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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.