Why landlords need to focus on tenant retention

The current economic situation being experienced in South Africa is putting pressure on commercial and retail property owners, who are seeing a decline in commercial property values. Statistics show that rentals are down and vacancies are up, which has major implications for rental growth, the main driver of optimistic valuations of commercial property.

Certain retail centres are feeling the pressure with consumers keeping their belts tightened, to the point that some retailers have shut shop or moved to cheaper premises – leaving rental vacancies that landlords can ill afford.

Gregg Huntingford, CEO of Spire Property Management offers the following advice to landlords and owners:

“Landlords need to make tenant retention their number one priority, as the biggest threat to property owners is that tenants will (as a result of higher market vacancies) be offered a better deal elsewhere and not renew their lease agreement as a result. This has a negative effect on property values given the likely vacancy a tenant’s departure will create.”

“With a vacancy and having to source a new tenant, come the costs of increased commission payable to property brokers as well as high installation costs. An effective discussion with the existing tenants, listening to their wants and needs and accommodating those where possible is generally a far more cost effective and prudent approach,” says Huntingford.

“Professional property managers act as a conduit between landlords and tenants - remaining close to the tenants at all times, knowing what is going on in their businesses and understanding their problems.”

"Property operating costs need to be carefully monitored to ensure that the most competitive price is being paid for the best possible service. Property managers should ensure that service levels of soft service suppliers are carefully evaluated and managed to ensure the highest possible service level is provided to the tenant and their clients.”

Huntingford advises that professional management teams need to maintain the value of the building on behalf of the owner by ensuring that the facilities are maintained regularly and that preventative maintenance is undertaken to address future problems.

“Slower economic times may actually prove the perfect time to undertake needed maintenance work to properties, as building and maintenance costs tend to reduce due to the lack of work for contractors and increased price competition in the sector as a result.”