Burt M. Polson | Napa Valley and Vallejo's Commercial Real Estate Broker

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Three words a landlord hates to hear

“We are moving.” As a landlord of a commercial property these are three words we don’t like to hear as it means a vacancy is coming soon.

This is what I do; help landlords fill vacancies in their building. But, it is seldom an easy or quick process and oftentimes a big deal for a landlord.

A landlord who I have a long term relationship with recently lost an office tenant. The site remained vacant for a few months until I brought him a new tenant who signed a lease. As part of the new lease several improvements were to occur at the cost of the landlord.

Not only did the landlord need to replace the flooring and paint, fairly standard maintenance items, but had significant improvements to make as far as some lighting issues and American with Disabilities Act (ADA) upgrades. The tenant moving in was a “high profile” quality company and, therefore a well sought after commodity. So, the property owner was willing to pour about $50,000 of improvements into the space to secure the tenant.

It does not always cost the landlord tens of thousands of dollars in improvements to a space to secure a new tenant. Sometimes, the tenant actually accepts the space in its current condition and performs improvements on their own. Usually improvements that are tailored to a tenant’s particular business is their responsibility, whereas improvements common to an office space or are maintenance related issues are the responsibility of the landlord.

Securing a new tenant is a costly endeavor as not only is there potential tenant improvements involved, but most likely a broker commission. Also, let’s not forget the loss in income while the site remains vacant. The best advice is to keep the current tenant happy, but be sure you lease to the right tenant to begin with. 

What can a landlord do to insure a long and harmonious relationship with a new tenant? First, it is important to screen the tenant thoroughly in the beginning. Not only reviewing their financial information and creditworthiness, but also the viability of their business or industry. It is almost like picking a stock in the stock market - you want a company that will be around with a product line or service that is in demand and not declining.

Second, keep the lines of communication open. Understand and respond to their needs in a timely fashion. Respond to maintenance-related issues that are the landlord’s responsibility, quickly. Don’t forget to be flexible. Flexibility is easier with a tenant who is timely in their rent payments, follows the terms of the lease and takes care of your property.

Lastly, keep the rent competitive. Market rent can change over the years especially when a tenant has a long-term lease. It would behoove a landlord to consider renegotiating a lease that is up for renewal that is far above market rent rather than lose a tenant as we have seen how costly it can be when a tenant moves out.

Confronted with an unreasonable and inflexible commercial landlord? Leave your story in the comment section below.

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