2 Helpful Habits for Owners to Mitigate Rent Roll Risk
Here are two habits that all owners — regardless of portfolio size — candevelop to mitigaterisk intheir rent roll.
#1: Proactively diversify lease term and future rollover
A lot of time is spent negotiating deal terms to maximize the value of a deal or asset. Despite this hard work, the impact that term has on overall asset value and risk profile is often overlooked. Is the lease you’re negotiating coterminous with other large tenants? Does your lease rollover leave you overly exposed in certain years?
Reducing this risk will help your team retain / renew tenants, refinance / sell assets, and ultimately create value. An easy place to start is focusing more on term and expiration during the leasing process. Here are a few things to consider as you lease up new space:
#2: Routinely look at mark-to-market and tenant activity
For existing tenants, the lease terms are what they are. However, there are several items you can review and questions to consider that will help you assess the potential risk of those tenants:
These two habits can help you approach new (or renewing) leases proactively and with a clear strategy to reduce risk or exploit opportunities. Knowing well in advance that a tenant will be above market at expiration expands the tools you can use to ensure they stay and you can preserve as much income as possible: early renewal, blend and extend, etc. Have a tenant who is below market...well that is a good problem to have!