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.
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 three months' rent,” says Huntingford. “Once you factor in things such as maintenance costs, lights and water and taxes, one can easily lose a further two months 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, says Huntingford, is thus very much a win win strategy.
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 wifi 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.
He explains that Spire uses a software platform (MRI) to streamline customer relationship management. MRI helps to organise, automate, and evaluate its 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 concentrating on offering residents the best experience possible while they rent in your building will result in the highest occupancy rate possible,” Paul concludes.
