Strategies to Lease Vacant Property in a Challenging Economy

In this blog, we’re going to highlight a few considerations for how to work get ahead of the pack to find a tenant for your vacant commercial property when times are a little tough.

In a challenging economic environment, before implementing any strategies to lease your vacant property, it’s crucial to start by analysing the current economic conditions. Your strategy will be partly determined by these conditions. For example, you need to understand whether there is still a reasonable level of inquiry in the market or if there is very limited inquiry. If there is still a reasonable amount of inquiry but your property remains vacant, then you need to consider why that is and what you can do about it.

If you’re not sure about analysing current economic conditions, we recommend you speak with some specialised commercial real estate agents and also do some independent research to become better informed.

Once you have a better understanding of the economic challenges you’re facing, you may like to consider if any of our below strategies are right for you to improve your chances of leasing your vacant commercial property.

Pricing Strategy: Competitive vs. Unrealistic

Is your pricing attractive? Pricing is one of the most critical factors in leasing property, especially during economic downturns. Are you competitively priced, or are you shooting for the stars? While everyone wants to achieve the highest possible rent, it may be prudent to recalibrate your expectations to align with the current market. For instance, if your property is vacant at $50,000 per annum and it takes you two years to lease it, would it not be better to reduce the rent to $40,000 and fill the property in half the time? In challenging economies, with mounting costs and pressure to keep businesses financially sustainable, tenants will look for the best rent deals to manage their overheads effectively. In particularly challenging times, you may need to consider being quite aggressive with your pricing to attract interest.

Presentation: First Impressions Matter

The presentation of your property can have an immediate impact on potential tenants. A property that is not clean and well-maintained can create a negative first impression. Keeping your property clean and well-maintained is the minimum standard. Beyond that, consider how your property presents from a market perspective. Speak with your agent about what tenants are looking for and ensure you’re ticking the right boxes. This might require painting, adjustments to the fit-out, or other upgrades to meet tenants’ expectations. While the cost of these works should be well considered, re-investing in your asset is a proven strategy to maintain strong performance over the long term.

Examples of upgrades to consider: Disability access to the property, disability compliant amenities, security lighting and cameras, flooring replacement or upgrade, LED lighting upgrade, fresh paint (internal and external), lift upgrade, HVAC upgrade (ensuring your heating and cooling is suitable for the space you have available), car parking improvements, green space upgrades (introduction of life into a building can offer a huge, cost effective boost) and signage / wayfinding.

Marketing: Effective and Targeted Exposure

Marketing your property appropriately is crucial. Do you have the necessary exposure to ensure prospective tenants can find your property? Marketing strategies should be tailored to your specific property and target market. Consult with your agent or a trusted advisor who understands the market and knows what is proving effective. It’s important to have a well-thought-out marketing plan rather than just throwing money at various marketing channels without a clear strategy. Effective marketing can significantly increase the visibility of your property and attract the right tenants.

Flexibility: Adapting to Tenant Needs (Maybe Most Important!)

Flexibility in negotiations can be a key strategy in leasing your property during challenging economic times. In fact, this may be the most important thing you should consider out of the strategies we have listed.

Consider how you can adapt to meet the needs of different inquiries. For example, if a client requires a longer rent-free period, or a much cheaper starting rent, but is willing to sign a longer lease term, it’s worth considering and finding a solution that meets both parties’ needs. The alternative might be waiting indefinitely for the next tenant. However, while being flexible, it’s important to make responsible decisions. Ensure you take appropriate risk mitigation measures, such as requiring an adequate bond or appropriate security (guarantors) under the lease.

By keeping an open mind in negotiations and being prepared to be more flexible than may have been required in the past, you can increase your chances of securing a tenant. Just remember to ensure that the fundamental elements are in place to protect your interests.

Conclusion

Leasing a vacant property in a challenging economy requires a strategic approach. Start by understanding the current economic conditions and the level of inquiry in the market. Adjust your pricing to be competitive, present your property in the best possible light, and invest in targeted marketing. Finally, and perhaps most importantly, be flexible in negotiations while ensuring appropriate risk mitigation measures are in place. By implementing these strategies, you can increase the likelihood of leasing your property even in tough economic times.