Filling the space | Concrete tips on how to lease or sell that vacant property
Are you a commercial landlord struggling to fill vacancies? You’re not alone. All sectors of commercial real estate are experiencing some prolonged vacancies, and sale listings can sit on the market for a long time as well. Some of our landlord and seller clients have come to us recently to ask about the current market conditions and what they can do to lease their vacant spaces or sell their properties faster. In some instances, price may be a factor, but other times properties are priced appropriately and don’t move. Here are a few ideas we’ve recently shared with clients on how to promote their properties or make inexpensive improvements to attract tenants or buyers.
Sweat the small stuff
In this market, commercial landlords need to recognize there are multiple options for potential tenants. These tenants will shop around and compare options to find the best deal for the most attractive space. Some of our clients have buildings that haven’t been upgraded much over the past 10 to 20 years and these buildings have vacant space that is competing with space in buildings constructed in the last five years. So owners of older buildings need to be proactive in maintaining and improving elements critical to the quality of the property, like the building systems, roof and mechanicals, for example. Just as important, however, is to have good property management in place. A good management company will keep the common areas clean, be attentive to existing tenants’ concerns and ensure building systems are regularly maintained.
Landlords of older office and retail properties also need to pay attention to the little things. That means caring about the first impressions of prospective tenants. In the past, we have recommended that landlords tidy up common areas, install new carpeting in the common hallways and foyer, paint lobbies and install better lighting. Landscaping, flowers, seal-coating the parking lots, re-striping spaces and sweeping the pavement and sidewalks are all simple ways to make a big difference in the first impression your building gives a potential tenant. It’s amazing the number of properties with trash in the parking lot, graffiti on the buildings, cracks in the pavement large enough to fall into and just a generally tired appearance. Even the smell of a property can leave a bad impression. It’s just like buying a new car and having the “new car smell.” If you walk into a building lobby that has been recently re-carpeted and repainted, it smells new and looks better than a building that has 10-year-old carpet and faded paint.
Other small things we regularly see on office tours are stained ceiling tiles, lights that don’t work or are blinking, cracked windows, stained carpets, chipping exterior paint and dumpsters that aren’t hidden or enclosed in fencing. In this market tenants are looking at all options and they are seeking good value and good quality. In my experience, many tenants will not negotiate the price much if the space is fairly priced, the building is attractive and the space is maintained in a quality condition. But if the space is not in good condition and the building shows poorly, it doesn’t matter what the rental rate is, tenants will keep looking for an option that is clean, well-maintained and economical.
First impressions last
One of our clients recently purchased a vacant, 80,000-square-foot building that had been occupied by one tenant for 15 years. The lighting, carpet, ceiling tiles and general appearance of the property were unappealing to many tenants. So to give potential tenants an impression of what the space could look like, the landlord took a 1,600-square-foot space and added standard finishes to display future upgrades and a model detailing how the rest of the building would be renovated. This model-unit idea is often used in the residential condo market, but is rarely implemented in the commercial realm. The architect also created a finish board with a variety of color schemes for paint, baseboard and floor coverings, as well as an architectural rendering to show exterior improvements under construction. The old carpeting was then removed in the rest of the building so tenants could see the blank slate. This model unit and finish board approach is certainly less expensive than renovating an entire floor and it leaves the desired clean impression for the tenant.
Using simple, cost-effective ways to make a great first impression on prospective tenants is critical when trying to lease space in a commercial property. Adding incentives like free rent, additional improvements or co-broker incentives can help as well, but there is no substitute for presenting your space as a clean, professional atmosphere for a tenant to conduct business. In the end, real estate reflects on the tenant’s business, so if the building presents an unprofessional image, the tenant’s business could suffer. Alternatively, if a tenant’s business is located in an impressive building or on a neat campus, it reflects positively on the tenant’s clientele. And that’s the kind of difference that makes deals happen.
Drew Sigfridson is a commercial real estate broker with CB Richard Ellis/The Boulos Co. in Portland. He can be reached at editorial@mainebiz.biz.
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