Org Geldenhuys, MD of Abacus DIVISIONS, a property marketing and development company, gives some advice on how to reduce vacancies in your property portfolio in the current market conditions.
He says “Tough economic times like the downward cycle we are in now calls for a new and fresh approach ensuring you are not sitting with costly vacancies. We are seeing a rise in vacancies linked with a rate correction and a downward push in rentals across our client portfolios. This is now affecting our clients across the spectrum from listed REITs to individual property owners.”
Geldenhuys believes it is time for property owners with vacancies to “Start thinking out of the box to fill those vacancies ahead of your competitors.”
Here are some of the suggestions he makes that can assist property owners to reduce those vacancies.
Start Marketing as soon as possible. One of the best ways to keep your vacancies low is to proactively start marketing your property as soon as you know you’re going to have an impending vacancy. By starting your marketing process as soon as possible you will ensure that you have a new tenant signed up before your current tenant vacates the premises.
Set rentals at market levels. Market rentals depends on a number of factors, including vacancies in the area, the current economic lookout and political landscape as well as the desirability of the property and market rentals differs from property to property in the same area. Doing your market research before setting your asking rental will enable you to price your property at the correct price and attract the right tenant. Pricing above market rentals will certainly leave your property vacant and pricing it too low will unnecessary leave money on the table. He adds “Ask around before making a decision on what rentals to charge. It’s always a good idea to speak to a broking firm who has the critical mass in the area where your property is situated, someone with a track record in placing tenants in your area.”
Get your property marketable. When it comes to vacancies, it is necessary to have a critical look at the property from a tenant’s perspective. A quick clean-up and a coat of paint will go far in helping to promote a fresh new look. Get rid of old and dated blinds, clean or replace the carpets and paint light and neutral colours. None of this need to be expensive, but would give you the edge when it comes to attracting a tenant. Geldenhuys adds that “Don’t leave it up to the tenant and expect them to work out the potential of the property – there is a good chance that they will only see the dirty carpets, dated blinds and the dark spaces and not what the space can be for their business & their brand.”
Renew your current tenants. Retaining your current tenants is arguably the most cost effective way to reducing vacancies. Know when their leases are expiring and start discussions about a new lease period well in advance. Its always cheaper to try and keep a current (good paying) tenant than sitting with vacancies for a month or 6 and then once your found a tenant, having to pay tenant installation allowance and agent’s commission on top of it all. Retain your longstanding tenants by renewing their unit with new carpets and some paint and reduce their rentals to be in line with what the market pays. Geldenhuys says that “Tenants will also do their homework and know what the market rentals are for a specific area – our broking firm gets calls almost on a daily basis of tenants doing a price check for a specific area.”
Market Aggressively. Our advice to property owners are always to try and get as many eyes on your property as possible. Use a broker with a big database of prospective clients and a wide advertising platform. Use aggressive marketing tactics and make sure your broker list the property on all the major online sites. There are a host of tools available to effectively market your property which may include, To Let boards, digital flyers, online advertising on property portals, direct marketing efforts to a prospect database, social media advertising and networking. He further adds “don’t be afraid to ask your broker to provide you with their plan to make sure your property gets the marketing effort it deserves. If you are not satisfied with the plan – get yourself another broking firm.”
Carefully screen tenants. Tenant screening is a crucial part of any tenancy process that should not be omitted, even more so in a sluggish economy. Even if you are under pressure to fill a vacancy, make sure you do proper credit checks and do payment references of your prospective tenants from their previous landlord. There are some clever online tools in the market that can assist you with drawing tenant payment profiles and rental payment history – ask your broking firm for more information. Geldenhuys adds that “a bad tenant placement decisions can be more costly than you think. It’s not just the cost of replacing a tenant but also the missed opportunities of signing the good tenants out there.”
Make use of a trusted broker – It goes without saying that a good broking firm with a footprint in your area and the necessary market knowledge and profile in the market will get the job done for you in no time. Pick someone who has a critical mass of personnel and property stock in your area – as they are most likely to get the bulk of the leasing enquiries in a specific area. There is also a case to be made for paying full commission for the service and not taking shortcuts when making use of a broker as paying below market rates for the placement of a tenant might just mean that your property will not get first option or the right number of eyes that you need to fill the space.
Geldenhuys says that “the current market conditions and tough trading environment is likely to continue for the next while, leaving tenants under pressure to reduce costs or face closure. Landlords with a plan to reduce or minimise their vacancies will pull through and will be ready to capitalise on the upturn when it eventually comes!