Rent Strategy in Commercial Property Leasing
There are many ways to look at rent in any commercial property investment. Whilst every lease will have a starting rent many other factors in the lease are more important to cash flow.
What’s the formula? It is the rent over time that matters from an income perspective in a lease of investment property and not necessarily the starting rent.
The starting rent is only important if you are about to sell or refinance the property. What really matters is the value of the asset rental over time. How can you set and grow the rental?
The Value You Create in Leasing
Commercial property leasing experts can help their clients by designing a leasing strategy that is strategic and impacting in a positive way over the longer term. Leasing is not all about the ‘start rent’.
At the time of lease negotiation, strategy is everything. Many simple lease situations can be optimised through considering the following factors:
- The prevailing market rental as it applies to the property type
- The existence of other properties in the local area that may be considered comparable and competing vacancies
- The upcoming the new developments in the area and the city that may have an impact on your property type
- The amount of enquiry that currently exists for the property type
- The types of improvements in the property today that will be of relevance to the tenant
- The age and functionality of the property and any intentions of the landlord to refurbish or expand
- The vacancy factors that apply to the property type today and how they are being addressed
- The level of local business sentiment as it applies generically to the area and the region, and then consider the same questions specifically for certain industries that may be considered more successful than others when it comes to growth and local demographics
When the property market is slow or tough it is the selection of tenants and the stability of tenants in the property that really matters. The rent in a property can always be improved over time through skilful and wise lease negotiation.
Selecting Tenants and Retaining Them
Getting the right tenants into the correct location will always help the property improve as an investment. A good tenant retention plan will then help the landlord with the growth of market rental, and vacancy minimisation.
The rental strategy in a property will be largely impacted by the following two factors:
- Will the owner of the property be disposing of the asset soon?
- What are the prevailing factors of rental and vacancy that relate to the property type?
When you take on any commercial property for leasing, consider those two questions and adopt an approach that can productively help your client. A good leasing expert can add considerable value to a property over time. You are a solution for investment property performance.
