Finding the right tenant for your commercial property can feel like striking gold. But before you start counting rental income, there’s crucial groundwork to ensure your space is attractive and functional for potential tenants.

Let’s go through some of the key steps you will need to take to transform your vacant property into a prime piece of commercial real estate. 

But first – is it worth it? This is often a question we hear from those looking to buy a commercial investment property or considering leasing their property for the first time. 

Commercial properties can be good investments, but there are pros and cons to consider  like any investment. Here’s a breakdown to help you decide:

Pros:

  • Higher Rental Yields: Compared to residential properties, commercial spaces often offer significantly higher rental income. This translates to a potentially greater return on your investment.
  • Longer Leases:  Commercial tenants typically sign leases for multiple years, providing stable and predictable income compared to residential tenants with shorter leases.
  • Professional Tenants:  Commercial tenants are often businesses with established credit and a vested interest in maintaining the property. This can reduce the risk of late payments or damage to the property.
  • Appreciation Potential:  Like residential properties, commercial properties have the potential to appreciate in value over time, offering additional returns when you eventually sell.
  • Diversification:  Adding commercial property to your investment portfolio can offer diversification, potentially reducing overall risk.

Cons:

  • Higher Investment Barrier:  Commercial properties tend to be significantly more expensive than residential properties, requiring a larger initial investment.
  • Vacancy Risks:  If you struggle to find a tenant, you’ll face a loss of income until the space is filled.
  • Management Responsibilities:  Managing a commercial property can be complex, requiring you to handle maintenance issues, tenant relations, and potentially legal matters.  Consider hiring property management if needed.
  • Economic Sensitivity:  Commercial properties are more susceptible to economic downturns. Business closures can lead to vacancies and decreased rental rates.

If you have decided to rent out your commercial property, there are a few things we recommend doing to get your property ready for tenants. 

Spruce it up 

If it’s been a while since your property has had a good clean, now is an ideal time to do a deep clean including carpets, windows, walls and any other amenities in the property. It is also the best time to address minor cosmetic issues like chipped paint and flickering lights. 

The importance of kerb appeal goes beyond just making your property look pretty. It’s  crucial for commercial properties, influencing everything from attracting tenants to building brand image. For a better kerb appeal, you may consider cleaning or painting the outside of the property, pressure washing footpaths and driveways and redoing or maintaining any gardens. 

Address Maintenance  

Conduct a thorough inspection of all systems, plumbing, electrical, and HVAC. Ensure everything is in proper working order and fix any outstanding maintenance issues.

There are several compelling reasons to ensure all maintenance is done on your commercial property before renting it out:

Reduced Risk and Liability:

  • Prevents future problems: Addressing maintenance issues proactively minimises the risk of breakdowns or malfunctions during a tenant’s lease. This translates to fewer headaches for you, the landlord, and a more reliable environment for your tenant.
  • Limits potential legal issues: Neglected maintenance can lead to safety hazards or code violations. Addressing them beforehand reduces the risk of lawsuits from injured tenants or fines from building inspectors.

Increased Attractiveness and Value:

  • Positive first impression: A well-maintained property with functioning systems makes a strong statement to potential tenants. It conveys professionalism and shows you take pride in your investment, making the space more desirable.
  • Higher rental rates: Tenants are willing to pay more for a move-in-ready space with reliable systems and minimal potential for disruptions. Addressing maintenance beforehand allows you to command a potentially higher rental rate.

Tenant Satisfaction and Retention:

  • Smooth operation: By handling maintenance issues upfront, you ensure the property functions smoothly from the start of the lease. This minimises disruptions for your tenant and allows them to focus on running their business.
  • Happy tenants, longer leases: Tenants who appreciate a well-maintained space are more likely to be satisfied and renew their lease. This translates to stable income and avoids the hassle and cost of finding new tenants frequently.

Long-Term Property Value:

  • Preserves the condition: Regular maintenance helps prevent minor issues from escalating into major problems down the road. This extends the lifespan of the property’s systems and finishes, preserving its overall value.
  • Easier future sales: A well-maintained property with a documented maintenance history will be more attractive to potential buyers if you decide to sell in the future.

By prioritising maintenance before renting, you’re not just preparing the space for a tenant – you’re setting yourself up for a successful and profitable long-term investment.

Consider Tenant Needs

One of the biggest factors you need to consider is that of the business that is likely to rent your space, and what they need to make the space work for them. Consider the square meterage required for the tenant’s operation, including storage, employee areas, and customer space. Think about the layout and if modifications can be made to accommodate different needs.

Restrooms, break rooms, and proper internet connectivity are essential for most businesses. Depending on the business type, additional amenities like loading docks, security systems, or signage allowance might be important.

Additionally, consider the surrounding area and how well it complements the tenant’s business. Is there ample parking? Is it easily accessible to customers or clients?

Leverage Professional Help

Hiring a commercial property manager is probably one of the best steps you can take when it comes to renting your property out. They will be a valuable (and knowledgeable) asset when it comes to marketing, tenant screening and lease negotiations, saving you valuable time and effort.

A commercial agent can handle property inspections for potential tenants, freeing up your time and they can advise you on legal requirements related to commercial leasing to ensure your lease agreement complies with local regulations.

A good commercial property manager knows the market, and can give you advice on the type of tenant your property is likely to attract, and how you can ensure the property meets their needs. 

Making the decision to rent your commercial property isn’t often taken lightly but with a few easy steps, you’ll find quality tenants and boost your income earning potential.