Welcome to 2015. A lot has changed and is changing at this time. For example, I have cancelled my land line with Bell after decades; the only difference I experience is no monthly charges and no telemarketer calls. I have also bought new domain names, created a new web site and changed my email address. All to keep up with the times.
As a tenant, your world has changed dramatically even over the past five years. You are in for an abrupt awakening if you have not noticed this change and kept up with the times.
Real Estate Investment Trust (REIT) Landlords
REITs now control a very large segment of the leased property market, whereas just a few years ago the same percentage was controlled by small private landlords. REITs are so dominant they “set the pace” for rent and tenancy standards in entire markets. REIT tenants whose approach has not changed with the times will be frustrated with REIT landlords.
A tenant summarized his feelings succinctly as follows:“Play hardball and if we need to we will find a new location. I am tired of these [explicative deleted] REITs that don’t honour prior negotiations. This may be a lesson learned site …..This location has dramatically decreased in sales because of all the landlord moves and decisions and it has cost me 2/3rds of my profits from their horse [explicative deleted].”
Tenants need to change their approach when dealing with REIT landlords.
First, know that it takes a long time to administer or negotiate any aspect of your lease. Count on 3 – 6 months for a renewal or assignment negotiation.
Secondly, know that most of the REIT employees are good people who have absolutely no personal animosity or bias towards you as a tenant. Help them do their job by having patience and understanding. Yelling at them only puts your file at the bottom of their pile.
Third, your advisor needs to know the key players at each REIT, and know each REIT policy in order to manoeuver your position around as effectively as possible. It is possible to cut a “good deal” with these people, but it has to be on their terms and conditions.
Fourth, play “by the book”. Don’t take chances. Never miss a deadline. If you let your guard down, the REIT employee will do their job.
Most REIT properties are superior, that’s why they are owned by a REIT. If you position yourself correctly, the financial performance of your practice should benefit from the style of property.
Internet versus premises marketing.
It’s time to critically evaluate your marketing plan and mode. Twenty years ago, referrals and signage made all the difference. Currently, tenants are finding that former referral sources have become active competitors, and signage is making significantly less impact than it did.
First, consider your premises location as a marketing tool. Can you add window cling style signage or increase fascia or pylon signage? Can you freshen up existing signage by changing the style and colour? Tenants who change or add signage are shocked to find that people suddenly notice their clinic after not seeing it for many years.
Second, the internet has become a very large communication medium in certain demographics. This is quite interesting. Tenants in some markets are reporting 20 plus per cent increases in new patient traffic simply based on web marketing efforts, whereas other clients report no changes after extensive web marketing efforts. Perhaps this phenomenon is due to internet use by the younger demographic. My sense is that the two mediums are different and speak to distinctly different demographics. A savvy operator wants their web site to come first in the Google search and be easy to navigate, AND they want their premises “curb appeal” to reinforce their message.
The Target Saga
As we now know, 133 Target units are closing in the Canada. In order to close these units, Target needs to address their lease obligations which may be easier said than done. From Target’s perspective, their leases are assets if they can be transferred to successors at a profit. According to industry gossip, Target tried to sell its leases to new tenants, but their landlords forced Target into bankruptcy to transfer control of the leases to the landlords or to third party court appointees in order to quickly re-tenant the space and assume any profit related to lease transfers.
All of this manoeuvrings means little to tenants located in Target malls. What is important is that the space formerly occupied by Target will be re-tenanted by more active operators and will improve new patient traffic.
In summary, the days when you as a practitioner could administer your lease affairs is over. You will experience the difference experience makes by retaining appropriate advisors.