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postheadericon The Commercial Rental Market

As the Economy Goes, So Goes The Rental Market

“The real estate economy is a large, integral part of the general business economy.  Housing affordability, the availability of credit and interest rates influence the demand for real estate. Local population trends also affect the value of real estate.  

The changes in supply and demand, due to the economy also affect commercial leases.  When the economy is doing poorly, there is lack of demand for a businesses services or product, the business may close and the unit can become vacant.   As this continues this not only affects the property owner’s bottom line but the remaining businesses leasing feel the effects.  Vacancy rates climb and the downward trend becomes more severe. 

Property owners must be proactive.   A good commercial property owner or manager tries to stay ahead of the market by understanding the distress of the economy on their tenants and working with the existing tenants to help them stay in the property during tough economic times.  It is better to collect reduced rents than no rents at all.   A vacant unit can take months to rent and thousands of dollars in needed tenant improvement money to attract a new tenant not to mention free rent. 

Work with existing tenants.   By working with existing tenants and anticipating changes in the market and adjusting rents accordingly, property managers can minimize the effect of contractions in the real estate cycle and keep vacancies as low as possible.   When space is in short supply, rents are high.    When there is a large supply of vacant properties, landlords have to be aggressive to lease space. 

New Tenant Leases.  “You don’t get a second chance to make a first impression.” Prospective tenants form their initial impressions of the premises based on “curb appeal”.   After the first impression is the usability of the space for the tenant’s intended use and price and terms.   Today it is a tenant’s market.   A landlord has to be flexible and have a clean, well positioned property with an attractive price point to attract today’s tenants.

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