These last few years haven't been easy on commercial property investors. The shift to working from home has reduced the competition for brick-and-mortar locations.
Though it may be a tough sell, you can still run a successful commercial property portfolio. The key is to practice regular commercial lease analysis to make sure that your practices align with the times.
Commercial lease analysis involves a combination of reviewing your own lease and assessing the current real estate market. Read on to learn why this is a benefit and what to look out for.
Assessing Current Commercial Real Estate Trends
If you're letting your commercial leases go stagnant, there's a good chance that your terms and pricing no longer align with the market. According to city data:
- Office vacancies have reached over 28% citywide
- Redwood Shores, specifically, has a 13% office vacancy rate
- Asking rents have dropped by over 4%
In other words, your asking rent from a few years ago may be too high for today's market. However, you're going to want to complete more localized comps to make sure that your pricing is competitive compared to nearby, similar properties.
Reviewing Your Lease for Legal Compliance
One of the many reasons that some investors get into commercial real estate rather than residential is that there are fewer laws to worry about. Commercial tenants don't have the same level of protection as residential tenants.
One California senator is looking to change that. If Senate Bill 1103 passes, commercial property owners will need to take additional measures to achieve legal compliance.
Regular commercial lease analysis encourages you to review legislative changes. Ensuring legal compliance is one of the most important investment property tips we can offer. When your lease breaks the law, you can face serious fines that cut heavily into your net profits.
Incorporating Incentives into Your Commercial Lease
In a tough market, commercial property owners need to go above and beyond to attract tenants. This means building incentives into your lease that encourage new contracts and lease renewals.
For example, Redwood investors should consider offering provisions for phased occupancy. This is a great way to reduce vacancies long-term. It also provides scalability to growing businesses, which can prevent them from moving as they expand.
Commercial investors should also consider offering a tenant improvement allowance. This makes it easy for tenants and landlords to work together to maintain a property. It also grants businesses a bit more freedom in making changes that would suit their needs.
Call PMI Redwood Realty for Commercial Lease Analysis
When was the last time you conducted a commercial lease analysis? In Redwood City's tough commercial market, now is a good time to start.
Better yet, why not get fresh eyes for commercial agreement review? At PMI Redwood Realty, we know Redwood City's changing real estate market. We also know what's working for today's commercial renters.
PMI Redwood Realty offers customizable and full-service commercial property management. Our real estate experts can take over day-to-day operations and boost your bottom line. Contact us to learn about our approach.
