Why Commercial Property Leases are So Important in Investment Performance

When you own commercial property or retail property, the leases that reflect the tenancy mix are the foundation of the cash flow.  Then when it comes to selling that property it is the leases that will drive buyer interest and ultimately assist in getting a better price for the property. 

A property with a good lease profile will create property investor interest; it’s that simple.  It then stands to reason that the lease negotiations that occur in your property should be carefully planned and optimised with the ‘end result’ in mind.  You never know when you want to sell or refinance your property.  The leases will be the attraction to support your processes and needs.

It can also be said that not all tenants are equal when it comes to investment performance. Ultimately you would want a mix of tenants that are not too ‘volatile’ in the daily events and operations of the property.

So, What Are Your Investment Systems?

So what can you do here as a property investor?  Take a look at all your leases and the broader tenant mix.  If you own a shopping centre or a large office tower with many tenants, think about creating a list of tenants and splitting them up into priorities and retention groups. It stands to reason that you may want to keep some of your tenants more than others. What can you do to negotiate leases with your ‘desireable tenants?’ Try a tenant retention plan for starters. That strategy should feature in your investment or property business plan. Understand the deals that you are prepared to do with your better tenants. That will include incentives, rents, and lease terms.

Set some rules and standards about these things below and then see a good solicitor to help you with the lease creation:

  • Rentals
  • Rent review timings and standards
  • Option terms
  • Make good provisions
  • Lease terms and conditions
  • Ideal tenant type and operations

When you make every lease count, the property starts to take on a whole new level of performance.