Episode 4: How to Find Tenants for Your Commercial Property
Episode Transcript
Welcome back to The Commercial Real Estate Investor Podcast, your weekly source for investing strategies, leasing & management tips, and market updates.
I’m your host, Tyler Cauble, and today we’re going over the three best strategies to find tenants for your commercial space.
Of course, there are many different ways to find businesses to lease space to, depending on how creative you get, but these are the three that I’ve found most effective on my properties.
Finding tenants and leasing commercial space can be pretty time consuming for more property owners. Especially if you’re not a full-time investor.
In fact, it can be a pretty painful process.
Handling those incoming phone calls, screening out the not-so-great prospects, site tour after site tour - and that’s all before you even get to the negotiations.
I’ve been there myself and I’ve also helped many other commercial investors along the way.
Unlike the residential world, commercial real estate doesn’t have a centralized listing resource like the MLS or Zillow.
While you can certainly utilize some of these online tools, they often populate your listing with incorrect information, the platform can be difficult to use, and you have to really pay to play if you want to get any attention whatsoever.
So, how do you find tenants for your commercial space?
Well, there may not be a unified database where you can easily place your commercial property listings, but you do still have a few options.
Here are the three most effective ways to find commercial tenants.
The first strategy is to list your property with a commercial real estate brokerage.
This is hands down the easiest and most efficient way to find tenants. Just hire a commercial real estate broker to do it for you!
Commercial real estate brokerages are dedicated exclusively to the leasing and selling of commercial property, which includes office, retail, and industrial real estate.
Since commercial real estate doesn’t have a listing database, brokers are the best resource to find out which businesses are currently on the search and which ones may be needing to relocate in the near future. They’re constantly in touch with business owners, property management companies, and other brokers so that they know what’s happening in their market.
Commercial real estate brokers have a fiduciary responsibility to you, so they’re working in your best interests and their fees are a percentage of the total lease value, so you won’t have to pay them until they provide you with a fully-executed lease.
You can also structure these payments so that you don’t pay their fees until you have money coming in. The most common way is to pay 50% of the commission upon lease execution after you’ve collected first month’s rent and security deposit and the other 50% at rent commencement - it won’t quite keep you from coming out of pocket but it’ll help. The other way is to pay a percentage of the monthly collected rents, but most brokers will raise their fee in this scenario, since they get paid over a much longer time period.
In addition to your commercial attorney, your landlord rep broker will be your expert adviser throughout the leasing process. So, not only can they help you find the tenant, they can assist with negotiating your letter of intent (which will save you on attorney’s fees), coordinate any vendors that you’ll need, such as contractors and architects, and assist in lease negotiations so that you know you’re getting the best deal possible for you.
Now, unless your commercial real estate broker also has their law degree they cannot give you legal advice, but they do know what’s standard in the market since they do it every day, so they can advise on whether or not concessions may be necessary.
Landlords that hire brokers to lease their space often find higher quality tenants and negotiate stronger deals.
Your second best option is to list your space for lease online.
If you’re looking to acquire a piece of property or you’re preparing for an upcoming vacancy, you may not yet need a broker to help you find a tenant.
Maybe you’re in the early planning stages trying to put a proforma together and just want to see what market rates and terms are.
Options like Loopnet, CREXi, and Craigslist allow you to scratch the surface and familiarize yourself with the market so that you at least have a basic understanding of what you’re looking at.
Sure, these online resources may not have the best reach and you’ll definitely be dealing with some unsophisticated and low quality prospects, but you never know what may come your way.
These platforms do give tenants the ability to search by product type (such as office or retail), the total square footage available, and (other than Craigslist) other minor details, such as loading docks, ceiling height, or access, so as long as you are as detailed as possible when listing your property, you should only get targeted prospects.
One nice side effect of utilizing these online platforms, too, is that you may be able to find a commercial real estate broker that’s focused on the neighborhood or area where your property is located.
They’re receiving calls on other properties in the area from tenants that may not be a fit for those buildings, but could be prospective tenants for yours.
The final strategy is to place high quality signage on the property.
That’s right - actually put a sign up in the window.
And not just any sign - you need to be very intentional with the information on the sign so that you hone in your targeting here.
Don’t just grab a sign from home depot that says “for lease” with a number below it.
Those signs are barely visible, they’re too small, and they don’t give off a professional feel at all.
And trust me - tenants can be very concerned about how professional their landlord is. Many of them have had bad landlord experiences in the past and don’t want to cross that bridge again.
The signs I use on my properties are at least 4’x4’. If I can’t place one up in a window, I’ll get a pallet stand and place it out front near the road.
Feel free to place information about the space on the sign, such as the size and type of space or whatever you feel is appropriate. Keep in mind, though, that you won’t be able to reuse that sign for any other properties.
Here’s a bonus tip - return those phone calls!
I know far too many investors and brokers that just never return phone calls. If you’re going to get the space leased, you need to put a bit of effort into it, as well.
So that’s it for my three favorite strategies to find tenants for your commercial space.
If you’d like to find more information on commercial real estate, you can find a link with other resources in the show notes.
Be sure to subscribe to the podcast so you don’t miss an episode and I’ll see you next time.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors as a board member for the Real Estate Investors of Nashville.
Each week, I'm going live at 8:30am CST for my "office hours" to answer your questions about commercial real estate on the show. Let's hear what you'd like to know when it comes to brokerage, investment, and development!