Nurturing space | Keeping vacant commercial units in mint condition pays off in a competitive market
Imagine you are a decision maker for a company looking for new office space. Your company needs about 5,000 square feet with a mix of private offices, open space, a conference area and break room. According to your commercial real estate broker, there are a number of options in the Greater Portland area that fit your requirements, so a property tour is organized.
Building 1 is a multi-tenant 25,000- square-foot office building. It has a 5,000-square-foot unit that has been vacant for about six months. The building is well maintained, the landscaping is professionally manicured and the parking lot is in excellent repair. A few weeks prior to the tour, somebody sprayed graffiti on an exterior wall, but the landlord paid to have it removed within days. Inside, the landlord had the unit professionally cleaned after the former tenant moved out and repaired a few broken window blinds, replaced some damaged carpet and patched several nicks and holes in the walls. The total investment was about $3,000.
Building 2 is a multi-tenant 30,000- square-foot office building with three 5,000-square-foot vacant units. This building is also in good condition, but the landlord had decided to cut costs by hiring a neighborhood kid to do the landscaping. He did an adequate job, but there are a few weeds showing and the bushes have not been trimmed in weeks. The landlord also decided that, because his building was half empty, the parking lot did not need the fresh coat of paint he had budgeted for this year. Inside, his vacant units still contain half-broken furniture and trash from the former tenants and the rugs have not been replaced, or even cleaned. The layout of one particular unit in this building is perfect for your company, but it has damaged ceiling tiles and lights. It also smells musty, suggesting the air conditioning has been shut off all summer.
After seeing approximately 10 more properties, you can barely recall the perfect layout of Building 2’s unit, but you do remember seeing trash in the parking lot, the old furniture inside and … the smell. You ultimately sign a five-year, $60,000-per-year lease at Building 1.
A deal breaker
Building 2 is suffering from what one broker in my office cleverly refers to as “vacancy trauma.” That trauma can absolutely make a difference when you are touring as many as a dozen similar properties. As a landlord with vacancies, you must give your building every competitive advantage you possibly can. You have to prioritize your cost-cutting measures, especially when you are trying to fill a building in a difficult market like we have today.
Let me give you a real life example. I have been the leasing broker for three of Joe Boulos’ multi-tenant office and warehouse buildings in the Greater Portland area. Like most commercial brokerages today, we have faced some difficult vacancies. But Joe is meticulous about upkeep; he has been known to spend his Saturday mornings driving to each of his properties and taking pictures of chipped asphalt, damaged curbs, acts of vandalism, poorly maintained bushes and landscaping, and anything else he feels might be an eyesore or inconvenience to not only prospective tenants, but existing ones. These pictures make their way to his property management team on Monday morning and, by Tuesday, each issue is remedied. I know that every prospective tenant I show the space to will see a clean, attractive and well-maintained building. I can also confidently encourage my prospects to speak directly to existing tenants as references.
I have another client who owns a 140,000-square-foot, Shaw’s-anchored shopping center in York County. It lost a 4,000-square-foot, in-line retailer over the summer. Nowadays, it seems every shopping center I visit has one or two blacked-out storefronts with “for lease” signs. My clients, however, decided that a dark window was not the kind of image they wanted to present to their customers. So they hired a local artist to paint a collage with removable paint on the window. The result was a beautiful piece of artwork that the neighboring tenants and their visiting customers could enjoy. It was a very creative solution that shows the landlord’s commitment to maintaining a positive and enjoyable feel to the center’s shopping experience. And that is something prospective tenants truly appreciate.
I encourage all landlords to avoid “vacancy trauma” and think like a tenant. Proactive property upkeep and maintenance can make the difference between landing a new tenant and losing one. A minor initial investment of time and money can lead to significant long-term gains.
Justin Lamontagne, associate broker at CBRE/The Boulos Co. in Portland, can be reached at jlamontagne@boulos.com. Read more of Justin’s columns here.
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