The Benefits of a Tenant Retention Program
The signing of the lease is just the beginning of a relationship with each and every tenant. It is equally as important to provide and maintain marketing programs & services that will keep tenants happy, profitable and remaining in their current space.
While some say that success of any business is a result of “location, location, location”, getting and keeping quality tenants is more of a struggle than ever before. One of the most important areas, an area often not understood, is developing an effective tenant retention program which includes marketing strategies that appeals to the tenants you seek and the tenants you wish to retain.
Tenant Retention vs Cost of losing Tenant
Have you ever looked at the comparative cost of putting a marketing strategy in place to retain tenants against the cost of a new tenant? Take the example of a neighborhood center with a leased space of 1,500 square feet and an annual rental rate price per square foot of $25 per year. If the tenant leaves at the end of the prescribed lease term and the owner has neither retained that tenant nor found a replacement tenant, the lost rental income from the space amounts to $3,125 per month. Add to this the $6,750 (3 years at 6% commission) on average paid to a broker to fill the space and a tenant improvement allowance of 3 months or $9,375 of lost rental income. Not to mention the lost common area maintenance fees (Triple net costs) for the center. In this scenario, the daily cost of that vacancy to the owner approaches $150 or $4,470 per month, when averaged over the entire year. Losing a tenant is expensive.
I know what some of you may be thinking. “Who doesn’t know how to retain tenants?
Tenant retention is a process. But, who doesn’t have a process? Owners, leasing agents and/ or their management companies have always had great communication between themselves and their tenant’s. You have those monthly newsletters that go out talking about what activities are happening at the center, when the parking lot repaving is going to start. You might even have a website where your tenant’s customers can go to learn about everything that is going on in the center. Plus on that same website there is a login area where tenants can pay their rent online. For the most part it has been a retention program that is only a relationship between you and the tenant. Not that there is anything wrong with that, but the days of sending out a newsletter, visiting them every so often, and placing a print ad in the newspaper are long past. Today’s tenants demand services-proven services.
So what does this all mean to you?
The health and happiness of your tenants is more important to you now more than ever before. Monitoring tenants allows you to catch problems early and address them, “An ounce of prevention is worth a pound of cure”, Benjamin Franklin. The program you now have in place to retain tenants is changing from an owner – tenant relationship to you acting in a roll as a consultant to assist in building the relationship between them and their customers.
“In the business world, the rearview mirror is always clearer than the windshield.”
~ Warren Buffett ~
Do you know where your tenants business will be in the future and how they will maintain their competitive edge? Tenants need to pay attention to the changing ways consumers act and think, because if they don’t adapt, they’ll be left behind.It’s tough to know what your tenants needs are in order for them to move forward. Many times it requires someone from the “outside” to take a look “inside” to show them what they have been missing.
Here are a tips to get you started in helping your tenants to move forward:
- First, get to know your tenant’s business. A SWOT analysis is a structured marketing strategic planning method used to evaluate business strengths, weaknesses, opportunities and threats. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business or project and identifying the internal and external factors that are favorable and unfavorable to achieve that business goals.
- Be a better listener and ask smarter questions.
- Help them through the thought process of developing a marketing plan, one that sets your tenant apart and connects them with the right target audience. Something that differentiate them from other competitors and creates action.
- Help them define their vision, stay clear and focus as much as you can. Do they see themselves with more locations, serving specialized types of customers, or developing a broader range of products or services?
- Make sure you know what’s important to the tenant; their bottom line, reaching goals and positive ROI.
- Once you have an idea of your tenant’s business goals and needs, create a suitable program for ongoing dialog.
This will get you started in developing a Tenant Retention Program.
This is not rocket science… Providing a sound integrated marketing and leasing strategy that will make your rental space appealing to the tenants you seek and will retain current tenants. Helping your tenants develop a strategic plan might seem like an overwhelming process, but if you break it down, it’s easy to tackle. As your tenant’s business grows and the business environment becomes more complex, the need for strategic planning becomes greater. There is a need for all tenants in your center to understand their direction and goals. Tenants consistently applying a disciplined approach to strategic planning are better prepared to evolve as the market environment changes.
I’m a big believer in, “If it ain’t broke, don’t fix it”. This is just another way to retain tenants. If you have any questions, contact Frank Arrotta