When you as a landlord own commercial investment property,
the rent paid by your tenants is one of the main factors to underpin the property
value. For this reason and in every
lease deal with a new tenant, care should be exercised in just how that rent
will perform over the term of the lease.
When the market gets softer and less tenants are around, the
incentives that you give to the tenant to influence them towards your property
are generally significant. Tenants know
this and will ask for incentives of certain types such as:
Reduced rent over an extended term
There is an old saying in the property game and it goes a
bit like this: ‘It doesn’t matter where
you start with your rent, but it does matter where you finish’.
A lease is for a period of time. You can grow the rent with creative rent review provisions during the lease term, and your property managers should help you with advice to achieve that.
Within reason, the start rent for a new lease should be attractive enough together with an incentive, so that the premises are leased in the shortest time possible to a good tenant. A good tenant will underpin property performance; it’s that simple.
When you own commercial property, the decision
of rental type will arise from time to time, when you do a new lease with fresh
tenants. Prepare for the situations of a
new lease so that you can find the right tenant and transact the lease
effectively and directly at the right time.
It is a competitive property market today, and
tenants are sometimes hard to find and difficult to negotiate with. Ensure that
you have the total tenant and lease negotiation control from the very start
through a proactive rental strategy of lease marketing.
What type of tenant do you want in your
property? Not all tenants are
equal. Not all tenants can pay the same
rent regardless of the property and its location. Don’t focus just on leasing the vacancy;
focus on the best tenant that will support the asset and the investment plans
that you have.
Take the property and the vacancy to the
market with a defined lease strategy considering other competing properties in
the location. Review all the other lease properties in the location so that you
can position your vacancy for the best enquiry and the best opportunity.
The rental question will be between a net type
rent or a gross type rent in the leasing process. The decision you make should be driven by:
1. The rental standards set in the
local property market for a property of that type
2. The requirements of the tenants
in taking a lease
3. The age of the building and the
expenditure trends based on recoverable outgoings
4. The expectations of the
landlord in cash flow management
These 4 simple facts will help you with the
choices to be made on the lease rental.
If you need other help, an experienced local commercial property agent
or property manager will have some answers.
Given that you must live with the rent amount, lease
type and the tenant for a long period of time, it pays to fully consider the
rent choice and make the best decision before you proceed. Property investments are a product of choice
and strategy developed over time.