The success of your commercial real estate investment depends on keeping that space occupied with stable, long-term successful tenants. You need a plan for attracting those tenants, getting them moved in, and then retaining them so they renew their lease agreements year after year.
When you want to enjoy the stability and extra ROI that comes with retaining commercial tenants, it’s important to provide a rental experience that tenants find successful and easy. You want to build a lasting relationship with your commercial tenants. To do that, you need to establish trust and excellent communication.
Bell Properties has some ideas about how to position yourself to attract and retain the best commercial tenants by building lasting relationships and enhancing tenant satisfaction.
Establish and Maintain Good Tenant Relationships by Sharing Expectations
Your tenant relationship begins even before your tenants sign a lease and begin making plans for your property. Think about how you respond to their needs, questions, and concerns while they’re seeing the property and communicating with you about lease terms and move-in requirements. Are you accessible during the marketing and leasing period? Do you provide the answers and the information that they need?
If prospective tenants have to leave several messages before you call them back, they aren’t going to feel like you’ll be responsive as a landlord. When they cannot get in touch with you as a tenant, they’re not likely to stay longer than their initial lease term.
When you’re listing your commercial property, respond right away to tenants who have questions about your location, your building, the space they’d be renting, and the particulars of the lease agreement they would sign.
Offer to set up showings, and be present and willing to answer questions. There’s a lot of self-showing technology being used in the residential rental space. Commercial showings are a bit different. You’ll want to leave prospective tenants alone to explore the property and think about whether it would work for them and their business, but you want to be there, at the building, walking them through the space and telling them what they need to know.
Here is where your relationship will really get off to a good and productive start: Once a prospective tenant indicates they want to rent your space and you’ve approved their application, make the move-in process as easy and efficient as possible. Provide reasonable timeframes for when the space will be ready. Offer resources and support as they’re getting settled.
Talk about what you expect from this tenancy.
Listen to what your tenants expect from this tenancy.
Setting up these expectations and reinforcing them to each other is an excellent way to ensure everyone is on the same page going into the agreement and the relationship. This will increase your chances of retaining your tenants for the long term, and it will establish a good foundational relationship upon which you can build something positive.
Continue building that relationship. You’ll maintain a good relationship by respecting the privacy of your tenants but checking in from time to time to make sure everything’s okay. Let them know when you’ll be on-site. Ask if there’s anything they need. Provide resources and information about the local area.
A good attitude goes a long way with your commercial tenants. They want to rent from people who are easy to work with.
Provide a Positive Rental Experience for Commercial Tenants
Remain communicative throughout the tenancy so you’ll have an easier time retaining tenants. If you sign the lease agreement, collect the necessary funds, and then disappear, tenants aren’t going to have a great experience with you. Remain communicative and helpful throughout the entire lease term. Make the rental process convenient for your tenants.
Provide resources and keep in touch without being overbearing. Tenants are going to be busy running their own business out of your business. They’re looking for privacy. You don’t need to be calling or sending messages every week. But, if there’s something happening in town that you think might interest them or impact their business, send a quick update. They’ll appreciate hearing from you that road construction is planned or there’s a festival in town some upcoming weekend.
Demonstrate gratitude. Say thank you when rent is paid on time or your tenant is accommodating to vendors, pest control people, or neighboring tenants who need help. You don’t want your tenants only to hear from you when something’s wrong. Keep your interactions positive and professional.
Be willing to invest in rewards and incentives. If rent is paid on time six months in a row, consider sending them a breakfast basket of bagels and muffins. It’s the opposite of a late fee; they’re getting positive reinforcement and they’ll remember that you appreciate them.
There are many ways to provide a positive rental experience. When you do it, you’ll find your tenants do not want to leave your space.
Respond to Tenant Maintenance Issues with a Sense of Urgency
Maintenance is a big part of tenant satisfaction, and when we’re talking about commercial tenants, maintenance is especially important. They cannot run a successful business if they’re not operating out of a well-maintained space.
When your tenants report a pothole in the parking lot or a malfunction with the security system or a problem with the heating and cooling, thank them for the information and respond right away. Maybe there’s a problem that needs attention in the building’s lobby or in their particular unit. If the lease agreement says that you’re responsible for maintaining the property and addressing these issues, make sure you’re responsive. Don’t wait to solve problems, and always communicate with your tenants about where things stand and how you’re planning to fix problems.
Some lease agreements will require the tenants to take care of their own maintenance issues. You still want to be informed of what’s happening at your property, even if something is going wrong or needs to be addressed. Listen actively to the problems your tenants are having. Offer vendor referrals or additional information that might help them. Be a resource during times of stress, and they’ll appreciate what you’re willing to do and how you’re willing to help.
Even if the lease holds tenants responsible for all maintenance, by being present and providing support, you’re establishing that you can be trusted, and your tenants will be more likely to renew their commercial lease agreement.
Always be clear about your expectations. Make sure your tenants understand what they’re responsible for when it comes to making repairs or replacements, and let them know when you want to be contacted and what you can help provide.
Every maintenance issue, whether minor or major, will feel like a big deal to your tenants. Take care of things quickly and make sure you have a great team of vendors and contractors who will treat your tenants with respect and care.
When we’re talking about maintenance, remember that curb appeal is important, too. Keep up with things like landscaping and pest control so your tenants can continue feeling good about operating out of your property. If they welcome customers and clients into the space, they especially want to make sure they can be proud of where they’re doing business. Don’t defer any maintenance or landscaping, and make sure you’ve got some solid recurring contracts in place so your property continues to look great.
When Negotiating Rental Increases, Keep them Reasonable
Commercial tenants do not have the same protections that residential tenants have in California. This is especially evident when we’re talking about rental amounts and the way you raise the rent on your commercial tenants in Los Angeles. You have a lot more freedom than a residential landlord.
When it’s time to negotiate a lease renewal, you’ll likely want to raise the rent, especially when the market has moved forward since the original lease signing.
This is typically expected by commercial tenants. They know they’re likely to pay more when they renew the lease. But, don’t make outrageous increases that will chase them away. There’s a lot of value to keeping your tenants in place, and sometimes making a minimal increase is well worth it in the long term.
There might already be language in your lease agreement that reflects how much the rent will go up. Or, it will be negotiable.
Think about retention when you’re negotiating the amount of your rental increase.
Your commercial property contract will likely spell out the terms of your lease and dictate what happens at the end of the lease. Look for language that stipulates the rent escalation provisions during the lease term and upon lease renewal. This is where you will find any amounts that have been already agreed upon in terms of rental increases. As a commercial landlord you can increase rent as much or as little as you’d like, provided that those rent increases during your tenancy are spelled out in the terms of your lease.
Listen to your tenant’s needs at lease renewal time as well. Maybe they want a longer lease term or a shorter one. Perhaps they’ll ask for some improvements or upgrades to the space. If you’re willing to negotiate, they’re more likely to stay.
These are just a few things you can do to keep your commercial tenants in place for the long term. If you’d like to talk further about this topic, please contact us at Bell Properties Commercial Real Estate.