variation of the fee structure can be created.
When it comes to the leasing of premises to tenants that are in location, it is normal to charge a leasing fee of between 50 to 75% of the standard fee that would apply to a new tenant coming into the property.
You are dealing with a captive tenant audience, that has a priority to stay within the property. Many landlords will expect you to discount your fee on that basis.
Here are some other factors that can be structured into your tenant retention plan and service for the landlords in your property management portfolio.
- The plan itself should be optimised for the property holding requirements of the landlord. You will need to know if they want a hold property for a number of years, or the longer-term. Those factors will influence the decisions and strategies behind each and every lease negotiation.
- Review the market rentals that apply to similar properties in your local area. Those market rentals will change from time to time and have some relevance towards the properties that you work on and the landlords that you serve. Always be careful when it comes to interpreting market rentals. Some of those rentals may have been established through ‘non-market’ conditions. On that basis, they will not be true market rentals.
- Meet with all the tenants in the subject property on a regular basis. In larger properties, that would normally be at least monthly. Keep minutes of the meetings. You can then identify any special tenant needs and requirements when it comes to lease occupancy, tenancy expansion or contraction, and levels of trade. Given that the current retail property market is somewhat volatile, it is desirable to establish an agreement if any of your tenants are under some form of occupancy pressure as part of their business.
- As part of the retention plan, some tenants will be leaving the property by choice, your decision, or end of lease. For this reason, you will need a specific plan regarding the marketing of upcoming vacancies. As part of that process, you should also understand the requirements of the landlord when it comes to standard lease terms and conditions, market rental, and undesirable tenants.
- There are differences when it comes to negotiations with anchor tenants vs. speciality tenants. Both types of tenants have relationships to each other and support the property overall. In a single property, the balance and relationships between the tenancy types will help the property perform and improve both in sales and rental. It is the job of the leasing manager or the property manager to ensure that the relationship between tenants is strengthened and optimised to improve Retail Property performance.
You can add to this leasing list based on local market conditions, the property type, and the strategies of the landlord. Importantly you should have a retention plan to take the property forward within the requirements of the landlord.