How to Boost Landlord and Tenant Relations in Commercial and Retail Property

foyer of retail shopping centre

The shopping centre and retail property markets are changing today, and that will reflect on how tenants create sales, attract customers, and grow their business over time.   The internet and the ‘online’ side of things are changing how property occupation works, and just what businesses need to lease premises successfully for the long term. 

Many businesses today don’t need to lease as much space as previously.  Many business people are completely mobile and attending an office daily is just not required for many reasons.  Customers and manufacturing are perhaps the only reasons a business or company would need a physical property ‘base’ to operate from.  On that basis, the landlord and tenant relationships of today are more important than ever before.

Relationship Rules in Investment Property

How can a landlord encourage positive tenant relations?  Try some of these for starters:

  1. Regular meetings – this sounds logical, but it is surprising just how ‘random’ many landlords are with tenant contact.  They let the contact go until something starts to pressure the tenant relationship or the occupancy.  When the ‘pressure’ is on, lease negotiations are always harder, and the alternatives to solving a lease problem will be less for both parties.
  2. Create comprehensive leases that work for both parties – the lease document supports occupancy and income stability.  When you look at it from that perspective, how a lease is created should be carefully considered.
  3. Clarify and control critical dates for all leases – this is a planning process of an advanced and positive nature.  Critical dates coming up with any leases should be watched and tracked at least 18 months out from the ultimate date.   That is how you can stabilize an investment property.
  4. Be flexible in tenant mix alternatives – if a tenant is under pressure, then look at the variables of expansion, contraction, or relocation.  There are ways to solve a tenant lease problem related to local business pressure.
  5. Understanding property use – for the investment property to thrive over time financially, the use of the property must be optimized.  There will be a balance between common areas, leased areas, car parking, and services.  The owners of competing properties of the location will always be seeking to attract tenants.  All the more reason to stay close to your tenant mix and property occupancy.
  6. Occupancy is not just about rent – collect a fair and reasonable rent for the property and the location.  Aggressive and high rents force people away from a property.  Look at the bigger picture of property occupancy costs including rent and outgoings.  How do they compare to other properties in the location?  Preserve your tenant mix by keeping occupancy costs in the ‘fair and reasonable’ zone.
  7. Negotiating leases early – if a lease matter is coming up (option or expiry), it is timely and sensible to negotiate any lease matter early.  Don’t wait for the lease date to arise before you start discussing things with the tenant. 

So these are valuable ways to work with tenants and preserve lease occupation in commercial or retail property.  Improve your investment property by negotiating with and consulting your tenants in a positive way.  Their business success will be the foundation of your real estate investment and its performance.

How to Encourage Tenants to Be a Good Part of Commercial Property Performance

shopping center mall

Landlords typically should spend more time strengthening relationships and services for their tenants in commercial and retail property.

A stable tenant and their business can add value to the investment property in many ways over time.  Conversely, lengthy and frequent vacancies will pull back the outcomes for the investment in rents, occupancy, and property value.

 

Some Tenants are Better Than Others

There are differences in tenants of course; some are more valuable than others as part of an investment property and its performance.  A large corporate tenant is generally a good part of the property income for quite some time; that must be protected and nurtured.

Stability in cash flow and occupancy is a core element of property performance.  I go back to the point that today, more landlords of commercial and retail property should spend time encouraging the relationships and support systems for their tenants.  It is a valuable partnership.

Where can that help be created?  Try some of these:

  • Early lease negotiation to provide the tenant with lease stability
  • The ability to change occupancy when expansion or contraction is required
  • Fair and reasonable market rent reviews with due regard to market conditions
  • Regular meetings with the tenant to ensure concerns are addressed
  • The selection of a good property manager that has experience and skill

 

man and woman talking

Calibrate Tenant Value to You

When it comes to leasing and managing your commercial investment property, it pays to keep in close contact with your tenants.  Tenants are like ‘gold’ and should be encouraged to remain in occupancy providing they are ‘stable’ and ‘relevant’ to the overall tenant mix; there is a balance there to watch and cultivate.  An investment property with a stable tenant profile will always attract more buyer enquiry and be easier to sell when the time comes around.

Realistically, commercial tenants and retail tenants all suffer issues relating to business activities and occupancy over time and through the year; the same can be said for the property owners and investors.  There is a partnership between the landlord and the tenants that should be encouraged.  That is where flexibility and communication are important controls to implement as part of the property management and leasing plan.

 

Drop Any Aggressive Negotiations

Landlords that are too aggressive on rents and lease negotiations are generally those landlords that lose the respect of their tenants over time, and that will be the first sign of a rising vacancy rate in the property.  When leases come to an end, those tenants will be the first to leave or put pressure on the property owners for any negotiations.

 

Prevent Tenant Problems From Starting

So, what can you do here to prevent those problems from starting?  Some of these ideas may help:

  1. Meet with your tenants monthly or quarterly to ensure that any issues and pressures are identified early
  2. Watch arrears issues and talk to tenants early to identify cash flow issues
  3. Administer the critical lease dates in a property in a timely way to ensure that nothing is left too late
  4. Keep on top of building maintenance problems, so the tenants have no hindrance to occupancy
  5. Address any lease expiry and rent review issues early so the tenants can plan for changes and pressures
  6. Ensure that the property is functional and attractive at all times to tenants and customers as they visit the property. That will include all services, amenities, and common areas.
  7. Maintain the exterior of the property, so it creates a ‘high-quality’ image for all tenants as they transact business and encourage customers.
  8. Provide practical and ample car parking for tenants and customers.
  9. Maintain the plant and equipment in a property, so that tenant ‘comfort’ is provided and the operation of the equipment is timely and cost-effective
  10. Keep property outgoings under control and inside budget
  11. Look at how tenants can market their businesses on directory boards or pylon signs at the property
  12. Provide good on-site security, access, and communication channels for all tenants.
  13. Ensure that the property manager for the property is communicating with tenants regularly and professionally.

These simple rules help greatly in controlling tenant interest and encourage them to remain in occupancy.  Good tenants are at least half of the equation when it comes to commercial and retail property performance.