Why The Internet Is A Threat To Your Tenants

Why The Internet Is A Threat To Your TenantsMost property management training courses spend some time discussing tenant mix and how to find that perfect harmony for your multi-tenant property.

With our first investment property management training article of the New Year, I wanted to share some thoughts about how the internet has, is, and will be affecting your tenant mix.

The Internet Is Your Friend

The internet plays a huge positive role in effective property management, marketing and leasing.

The internet is the key ingredient to zero or low-cost marketing efforts, establishing a professional image for yourself and your properties, and can reduce your back-end property management costs through on-line tenant billing, on-line payment portals, and tenant repair requests.

Tenant Mix And The Internet

There are pros and cons to everything. When it comes to tenant mix and the internet there may have more cons than pros.

The internet is creating an ‘open source’ world, where entrepreneurs and small business owners can have incredible leverage, create businesses literally over night with out the need for a bricks-and-mortar location, and by extension wreak havoc with your tenant mix.

How To Protect Your Tenant Mix

Obviously you’re not going to be able to stop the internet. But you do have quite a bit of control over the mix of tenants in your property.

Here are a few tips that I’ve used to try and protect the tenant mix in our retail properties from the negative influence of the internet:

Sign short-term leases

Unless you’re planning on selling your property, it’s hard to argue against this.

By signing a short-term lease you minimize the risk you’re taking on a tenant, the tenant is reducing the risk it is taking on its business, you’re able to improve your tenant mix by taking on what might otherwise be a more risky tenant, and you’re reducing you costs by not having to pay a hefty up-front leasing fee to a broker.

Abate rent in exchange for tenant TIs

The more of its own money a tenant puts in to its space the better it is for you. The odds of a tenant doing a ‘midnight move’ are reduced and you’ve had some improvements done on your vacant unit as well.

Keep your rents competitive

The internet has had a huge impact on brick-and-mortar locations and will continue to do so for quite some time.

But physical locations do have their advantages. If you’ve signed a short-term lease with the tenant and are in a position to pass through some reductions to the tenant, you’ll given the tenant one less reason to consider moving its business completely on-line.

Discretionary Income, Tenant Mix And The Internet

If you’re able to apply those three steps to your business model, with luck you’re going to attract a higher volume of prospective tenants and may be able to be a bit choosy.

Over the last couple of years I’ve personally seen some tenants more affected by the internet and by there being less discretionary income than others.

Here are my top 10:

Travel agencies Mom-and-Pop convenience stores Video rental Electronics repair Churches Book stores Fitness Cellular Insurance Printing

If you’re actively involved in property management and trying to get a good tenant mix no doubt you’ll be able to add to this list.

Note that all of these businesses compete with readily-available substitutes found on the internet or are affected by there being less money in the economy, or both.