Vacant commercial properties quickly generate a mountain of expenses. You don't want to pay property taxes, utilities, and fees on unfilled storefronts, offices, or warehouses.
If you frequently deal with vacancies, it's time to rethink your approach to lease negotiations.
In this guide, you'll discover the right tools for negotiating a lease.
Assess Commercial Needs
Your first step is to consider the business needs of your commercial leaseholder. If the company is profitable, but the business owner is considering a new location, think about the reasons why.
Questions to consider:
- Is the rent too expensive?
- Does the property need repairs?
- Do they need outdoor marketing help?
- Are they new to the area?
These questions are your cue to create incentives. The best incentives speak to the needs of the leaseholder.
For example, you could discount the leaseholder's rent for the first three months. As an alternative, make the first month's rent-free.
You could partner with local advertising companies to provide free (or discounted) outdoor signage for the leaseholder. This incentive also includes pop-up stands in other local businesses, like grocery and hardware stores.
Negotiations may also include community inroads. Partner with the business community to create outdoor markets, street fairs, and other opportunities for your leaseholders.
Follow the Market
When negotiating a Grand Rapids commercial lease, you have to check the area's market first. Rent prices fluctuate with the market. Thus, your lease must reflect the average rate for the area.
If your asking price is too high, the current leaseholder will move to a new location. Therefore, you must analyze your competition's pricing strategy.
However, don't sell your property short. Analyze the market for future appreciation values. If the property is situated in an up-and-coming area, you can set a higher asking price.
Higher asking prices are appropriate for the first lease contract. When setting this price, make sure the property is clean and free of damages.
Always Involve a Lawyer in Lease Negotiations
Never write a lease contract on your own. These contracts must be written by a lawyer. You should also consult a business lawyer when a leaseholder wants to negotiate a lease renewal.
Make sure the lawyer is present as you negotiate the lease renewal. The lawyer would then redraw a new contract with the agreed-upon terms.
Maintain Excellent Tenant Relations
Tenant relations are essential for a smooth lease negotiation process. Commercial tenants are more likely to leave if their maintenance requests aren't met. That's why PMI West Michigan provides a user-friendly online portal for requests.
Upgrades are also part of the tenant relations strategy.
Offer to upgrade the following:
- Storefront counter spaces
- Wall treatments
- Retail lighting
- New Windows
- Parking lots
The last point is an essential upgrade to consider. Offer to expand or repair the leaseholder's parking lot to help them improve customer experiences.
Create a Commercial Lease Negotiation Checklist
These tips are an excellent starter to your checklist. Don't forget to assess leaseholder needs, perform market research, consult a lawyer, and create a tenant relations strategy.
You don't have to navigate lease negotiations alone.
PMI West Michigan wants to guide you toward more lease renewals. It's a win-win for you and your tenants. Contact us today or book a rental analysis to learn more.