Commercial real estate can be a great source of recurring income, but you can only make money when you have tenants.
Most commercial property leases last for three to five years, but they can be shorter or longer under some circumstances. Whenever a lease comes to an end, the best outcome for a landlord is usually that the tenant wants to renew their lease. If they do, you don't need to worry about periods of vacancy or finding new tenants.
In this guide, we'll look at some lease renewal strategies that can help ensure your tenants want to stay for longer. Keep reading for more.
Provide Flexible Lease Terms
The more rigid a lease is, the more offputting some commercial tenants will find it. If the previous one was five years, they might feel that agreeing to another five is too high risk.
You could offer them a shorter lease of three or four years. In some cases, it may be suitable to agree to even less than this.
With that said, some tenants may prefer a longer lease. This can be beneficial for both you and them, so you may want to offer it when it's suitable.
Consider Flat Renewals
It's fairly common for landlords to increase rent with each renewal. While this will help you boost your profits (or at least keep them in line with inflation), it may not be the best idea.
Depending on market conditions, this could backfire. If your tenants can't afford a higher price, they might decide to leave and you'll be left with an empty commercial building.
A professional property management company can help you assess the market effectively. They can then advise you on whether increasing rent in a lease renewal is a good idea or if you should hold off and keep it the same.
Bring Renewals to the Renter
These days, people prefer to get most things done online. It can be more convenient for your tenants to allow them to handle their lease this way too. This allows them to renew their lease from anywhere at any time.
This is easier for both parties and can improve tenant satisfaction. You can organize this through an online tenant portal, which can also offer other features such as tenant communications, rent payments, and maintenance requests.
Make Improvements
There are various improvements and upgrades you can make to a property. If you do this while your tenant is there, they'll be happier with their situation.
This will make it more likely that they'll want to stay for longer as they'll feel that they're getting more than what they paid for. These improvements can also increase the overall value of your property.
Making Effective Use of Lease Renewal Strategies
The lease renewal strategies above will help keep your tenants happy and encourage them to stay. Offering them convenience and flexibility is always ideal, and making improvements where possible will only make them happier with their current situation.
PMI Presidential is a full-service real estate asset management company serving Richmond and the surrounding communities. Under the PMI brand, we're part of the fastest-growing property management company in the US. Take a look at our commercial property management page to learn more about how we can help you.
