I know a landlord with multiple properties in the Dominican Republic who has something that has always caught my attention: an extraordinarily low tenant turnover rate. And I don't think that's a coincidence.
Part of their strategy is quite simple: they talk to their tenants. Not just when it's time to renew a contract or when a problem arises. They do this throughout the entire business relationship.
What do you need? What can we improve? Do we need painting? An updated lobby? A new elevator? Additional parking spaces? An employee cafeteria?
It seems like common sense, but it's not always the case. Because when a corporate tenant finally calls the landlord to tell them they're leaving, that decision probably wasn't made that morning.
For months someone has been evaluating alternatives, crunching numbers, visiting properties, calculating capital expenditures (CAPEX), and seeking internal approvals.
By the time formal communication arrives, the movie has often already ended.
What is the real cost of losing a good tenant?
Sometimes, a landlord tells me, "Indhira, they're asking for a rent reduction." My first question isn't how much that reduction is. It's something else:
How much does it cost you to lose it? And here's a situation we're seeing frequently. A tenant may have been occupying a property for five or ten years. During that time, the rent has contractually increased every year.
The landlord looks at their latest statement and thinks, "If I was charging this much, I can't rent for less now." I completely understand that logic. The problem is that the last rent paid doesn't necessarily reflect the current market rent.
While that contract was in effect, new buildings appeared, the supply changed, user requirements evolved, and more modern properties emerged that now compete directly with that asset.
So, the space remains vacant because the landlord tries to enforce the last contractual rent. Three months pass. Six. Twelve.
And ultimately, the market forces negotiation. Perhaps they end up accepting a lower rent anyway, after having already covered months of vacancy, real estate commission, maintenance, grace periods, and possibly contributions for the new tenant's renovations.
Therefore, before saying no to a good tenantwhorequests a renegotiation, I would first run the full numbers. It can be much more profitable to adjust the rent and retain a good tenant than to defend for months a price that the market is no longer willing to pay.
Retaining doesn't just mean lowering rent
Buildings age too. While for years we think "that'll still hold up," new projects appear with better access, elevators, climate control, security, parking, amenities, and technology. Little by little, a once extraordinary building can cease to be competitive.
Therefore, CAPEX shouldn't begin when the first major vacancy occurs. If your tenants have been saying something needs improvement for a while, listen to them.
Updating an asset is part of keeping it current and competitive. And when I'm dealing with a reputable company that pays well, takes care of the property, and has been fulfilling its obligations for years, my recommendation to the owner is usually quite clear:
Do what's reasonable to retain her. Although, as a broker, a vacancy could represent a new business opportunity for me.
I prefer to recommend what I believe best protects my client's assets and interests.
There is also an account on the other side
The same principle applies to tenants. If a company is well-located, has invested a significant amount in its office, premises, or warehouse, and the property still meets its operational needs, moving shouldn't be the first response to any disagreement.
A new headquarters involves moving, renovations, capital expenditure, time, and months of internal work. Sometimes it's much more worthwhile to sit down with the owner and say:
"This is what we need to stay.".
Of course, if the space has stopped functioning or the property no longer meets the needs of the operation, then the conversation is different.
But a good relationship between landlord and tenant has value for both parties.
Retention is also an investment strategy
The landlord I mentioned at the beginning understood something very simple: he doesn't wait for the contract renewal to ask his tenants if they are satisfied.
He takes their pulse throughout the entire relationship.
Listen, identify needs, evaluate improvements, and try to anticipate problems.
Perhaps that's why it has such low turnover.
In the real estate business, we often talk about tenant acquisition, marketing, occupancy, and new opportunities. However, we sometimes forget that retaining a good tenant is also one of the most profitable decisions a landlord can make.
Because finding a good tenant can be difficult.
But losing one you already had because you didn't listen to it can be much more expensive.
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