All you need to do in todays market is drive around for about five minutes to realize that the current high vacancy rates amongst most commercial sectors give tenants in today’s market apple choices should they choose to relocate their business. However, there are a few things you can do to minimize vacancies:
Invest in the property – Although it may be difficult to put money into an asset that may still be declining in value, keeping the property maintained is a great way to keep tenants in your property. Even if you have higher rental rates than some of your competition, your property may be worth the additional rent in the eyes of the tenant if all their other options show signs of neglect. You may even want to take things beyond simple maintenance and actually improve any features that are a functional obsolescence. If the bulk of you tenants meet with clients at their place of business on a regular basis, having an up to date office building may be very valuable to the appearance of their business and therefore keep them around for a long time.
Don’t neglect existing tenants – It can be easy to spend too much time focusing on trying to get your vacant units/properties occupied. However, you will want to make sure you’re not forgetting about your current tenants. It’s a good idea to contact your tenants on a regular basis to make sure they are happy and to see if there is anything they need you to do. Most landlords wait until a tenant’s lease is up to put aside this type of face time, and by then it may be to late.
Even if you do keep in regular contact with your tenants, you are still going to find yourself on the opposite side of an unhappy tenant. If you do find yourself in this type of positions, try not to let yourself go on the defensive or point the finger somewhere else. This type of behavior is only going to make the situation worse, even if you are right. Instead, try to empathize with your tenants and work to find a solution that will put them back into your good graces and in the long run will help keep their rent payments coming in on time.
Education – One of the worst things you can do is try to shield your tenants from the truth about the market, or try to convince them that they don’t have any other options when they clearly do. The fact of the matter is; they’re going to do their own research and find out the facts of the market anyways. Not only that, but once they discover that you have been trying to mislead them about the market, their defenses will go up immediately and there will be little chance of rebuild enough trust to come to any favorable renewal terms.
I actually find it to be helpful to start approaching my tenants well in advance of the expiration date of their lease in order to start discussing the current market conditions and begin negotiations for their renewal. I will also bring in area comps and market data in an effort to be as clear about my position as possible and ensure to my tenants that I’m willing to make a fair deal for their continued loyalty to my property. Depending on the term of the lease, this can be anywhere between 3 – 24 month before the renewal date.
Choose your new tenants carefully – I’ve seen vacancy rates in certain micro markets in my region as high as 75 – 80%. With these types of vacancies, it’s sometimes hard to resist allowing any willing and capable tenant rent from you. However, be careful not to bring in a new tenant the may be in direct competition with an existing one. Doing so will likely result in the same vacancy rate once the older tenant decides to move on after they’ve come to the conclusion that you’re not interested in helping their business succeed. In an even worse case scenario, both tenant stay, but they eventually just drive each others business into the ground resulting in two vacant units where you previously only had one. You should also be careful of this type of scenario, as it may also get you in the middle of a lawsuit with one or both of the aggrieved parties.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
Commercial Sales & Property Management
Office: 775 850 5953
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
Legal disclaimer: I am not an attorney, tax professional, modification specialist or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.