Tenant retention is key to commercial building profitability

Posted On Saturday, 08 April 2017 08:03 Published by
Rate this item
(0 votes)

As the main source of income for commercial buildings, tenants are key, highlighting tenant retention as a primary focus for building owners and managers.

Gregg_Huntingford

This is according to Gregg Huntingford, CEO of Spire Property Management, who says that it is more cost-effective to keep your current tenants happy than to find new ones.

Tenant Churn can significantly impact profits

Huntingford refers to “tenant churn”, and the related cost of moving and installing tenants. “Turnover of tenants is costly and recruiting new occupants involves significant costs.

Turnover costs include loss of rental income, repairs to the rentable unit, and other hard costs. In addition, the pre-letting marketing costs can be significant.

“The existence of vacant space can significantly impact your profits and every time a tenant moves out for an avoidable reason, you often have the basic upfront vacancy loss of around 3 months rent,” says Huntingford. “Once you factor in things such as maintenance costs, lights and water and taxes, one can easily lose a further 2 month’s worth of rent. With stubborn vacancies, these numbers escalate quickly.”

Huntingford also notes that equally from a tenant perspective, staying at a premises with a good property partner offers value. When moving a tenant can expect to be spending a lot more on new premises than just the rent. When all the costs are factored in, the tenant may end up spending around a third of the rental again, in amortised costs.

Tenant retention is thus very much a win win strategy.

Retaining existing tenants

Sean Paul, Executive Director of Spire offers some advise on effective measures to retain tenants:

“The bottom line is to provide excellent customer service and to be responsive to tenant needs. Also engage with your tenants and keep them informed.”

“At Spire we look at innovative tenant retention strategies. Things such as offering renewal bonuses, rental discounts, free last month’s rent and free wi-fi can all work in encouraging tenants to renew their lease,” says Paul, who goes on to say that engaging in tenant retention strategies will increase your building’s profitability as well as reduce the number of dissatisfied tenants.

Paul explains that Spire uses a leading software platform (MRI) to streamline customer relationship management. MRI helps us to organize, automate, and evaluate our retention efforts – keeping track of leases and lease anniversaries, tenant records, maintenance activity and work orders,

“You will always have tenants that have to relocate because of jobs or life circumstances, but by concentrating on offering residents the best experience possible while they rent in your building will result in the highest occupancy rate possible.”

Last modified on Saturday, 08 April 2017 08:16

Most Popular

Fairvest to become fourth property company to list on A2X

Oct 30, 2019
DARREN WILDER
Fairvest Property Holdings, a real estate investment trust with a market cap of R2…

Pam Golding Properties Annual Residential Property Report 2019

Nov 08, 2019
SA Reserve Bank
Signs that the residential property market is beginning to stabilise.

Diverse range of residential and commercial properties on BidX1’s next online property auction

Oct 22, 2019
BIX1 AUCTION 1
A diverse array of residential and commercial properties with lucrative investment…

Atterbury launches its new co-working concept, Attspace

Oct 22, 2019
ATTSPACE1
Atterbury is making its first foray into shared workspaces with its new Attspace…

Prime commercial and residential development opportunities and investment properties on auction

Oct 22, 2019
 LOT 8 2
Business owners, entrepreneurs and developers seeking commercial or residential property…

Please publish modules in offcanvas position.