The past decade of growth allowed for easy times in commercial real estate.  The expanding economy and limited new construction have kept property net incomes growing. But 2020 brought troubled times as many product categories of commercial real estate suffered desperately during the shut downs and are now on shaky ground. 

During times like these, the proactive property management team earn their keep. One can’t just coast along.  They must be hands on.  And many property owners are starting to ask their managers the tough questions.

In this article, we address the seasoned approaches to effective property management. And more specifically what strategies to employ when the economy has crested the top of the economic cycle and is on its downward decent.

What should be done before things erode further?

• Credit Worthy Tenants: Find the strongest possible tenants who can weather downturns in the economy. This includes national “bond rated” tenants as well as very established locally owned companies.   Some argue a locally owned striving business with little or no debt is superior to a national company. Securing long term leases is well worth the investment of free rent and tenant improvements.  This will bring stability during tumultuous commercial real estate times.
• Uncover extra revenue sources: Can extra income be derived by charging rentable square footage verse usable?  Are there cellular carriers needing additional coverage in the area?  Can kiosks or small restaurant venders be accommodated in the common areas?  When scarcity of land exist, more developable land can be created by installing subterranean retention ponds.  In essence, look under every rock for income sources.
• First Impressions: The grounds of the property, common areas and exterior elements of the  building attract tenants.  This also sets the stage for higher rents. This is true for office, retail and industrial properties.  For example, we recently toured a Maitland Center office building which had performed nearly $1,000,000 of common area upgrades. This might sound like a large cosmetic renovation budget but it only equated to $3.20 per rentable square foot and the lease rates post renovations increased by $2.50 per square foot. These costs will be recouped in 15-18 months.  Not to mention, the occupancy increased radically.
• Long term leases: Require long term leases for all new tenants.  For the existing tenants who have faithfully paid create incentives to get longer lease commitments NOW. Any leases which are expiring in the next 1-2 years should be targeted for early renewal.
• Lock in today’s lease rates: Tomorrow’s rates will be lower.  Prudently lock in today’s high lease rates to help ride out challenging times.
• Invest now to bolster your occupancy and rent roll. We have seen fantastic new physical buildings fail during down economies while the old dysfunctional building next door survived. Why?  Because a wise and prudent owner allows the property management and leasing staff to take the above steps.  By strengthening your rent roll in these ways, you will enter the recession in a position of strength not weakness.

Acquisition Consultants is quickly approaching its 30-year anniversary. Over these many years we have learned how to thrive in all economies. Are you looking for a new property manager right now or in the near term future? We are available to perform property management on your commercial real estate assets with the goal of thriving during these coming tough times. Please do not hesitate to make contact with us today.