Are You Managing Your Tenants Successfully?

Managing TenantsManaging tenants successfully, is not difficult, if you make proper and prompt communication your first order of business. You also have a variety of primary tasks to handle:

• Tenant complaints• Preemptive management• Renewal programs

Tenant ComplaintsUsually you have the responsibility for major equipment in your buildings, such as a working elevator. If your tenants keep reminding you that something isn’t working and you don’t fix it, you are responsible for any problems or injuries that occur.

When their lease comes up for renewal, they probably won’t move out. Businesses don’t move as often as people in residential situations because moving involves some major expenses, such as business cards, letterhead stationery, and telephone service. However, if they become dissatisfied enough, they will move.Therefore, handling complaints becomes a critical issue. This is especially true when the market slows down, because happy tenants normally stay. Otherwise, they wouldn’t consider moving unless they are expanding and need more space, or perhaps they are extremely successful and profitable and they’d like a more prestigious base, perhaps from a Class B to a Class A building.Tip: Managing tetants successfully, includes handling complaints promptly and communicate effectively with your tenants to avert any troublesome situations.Preemptive ManagementIf you buy a building that already has tenants be sure to determine when each lease expires. This will immediately show if there might be any vacancies occurring at about the same time. If you have only a few tenants and even if only two of them have leases expiring about the same time that could possibly represent a huge loss for you.

What you need to do in this type of situation is meet with each of these tenants separately and discuss the expiration date now, before it occurs. If a tenant in a commercial building is going to move, they usually decide that at least six or eight months before the lease expires, so they can create detailed planning and scheduling.

When you meet with them, be prepared to talk about renewing their lease immediately. If they are willing to renew this far ahead of schedule, you should consider granting them extra concessions. Offering three or more free months when the lease expires is usually a deal that most commercial tenants would certainly appreciate.It’s also a good deal for you, because it could be significantly more than three months of vacant space if a tenant leaves. You might even have to include the cost of cleaning and re-renting and possibly remodeling the space, by moving walls or adding extra tenant improvements, like new carpeting. Those costs could be far beyond what you would be giving away with three months of free rent.

Sometimes the conversation with tenants turns up the fact that they would like some more space, perhaps a few thousand square feet. If your meeting with the second tenant helps you to determine they need more space, but it’s more than you can provide, they may need to move. This will allow you to offer some of their space to the first tenant.If the first tenant signs the new lease that includes the extra square footage, you could have less of a tenant vacancy problem than you had earlier. Sometimes this solution will work easily because it’s contiguous space.The whole point of this is to be proactive in your leasing. To ensure that you don’t have too much vacant space and reduced cash flow, pay particular attention to your tenants’ needs. Be careful to monitor your leases.

Preemptive management is a major part of managing tenants successfully and includes offering these renewal programs to balance your turnover, and make sure you’re on the top of your game.

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