Commercial real estate can be a lucrative investment. Not only do commercial properties often generate higher rental returns than residential properties, but landlords also enjoy the added security of longer lease terms and incremental rent increases written into the lease agreement.
However, the ability to generate solid returns from commercial property is entirely dependent on one thing—whether you can source quality tenants.
If you’re curious to know how to find tenants for commercial property, there are several strategies you can use. In this article, we’ll equip you with everything you need to know to find a suitable tenant and get the most out of your investment.
How to find tenants for commercial property: What are the options?
Commercial property agents
The stock standard strategy for many commercial property landlords when seeking a tenant is to engage a commercial property agent.
Commercial property agents operate in much the same way as a residential property agent, however they focus either exclusively or primarily on commercial properties.
A commercial property agent is generally well-connected with local business communities, which can be helpful when searching for a tenant, however, they can be expensive.
While the fee structure between different agents can differ, you can generally expect them to charge an initial leasing fee (usually the equivalent of around 1-4 week’s rent) as well as an ongoing rental management commission (somewhere between 5-10% of annual rental return).
Self-managed tenant sourcing
Commercial landlords also have the option to source tenants themselves.
Opting to self-manage your tenant sourcing can maximise the return on your investment by eliminating unnecessary property agent fees. While it will involve a little work, we, at Property Now, make it easy by providing cost-effective methods to advertise your rental property.
You’ll be able to create an online property listing on a range of leading real estate websites to maximise visibility and reach commercial tenants on the lookout for a property like yours.
You’ll also be able to access additional services and support to help you conduct a professional advertising campaign, such as online application lodgements and inspection bookings, printable brochures, professional photography, advertisement copy and ‘for lease’ signs.
Evaluating prospective tenants
Commercial investments do carry some risk. Not only can a tenants’ business requirements change over time, but they can also experience fluctuating profits while also being subject to changes in wider economic conditions.
To find a tenant that’s likely to stay in the longer term, it can help to conduct a basic suitability evaluation to minimise any risk to your investment.
Some things to consider include:
- their rental history
- the general financial health of the business
- how well fit-for-purpose the property is, and
- the volatility of the industry they’re operating in.
What if you can’t find a suitable tenant?
On occasion, it can take some time to find a suitable tenant. If you’re finding it difficult to source a tenant and facing significant holding costs, it might be worth weighing up whether it’s better to lease or sell your commercial property.
Just like self-managing the commercial leasing process, Property Now also makes it easy to sell a commercial property without an agent and still achieve a great price.
Get started with Property Now to lease or sell your commercial property for a fraction of what it costs to use an agent.