Shopping plaza and mixed-use property investments have become even more desirable this year. Of course, the actual performance investors will realize in their portfolios and bank accounts is a lot more about the execution and management than just the potential of the acquisition. One of the biggest differentiators is going to be vacancy and occupancy rates. If units are empty, they aren’t producing income. Vacant units bring down cash flow and yields and eventually cause a domino effect throughout the property that can negatively impact asset value.
Here are some of the ways that expert property managers mitigate vacancy risk, to keep properties full and performing at their maximum potential.
In general, it is wise to stagger lease end dates so that you never end up with a large number of units potentially coming vacant at the same time. This will help keep vacancy rates low over the long term and keep cash flow steady.
Smart commercial property asset managers are proactive and diligent about forging and maintaining great relationships in the industry. This includes corporate chains and franchises who may take space in multiple properties year after year. This should also include successful and well connected real estate and business brokers, startup incubators, and others.
Savvy landlords are diligent about communicating and staying engaged with tenants. Always be in tune with their needs and concerns. Know their aspirations for growing their business, and thoughts on moving or expanding their floor and window space. Look to meet needs for expansion, fulfilling the need for new locations, shrinking the footprint, etc. and you’ll be able to keep them as tenants for far longer and the relationships will be far more profitable.
Good tenant relationships aren’t just about engagement. They are also about cultivating and maintaining good relationships, trust and appreciation. Short-term thinking, greedy landlords can sabotage themselves to the brink of bankruptcy very quickly by treating tenants poorly. Those who act in good faith will enjoy long-term tenants, loyal tenants in tough times, more referrals, and higher paying tenants. All while lowering operating costs and increasing net cash flow and yields.
Lining up new tenants when there is an upcoming vacancy shouldn’t be left to the last minute either. The best asset managers should have a waiting list of ready and qualified tenants wanting to move in, and ready to ink leases in advance of the availability date.
When there are gaps in long-term tenants, creative use of vacant space can keep up income, and overall property performance. They can be used as flex space for short-term and seasonal tenants, or for pop-up shops and events.
Vacancy rates can make all the difference in the real performance and returns on commercial property investments. Especially in the retail and mixed-use space. These traits are seen among the most experienced asset managers, who really know how to manage these properties and maximize their potential.