Are you checking your most valuable real estate metrics? One of the most important metrics to track is your tenant turnover rate.
On average, turnover can cost over $2,000 per tenant. Think about how much this loss adds up per year. You also have to pay for repairs, screen for more tenants, invest in even more advertising, and so forth.
Potential buyers also look at this metric. An investor interested in a commercial rental property may not want a property with a high turnover rate.
Now is the perfect time to integrate lease renewal strategies into your business plan. Here are some tenant retention tips every investor needs in their toolbox.
1. Identify the Ideal Long-Term Tenant
A low tenant turnover rate should be at the forefront of your mind. This process starts by defining your ideal tenant.
If you want to reduce tenant turnover, you need a long-term tenant. Ask yourself what qualities this person needs. How do you find out this information?
A potential long-term tenant is more likely to have five-year business goals. It may be someone moving to the area to be closer to their market. They're often someone who can prove they can pay the monthly rate long-term.
The ideal tenant has a good history of commercial tenant-landlord relations. It's a good sign if the lead was at their previous address for a few years.
2. Plan Your Marketing and Financials
Craft this profile first and build your marketing campaign around attracting and converting this profile. Build your screening process around this goal. Commercial property managers can be of great help here because of the extra mile they're willing to go to secure the perfect tenant.
Look at the applicant's business financials to gauge the health of their company before moving forward. You want a commercial tenant with a winning business strategy for the local community.
3. Discuss Community Needs
When filling a commercial vacancy, observe what the community needs first. If the area already has enough cafes, there's a higher risk of business failure. However, if the community needs a new laundromat, there's an opportunity there.
Your property type also makes a difference.
If you own a vacant office building, you'll need a tenant with a proven track record of business success. They may own a successful production company or product development firm and need an office space closer to their market.
4. Retain Tenants Through Incentives and Effective Communication
You don't want a profitable tenant to move their retail space or headquarters to another promising area. If the renter is in a position to negotiate, talk to a real estate professional about including incentives in the lease renewal contract.
The above points speak to the importance of great communication. It's vital to know your tenant's needs, from maintenance concerns to property upgrades.
Don't move forward with this decision without help from an experienced commercial property manager.
Remember These Lease Renewal Strategies
Put your portfolio first by reducing tenant turnover numbers. Think about the above lease renewal strategies. Identify ideal tenants, community needs, and incentives.
PMI Los Angeles is committed to building a thriving business community. We've integrated the latest technology into our full-service real estate asset strategy to maximize profitability for our clients. Talk to us about our Los Angeles tenant strategies.
Schedule a consultation to learn more.
