Reinvention: Turn Your Sleepy Commercial Space into a Hot Commodity
If you’ve been trying in vain to lease out your commercial property the past few years, you may have wondered if your invitation to the rental party somehow got lost in the mail. After all, the residential rental market has been gaining like gangbusters. The commercial leasing market? Not so much.
The good news is that commercial landlords are finally being let in on festivities. Bolstered by a slowly strengthening economy, occupancy rates for commercial properties are on the rise. But before you pop a cork, dust off your thinking cap, because the commercial leasing market is still a renter's market and landlords need a creative approach to maximized profits.
Some of the factors that have produced more renters and boosted residential demand – higher employee turnover, underemployment, inconsistent growth in hiring – are the same ones that have stunted growth in the commercial rental market. As the U.S. economic recovery continues and businesses grow, the commercial market is starting to rebound. According to the most recent National Association of Realtors’ Commercial Real Estate Outlook, office, industrial and retail vacancy rates are all expected to decline into 2016. Multifamily vacancies, on the other hand, are expected to increase slightly due to the glut of new construction.
Does this mean you should ditch your apartment buildings? Nope. However, it does mean that there are increasing opportunities to lease your commercial spaces. And if you add a dash of creativity to your marketing efforts and consider new ways for potential tenants to use your properties, you increase your odds of finding stable long-term tenants.
Different Faces for the Same Spaces
A rosier outlook for commercial properties doesn’t mean you won’t have to work at getting your spaces filled. Even in improving market conditions, office vacancies are projected at a steep 15.5 percent in 2016. Commercial landlords don’t have the luxury of complacency. And depending on your market, you may have to hustle harder than ever to find good tenants.
One way to get moving is to think about new ways your commercial property can be used. Although many think the death knell has sounded for brick-and-mortar retail stores, it’s worth noting that the retail vacancy rate (13.2 percent) is lower than the office vacancy rate and is on a downward trend. Still, strong tenants for your standard retail business may be tough to find, which is why it may pay to think outside the box.
Clean Up with Pop-Ups
Consider, for example, pop-up businesses to fill in the gaps. Pop-up businesses (like a costume store at Halloween or a formal-wear store for prom) have high-volume sales in a short time span. Cobble enough of these short-term leases together and you could find your space occupied year-round, and at potentially higher rates for the shorter-term commercial lease contract. And right now is the perfect time to consider leasing your space to a political campaign.
Your property might also appeal to artists and artisans. Establishing it as a cooperative space for a group of artists will make it more affordable and appealing to this growing sector. Or really think outside the box – the cookie box, that is. One New Hampshire landlord leased a warehouse to a girls scout troupe to create a drive-through cookie booth.
If you have office space to lease, do some research into what business sectors are growing. Start by checking the Bureau of Labor Statistics for up-to-date information. Healthcare is a leader, so try targeting doctors and other medical providers in your marketing efforts. You could also try leasing your property as a meeting space, which would allow organizations that don’t have the funds for a permanent office a way to hold events.
One reason traditional office space has been harder to fill is the rise in remote/telecommute companies, that have no office. But not all telecommuters want to work from home, leading to a rise in office cooperatives. For a monthly membership fee, telecommuters can work in communal office space, along with all the attending amenities: internet, conference rooms, printers, fax machines, scanners, etc.
Your property might also be perfect as a community college’s satellite campus or for religious congregations. You could even try parceling out the space, say by renting a front window display or a parking lot. Demand shifts over time, so just because your space was originally designed for one purpose doesn't mean that is still the highest and best use of it.
To Market, to Market
Now that you’ve looked at your property with fresh eyes, take some time to reevaluate your marketing. If you aren’t current on rising online rental listing services, now is the time to catch up. You should be advertising your property on every available platform. That may include online listing sites that specifically cater to commercial leases, such as LoopNet and CoStar, but also Twitter, Craigslist, Facebook and Ebay.
Wait, Ebay? The website currently has listings of commercial properties for sale and for apartment and vacation rentals. A clever landlord might be able to marry the two and find a way to lease a commercial property via online auction, at least short-term. If traditional online services and print marketing aren’t getting the results you need, then brainstorm about new ways to reach potential renters.
New Twists on Old Tricks
Sometimes traditional real estate marketing methods can feel fresh when applied to commercial properties. Holding an open house, and even staging your property to appeal to different types of businesses (a rack and mannequin for a clothing store or a treadmill and mirror for a gym) could be a way to drive traffic to your space. And the old freshly-baked cookies trick never hurt, for open houses.
But whether you’re using print marketing or online methods, make sure your descriptions sizzle. Include lots of pictures and consider using a drone to take aerial photos; impressive photos can be especially important for large commercial properties. Need help crafting the perfect description? See “An Internet Dater’s Guide to Creating Irresistible Rental Ads” for tips on how to write an ad that pops.
Businesses and organizations still need space, and there’s no reason that your commercial property can’t fulfill those needs. A willingness to look in new directions and try a different approach may be all it takes to turn your wallflower into a winner.