Keeping Vacancies Low
Bill MacAvoy Featured in Progress Magazine
It has been said that every challenge is also an opportunity. When a commercial tenant departs, the impact to the Landlord is significant, both in lost net revenue, but also in the proportionate share of common costs and taxes. Often one tenant can materially impact the cash flow of the property, which becomes more significant if there is debt to be serviced.
Here are four ways that the vacancy can be minimized:
1. Avoid the vacancy altogether. Tenant relations are the basics of being a Landlord. Collecting rent, but not answering queries or maintaining the building and grounds to a standard acceptable to the tenant is a surefire way to increase vacancy risk. Dealing with renewals well in advance of notice and making appropriate concessions are prudent actions to ensure that the proverbial music doesn’t stop.
2. Start marketing early. If there is no way to renew the tenant, marketing the vacancy in advance of the tenant’s departure increases the odds of securing a deal that will minimize the downtime. Today’s technology allows lots of creative ways to get the word out. Commercial real estate brokerages offer groups of properties for rent or sale; being in their inventory can maximize your exposure to those who are looking for a lease.
3. First impressions matter. Prospective commercial tenants are drawn to the same things as residential tenants: good lighting, clean exterior, clean washrooms, etc. The downtime of a vacancy is also an excellent time to upgrade the space in terms of flooring, washroom and kitchen fixtures, and doors and windows.
4. Winning a negotiation and losing a deal is still a loss. When the offer paper starts to circulate, the dealmakers rise to the top of their game. However, sometimes the forest gets lost for the trees. In order have a fruitful multi-year relationship (and more renewals) sometimes it can be necessary to concede on more elements of the deal than planned. It can be a savvy business decision.
Real estate ownership can be a rewarding experience. But it’s not a spectator sport. It requires hands on management, either directly or through a service provider. Vacancies happen, but they don’t happen as often to proactive landlords; when they do, they can be turned into an opportunity to acquire a new tenant, who may be an even better fit.