Coming from a year where the United States’ unemployment rate peaked at 14.7% in April, businesses are having trouble staying afloat. And, many real estate owners are having trouble filling vacant commercial units.
Many businesses have adjusted accordingly, allowing their employees to utilize technology and work remotely from home. What does this mean for commercial real estate? Filling vacant commercial units for landlords and property management companies just became much more challenging, but not impossible. Here are several actionable tips that can help you avoid vacancy across your commercial units and buildings.
Offer Flexible Terms
As a landlord, it is tempting to lock tenants in for multiple years through a 3, 5, or even 10-year lease, especially with commercial units. In general, commercial units can be more difficult to fill. While these long lease terms are still possible to achieve, it may scare off potential tenants due to the previous months’ uncertain economic times and future months to come. Offering flexible terms, such as a 1-year lease, opens up your pool of potential tenants.
Renting a commercial unit as a business owner is a two-way street. Of course, the landlord wants to trust and believe that your business will stay in business, and you will continue to pay rent. On the flip side, the business owner wants to trust that you, the commercial building owner, will have the means to continue paying whatever expenses and overhead that comes with owning and managing the building. If not, the business owner would potentially have to move, which is not ideal.
In 2020, and likely moving forward, we will see more flexible lease terms for commercial units. For example, offering a 1-2 year lease has become more popular recently. Commercial building owners have also been experimenting with flexible pricing for their units. We are not saying let everyone rent for free! A few possible incentives that you can consider offering as a landlord are:
- Waived rent for first 1-2 months
- Decreased rent by 5-10% for the first 6 months
If you can get a strong and reliable tenant in your unit that does well, they are likely to still stay for multiple years even if the initial lease is shorter.
Consider All Types of Businesses
Keep an open mind when considering which type of business tenant you will consider when filling your next vacant commercial unit. The world has completely shifted and continues to shift with the growth of technology. This will cause business models to change. Don’t limit your tenant pool by the previous types of businesses you’ve had in your units.
First, identify any limitations to which type of businesses can operate in your building. You can typically find this out by contacting the city where your building is located or researching online. Many businesses and industries are still thriving during the past year and will likely continue to do so. For example, you can consider sticking to essential businesses in most U.S. states, such as a Chiropractor or other related medical services. Please note, this will vary depending on where you are located. Additionally, if you are going with a tenant in the medical industry, you need to make sure that your building and location is allowed. You can go after other businesses that are also essential, which provides peace of mind.
Allow Customization of Workspace of a Commercial Unit
Businesses and commercial spaces are not a one-size-fits-all combination. Allowing tenants to come in and customize a space will attract more potential candidates to fill your vacant commercial unit. If your unit is outdated, consider letting them spruce it up and do renovations. It can be unsettling to allow a new tenant to completely renovate your unit. Make sure you put everything in writing so that both parties are on the same page and are protected for any improvements.
You can structure tenant renovations in a variety of ways. Some landlords will split the cost. Others will pay for it all, in return, having the tenant sign a longer lease. Do what works best for you and the tenant. Remaining flexible with allowing customizations to your unit will get more potential tenants in the door to consider leasing your unit.
During tough times, it can be challenging to keep commercial units filled with consistent tenants. Do your best to stay creative when thinking of ideas for attracting the most number of candidates possible. From there, you can decide who is the best fit to fill your vacancy.
Alex Capozzolo is the Brotherly Love Real Estate blog owner and a content writer for the real estate industry. Our focus is on helping people through one of the most important investment decisions of their lifetime by seamlessly providing fast, honest, and professional real estate services.