How Retail Property Management Businesses Can Attract Tenants
With the COVID-19 pandemic limiting indoor shopping and e-commerce becoming increasingly dominant, retail property management businesses are in a tough position. Although the long-term value of renting retail space to tenants can be high, there's great financial risk if the space remains unused. Meanwhile, minimizing risk and supporting positive cash flow are as crucial as ever.
Here are some smart strategies you can implement to tackle common problems property managers face in the current climate.
Pursue new tenants with proven strategies
Every month a property is vacant can adversely impact your cash flow. Rent abatement and tenant improvement allowances are common ways to entice new tenants. At the same time, though you might fill vacancies, these incentives could also strain your cash flow.
To minimize the downsides of these tenant enticement strategies, determine your break-even points and how long you expect the market downturn to last. Then, contrast a higher vacancy rate against the cost of these incentives on your cash flow. From a cash perspective, it's sometimes better to continue to pursue new tenants than to agree to terms that aren't favorable for you just so you can fill a vacancy more quickly.
Improve customer satisfaction
Some of the problems property managers face arise from not knowing tenants' priorities. Surveys can be an inexpensive way to gain useful insights and data into what's most important to your tenants. Consider surveying existing tenants to determine what they like and dislike, what you're doing well and where you can improve.
Then, use the survey results to help you address any issues, make improvements and enhance what you already do well. By addressing what matters most to your tenants, you'll likely improve retention. You may also be able to attract new tenants, as your current tenants may be more likely to refer you.
Drive tenant referrals
To actively encourage tenant referrals, consider creating an incentive program that rewards your tenants for qualified referrals. These incentives could range from rent abatements to gift cards to free services. Use the information from your surveys and any follow-up to determine what the best incentives would be.
To conserve cash, consider barter opportunities and partnerships as well as enticing tenants at a different property to provide free or reduced-cost gift cards. Then, advertise your referral program.
Advertise creatively—and smartly
If it's particularly challenging filling vacancies because your retail property is in a poor location or other factors, it's important to be strategic and creative.
Simple techniques like revamping your signage to be clean, attractive and noticeable still work. Hang understated yet eye-catching "Available for Rent" banners to draw attention to available space. In vacant retail spaces, ensure the windows and doors are spotless and consider posting large, nontypical signage. For example, instead of using signage that states, "Space for Rent, Call XXX-XXXX," try something catchy like, "Tenants love it here. How can we get you in?"
You can stretch a limited marketing budget further by conducting market research. Read property management and real estate trade publications. Drive around and look at retail properties with similar tenant profiles. Talk to tenants at fully leased locations to determine what the property managers are doing and whether you can cost-effectively do the same.
Consider retail-adjacent tenants
Aside from retail tenants, retail-adjacent tenants may be a good fit for your property. Service providers such as accounting or tax firms, chiropractors, insurance companies and others don't rely on retail traffic but can benefit from the exposure. Although they may not be willing to pay typical retail rates, you may be able to lock them in for a longer term without a need for rental concessions.
Shared kitchens and small distribution centers are also retail-adjacent tenants to consider. These businesses often rent spaces in small restaurants or retail locations to be closer to delivery points. To lease shuttered restaurants, seek out entities that provide shared kitchens or delivery-only restaurants.
Retail vacancies are one of the largest challenges in property management during the pandemic. But by finding the right strategies for your business, you can minimize risk while still ensuring your properties have the requisite cash flow to continue to sustain themselves into economic recovery.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.