We are all wired to focus on the fire; the development, the acquisition, the anchor letting, the refurbishment. But when the break notice lands, when the friendly S.25 notice isn’t acknowledged and when the administrator rings, it gets your attention. What follows is a huge reactionary spike in time commitment. In my experience, the noisy estate isn’t the one that absorbs time; the real danger is the one that’s completely silent.
The Myth of the “Safe” Asset
You know the one I mean. The one that’s really well let. The one which never pops up on arrears lists. The tenants never call. The quarterly report from the managing agent is a single page that basically says: “Nothing to report. As you were.” And here is the danger. There probably is something to report here but property managers are not ‘early warning systems.’ Nobody is being forensic with occupier needs and requirements.
What Silence Actually ‘looks’ Like
If you could see what silence’ looks like’ then I think this is what you need to look out for; I call it property drift.
- The estate directory is out of date – the occupier names are wrong.
- The “To Let” board is bleaching in the sun and hasn’t been taken down from the last letting which completed 2 years ago.
- Tenants have started making their own rules. Pallets are stacked in the common areas and against buildings. Unauthorised signage and alterations are a standard feature.
- Restricted profile and presence, usually from overly mature landscaping, poor and dated wayfinding and an unclear brand.
- Restricted circulation around the estate. It’s a ‘free for all’ with parking.
Combined, these all serve to discourage occupiers from renewing and if they do, they will resist paying the same rent as the better managed estate around the corner.
And this is the killer. The estate is full, but the Average Weighted Unexpired Lease Term (AWULT) continues to quietly drift downwards, perhaps below 2 years and you have no knowledge of your tenants intentions. The meteor strike can often be a self-made one – because the tenants don’t feel valued, they just run down the clock.
The Cheltenham Example
A few years ago, I was appointed on an estate in Cheltenham. It was the very definition of the ‘silence’ discussed here. On paper, it was fine. Well let, low void rate. On-site, it was a ghost town. The tenants were paying rent, but they weren’t in occupation. They’d vacated and they were running the leases down.
The silence was actually the sound of a net income implosion and void rate explosion. The AWULT was sub 3 years and without a change of approach and a huge asset management time ‘hit,’ then the estate would have shown negative net income returns pretty quickly.
The Yoke Approach: Make Some Noise, and lots of it.
Asset Management is about knocking on the shutter doors, asking the difficult question and fixing the difficult issues to get the rent and lease term you want. You have to break the silence. You have to be the one who cares enough to cause a fuss. This is because when a landlord shows they care and deliver on their word, then the tenant starts to care. And when a tenant cares, they engage in different conversations. These often lead to valuation changing events such as a break clause removal, reversionary leases or even taking more space.
Search for Silence
Go look at the quietest asset in your portfolio. The one you haven’t thought about beyond your annual inspection. If you are lucky, it’s just ticking along. But more likely, it’s drifting off course, and the meteor strike might be expensive and time consuming to fix – but often, it’s avoidable.
If this feels familiar then get in touch. A tenant and wider asset audit can uncover quick and easy wins. Who knows what you’ll find to do.
