Minimizing Vacancies on Your Commercial Rental Properties

While 2007 had been a boom year for owners of commercial rental properties, 2009 was not. The year 2009 saw the highest rates of vacancies since the market fell apart in 2005. In 2009, Phoenix had a 17.4% commercial vacancy rate, Las Vegas had more than 20% commercial vacancy rate and Providence, Rhode Island had an incredible 30% commercial vacancy rate. While the economy appears to be improving slightly in 2010, it is essential for an owner of commercial rental property to find a way to minimize vacancies on his or her rental properties.

The Consequences Of Allowing Commercial Vacancies

There are several results of permitting vacancies of your commercial rental property. Some of these consequences are financial while others are legal issues. The most common problems you may run into include

• Decreases in overall revenue
• More difficulty in attracting new commercial tenants – Many tenants do not want to locate where there are vacant storefronts or retail space.
• Liability becomes an issue – This applies to the remaining tenants as well as to you. The empty space or spaces can attract vandalism and other unwelcome behavior.
• Insurance is directly affected

The problem with empty real estate space is it can end up being the result of and adding to a vicious cycle of continued empty spaces.

How To Minimize

There are several ways you can try to minimize the number of vacancies of your commercial rental properties.  You can hire a property manager to

• Be proactive in the renewal of leases
• Be aggressive in leasing efforts
• Provide excellent property management including maintenance

A commercial property owner can also attempt to keep the number of vacancies to a minimum by considering the type of rental agreements he or she wishes to utilize. A commercial lease is a contract. There are gross leases, net leases and step leases. Examine what the average market price is asking and what is actually applicable in your area.

To encourage leasing, you might also want to offer abatement. This is a reduction, rebate or a decrease in the rent. It is sometimes referred to as “free rent.” This may succeed in attracting and keeping tenants.

When You Should Consider Consulting An Attorney

Before you draw up any contract, talk to an attorney. He or she may be able to best advise you on the necessary legal aspects. A real estate lawyer expert will also be able to provide you with the necessary information on what will work best in minimizing the vacancy rate in your own commercial property.