Blog - TGC News

19 March 2019

Five Tips to Find the Right Tenant for Your Commercial Property

Why is securing a good tenant important?

Finding a reliable, stable and long-term tenant for your commercial property is important. It helps keep your commercial investment safe, secures an ongoing stream of income and may even reduce complaints and build your reputation as a landlord. You’ll also save considerable money in the costs of replacing a tenant.

How do you find the right tenant?

We know why securing the right tenant is essential. But how do you find the right tenant for your commercial asset? What should you be looking out for and what else do you need to know?

Follow these five tips to help you screen and choose the best tenant for your investment …

  1. Carry out due diligence

Before you lease/rent out your commercial investment, it’s important to know who you’re renting to. And this starts with a tenant check.

Conducting simple background checks by way of application forms, references, credit reports, face-to-face interviews and market or online research can help you reduce your risk and answer any lingering questions you have.

It’s also essential to:

  • Review a copy of your potential tenant’s certified assets and liability statements to help determine how solvent they are.
  • Understand your potential tenant’s proposed fit-out of the space (including signage).
  • Incorporate a ‘make-good’ – a clause requiring that your property is returned to its original condition – into your contract.
  • Evaluate your potential tenant’s long-term business plans.
  • Consider other retail businesses in your area (if it happens to be a retail space) to help avoid market saturation.

Reading glasses sitting on a rental application form next to a laptop

  1. Find out how the potential tenant intends to use the space

Try to get an understanding of what your tenant wants to use the space for and the number of people (and types of people) that will be passing through.

All commercial agreements incorporate a ‘use clause’, which defines the activity that the tenant can engage in on the premises, based on council restrictions/zoning. Usage may be changed by lodging a DA with the council.

Knowing in advance what your tenant intends to use the space for is also important as depreciation and wear and tear tends to increase relative to the number of people who pass through. And because the type of occupants leasing your space may affect vacancy rates within the same building.

Knowing your tenant’s business plans can also help to avoid problems down the track. If a tenant expects their business model to change, make sure you’re comfortable with those changes to avoid messy disputes.

  1. Do not rush your selection

While vacancies can be stressful, it’s important not to rush your decisions.

Changing tenants can be costly. Choosing the wrong match now may get your income stream back to normal quickly, but it could be expensive in future if the lease doesn’t work out or if your landlord-tenant relationship is punctured with constant conflict.

So, be careful to make sure that new leases match your investment objectives and remember to consider other factors that may affect the quality of your decision (such as how well the proposed tenant fits the business profile of the building).

Looking up at two modern skyscrapers against a blue sky

  1. Present well

A well-presented property usually attracts a significant number of high-quality applicants. In such a competitive market, tenants are likely to choose the best match for their needs, and that often means choosing the most modern looking property in their price range.

Also consider this: Businesses have a greater chance of success in a well-presented property. It’s in your interests to foster a long-lasting relationship with your tenants and to place them in a space that will help them thrive. If their business fails, you’re back to square one.

So, keep up appearances – make sure your property is clean and well presented, and invest in good quality paint, carpet, lighting, amenities and fit out to maximise your chance of attracting (and keeping) the right tenant for your space.

  1. Negotiate

You should negotiate a lease that satisfies the needs of both you and your tenant, paying particular attention to the market that your tenant is working and competing in.

Offering an incentive to make your property more attractive for ongoing occupancy is also commonplace in the current market. Be aware of what other landlords are offering in order to stay competitive.

Currently, most tenants are offered around one month per year of the lease, for leases three years or longer. You can also take steps to help with a tenant’s fit-out, particularly if it will be in your long-term interest. This can take the pressure off your tenant and help them make it through the difficult early stages of setting up in a new space.

You can learn more about the different types of incentives here.

A beautiful office fit out with a view

Find The Right Tenant With The Help Of TGC

A good tenant can be more valuable than high rental yields – at the end of the day if your tenant has a problem you do too!

If you are looking to find the perfect tenant for your investment, it’s always best to obtain professional advice. So, talk to one of our agents today. Call 1300 458 800.

Date: 19 March 2019 Author: TGC Writer
TGC News
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About the author:

TGC Writer

TGC is the largest privately owned commercial real estate agency in the Sydney CBD, with over 20 years experience servicing the CBD, City Fringe and greater Metropolitan property market. We’re committed to assisting you with your total property needs, including buying, selling, leasing and property management.

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