How to Build Tenant Relationships & Increase Long-Term Occupancy

September 20, 2019 Washington DC

According to the CCIM Institute, retail occupancy rates are at a whopping 94%, and every investor views the Washington DC commercial market as the most stable in the country. In order to keep occupancy rates high and cashflow from stalling, DC area commercial property owners must prioritize tenant relationships above everything else.

It may seem risky to pay more attention to customer service than other important matters like budget management. But a large amount of commercial space available combined with high tenant expectations means they will go elsewhere if you’re not staying in touch.

Here are a couple of guidelines to build an effective tenant relations program for your commercial property:

Start LONG Before Your Tenant Signs the Lease

Tenant relations isn’t just a function of marketing. Everyone involved with getting the space ready needs to be involved. From property managers to construction workers, every person who comes into contact with your prospects—whether directly or indirectly—needs to work hard to make a great first impression. Problems early on in the process can lead to a damaged relationship before the tenant even moves in.

Hire a Knowledgeable Property Manager

If it were easy to manage a commercial property AND turn a profit, there would be no need to hire a property manager. The DC area’s real estate market is increasingly complex because of its government-based economy.

Local property managers understand the complicated world of government contracting that drives area businesses. They also know how to take advantage of tax exemptions and abatements that will help keep property taxes manageable and costs lower.

In addition to understanding the local economy and tax regulations, your property manager will also know what amenities and types of leases local tenants prefer or require in order to meet their business objectives.

Carefully Screen Prospective Tenants

Though screening tenants is a prerequisite for any commercial lease, it is wise to look beyond the credit report and references provided.

Things are not always what they seem. At times, businesses that appear legitimate are not upstanding at all. On the other hand, smaller businesses that may not seem to be good candidates may make great tenants.

Here is a link that will give you insight into the business dealings of your government contractor clients: DC Office of Contracting and Procurement Awarded Contracts Database: View all contracts over $100k awarded by the District of Columbia. Search by company name.

Lucrative contracts also exist at the county level, so it may be wise to ask your contractor tenants which government agency they work for and if they are the main contractor on the award. Even subcontracting can be big business; don’t write off a prospective government because they appear to be too small or haven’t been in business very long.

Have a Well-Written Lease AND Explain It Thoroughly

A lease is the cornerstone of your business and the foundation of the relationship between tenant and management. Because every relationship is different and you will likely have various tenants, don’t use a cookie-cutter lease.

Because of government contracting’s transient nature, be sure the terms are clear, and the tenant understands them before they sign. If they are working on a short-term contract, point out to them the lease’s length and the penalties involved if they need to vacate early.

Be prepared for negotiation and sudden changes to tenant situations. This is common due to the fast-paced nature of the DC market. But if you treat your tenants well regardless of their difficult circumstances, you will gain a good reputation and enjoy a healthy bottom line.  

Avoid These Pitfalls in Tenant-Landlord Relationship Building

Buildings Magazine editor Leigh Garris recommends not putting so much emphasis on the facility itself when working on tenant relationships. While the building’s amenities and condition are important, tenants are more concerned about the service than the space.

Never say no to a tenant. If someone comes to you with a need, it should be accommodated. If the request seems unreasonable, find out as many details about the problem as possible and work with your staff to come up with a solution that satisfies both you and the tenant. Don’t be afraid to ask for an additional fee if the answer to your client’s problem falls outside the lease terms.

Make Your Building Attractive to Tenants

You’ll always have the bargain hunter tenants. The DC real estate market is one of the most expensive in the country, so, understandably, some commercial buildings offer the bare minimum.

But to be successful, you need to really put yourself in the mind of a tenant and find out what they really want.

Energy efficiency, fitness centers, and parking are among some of the best amenities to offer your tenants. Knowing your tenants will provide greater insight into what would make them happy and increase your chances of a high renewal rate.

Keep in Touch With Your Tenants

If the only time your tenant hears from you is at lease renewal time, the chances of you keeping them in your building are low.

The Commercial Real Estate Development Association recommends contacting your clients often and personally to build and maintain a good relationship.  Email is a great way to send generic messages to all your tenants at once, but in the age of email overload, a phone call or a visit shows that you think of them as more than just a monthly rent check.

Wrapping It Up

Tenant relationships are not just for the property manager or marketing department. It takes a team effort to create a positive impression. Look for ways to incorporate an emphasis on tenant relationships into your company’s culture so everyone from the janitor to the CEO does their part to help keep your building full.