The Keys to Retaining Tenants in Commercial Investment Properties Today

In most commercial, retail, or industrial properties today it is wise to formulate a tenant retention plan and put it in place.  If you have lots of tenants in a building then the matter is even more important.

So what does a plan like this look like?  Here are some ideas that I have used with high rise commercial office towers:

  1. Pick out your important tenants – Some of your tenants will be critical to building image and stability. If they occupy a lot of space within the gross lettable area then that will be a key consideration.  Connect with those tenants and understand what they are doing and thinking from a business perspective.  Regular meetings with your important tenants will help with lease stability.
  2. Look for threats – The threats coming from a lease can be varied. The only way to understand threats would be a complete lease review.  Typical matters to be concerned with would be rent reviews, lease options, renovation provisions, outgoings recoveries, and permitted uses.
  3. Review all rentals – The rent that a tenant pays today should be compared to market rental levels for a property of its type in the location. Is the property under rented?  Perhaps it is over rented?  Either way you must know the position of the property in today’s rental terms.  Any upcoming rent review or lease renewal negotiation will be impacted by current market rents.  In reviewing those rents, understand the differences between gross rent, net rent, and incentives.  The rents and ratios will change throughout the year and will have an impact on any property that you lease or manage.
  4. Look at critical dates – The dates coming from a lease will be critical in so many different ways. I like to watch lease dates at least 12 months out so my landlords are prepared for the situations and choices that need to be made.
  5. Review your lease documents – Always review leases and the terms within those leases. There will be variations between lease terms and conditions.  Look for the factors that have an impact on the tenant and the landlord.  Lease compliance is a big issue, and all lease terms and conditions should be enforced or actioned in a timely way.  With some leases there will be other documents that will also have an impact on occupancy such as licences and car parking.  Look for anything that impacts rental and the payment of a real market rent.

If you watch all five of these things, you are likely to be prepared for the pressures of tenant negotiation and retention.  Over time that allows you to help your landlords with their cash flows and property performance.

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