Last edited 22 Nov 2019

Property practices to assist tenant retention

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Replacing a tenant requires substantially more effort and expense than retaining a tenant.

A cosmetic overhaul of a building is one of the quickest ways to give a building an uplift. Tenants’ spirits can be improved by a change of colour (particularly a shift to natural colours), improved lighting (more natural light if possible) and the replacement of ageing fixtures and fittings.

But before embarking on a refurbishment programme, consult each tenant’s lease and the Schedule of Condition (seeking advice if necessary) to check dilapidations responsibilities because unless the lease is adapted, changes to the fabric of the building may pose complexities when it is terminated. Also consider the timing of the refurbishment in relation to the planned preventative maintenance cycle. It would be unwise to invest in new lighting, for example, if a suspended ceiling is due to be replaced within a year.

Consider what additional amenities might benefit existing tenants. This might be a comprehensive change of use for parts of the building – such as the creation of a crèche, café or gym, or more simply, additional facilities such as storage lockers, a concierge service or digital security system. Amenities add personality and broaden market appeal. But plan additional facilities carefully, ideally consulting tenants to ensure suitability.

If the property does not already have free wireless Internet access, this should be a top priority. Other technologies which might be provided alongside Wi-Fi may take an owner's service from basic to desirable.

Many Grade A offices now provide network-based heating, ventilation and air-conditioning systems which monitor performance and adjust the service based on the time of day. Other smart building systems can help owners reduce the amount of electricity being used by scheduling consumption, and can streamline visitor management by providing an efficient email-based system of registration.

Car parks provide an opportunity for additional facilities. Most building refurbishments involve a reduction in car parking spaces. While this is partly in response to the sustainability agenda, it is also in recognition of the increasing number of people using public transport, walking, running or cycling to work. The replacement of some car parking spaces with secure, covered bicycle storage, or external seating in an attractive landscaped setting, can be a bonus. Again, consulting existing tenants, and perhaps taking into account the likely needs of future tenants, is worth the time and effort.

Security, particularly in city centres, is an increasing concern and any improvements to surveillance systems can add considerable value. Rapidly evolving property management software, which can be remotely controlled and provide high levels of integration with other services, can prove to be very efficient after the initial investment.

Building owners should not necessarily be put off by the expense of improvements, as tenantsservice charges typically cover both the installation and running costs of many of the features mentioned here. It may be necessary to check the service charge agreement with a property surveyor and there is much to be gained from engaging with tenants to better understand their priorities.

An a-la-carte approach can address any conflicting views from tenants regarding which amenities they are prepared to pay for. And do not overlook the potential to extend some services to other nearby companies to reduce costs.

While much of this advice is focused on retaining tenants, it is inevitable that eventually, some tenants will move on. Or it may be that an owner wishes to change the tenant profile – perhaps creating an improved product that attracts a more discerning tenant. In this case, it is worth giving some thought to synergy - because tenants themselves can be a draw for other tenants, or a drawback. It is surprising how frequently investors purchase commercial buildings with tenant-mix disparities with the sole purpose of fixing the imbalance, and in doing so, increasing the value of the investment.

Finally, while an owner can add to the value of their property and both maintain and attract tenants by repositioning it in the market, they should wary of making changes for changes' sake. Having a plan that is fully costed is imperative, as is consulting with existing tenants and seeking the necessary advice from a building consultancy, lawyer or accountant.

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--Trident Building Consultancy