Aesthetics versus Numbers
Commercial and industrial real estate is a numbers game, and it’s this factor that makes it such a gratifying industry for me.
As commercial agents, we contact people and eventually we’ll find an owner who wishes to sell a property or a lessor seeking a quality tenant. We bring the property to market and eventually after showing it enough times, someone will decide it is suitable to buy or lease. The more you do this, the more hours you are prepared to invest, the more transactions take place. If only it was this simple!
The numbers game
Industrial and commercial property is more influenced by numbers than residential real estate. With a residential property, the number of bedrooms, car spaces and toilets is critical.
However, there is also the aesthetics that can underpin its appeal and value. Aesthetics are not a natural or measurable phenomenon. But it’s linked to the principle that beauty is in the eye of the beholder – every man’s home is his castle.
In the industrial and commercial sphere, the dollars are the key numbers. A commercial property’s affordability will be determined by the floor space (m2) and whether it can cater to a business’ storage, manufacturing, display and staffing needs.
Other numbers will indicate the health of a region. The Property Council, for example, issues an annual state of the office market that measures the vacant floor space in every major Australian capital city and regional centre. There is also Newcastle’s very own Raine and Horne Industrial Average which measures the vacancies in (m2) in the major industrial suburbs around our region (see www.raineandhorne.com.au/cms_lists/2/cms_pages/20622)
The Raine & Horne mid-year survey indicated an improvement in industrial real estate, denoted by a 1% drop in the vacancy rate. This is equivalent to approximately 30,000m2 of space being taken out of the supply pool by either leasing or selling. This has occurred in just 6 months, and every square metre of space corresponds to part of a new job.
5-steps to lower commercial vacancies
Despite my views on aesthetics, the staging of a commercial or industrial property could be the difference between a short-term and an extended vacancy. Here are some tips for minimising commercial property vacancy rates:
1. Retain current tenants – vacancy times can range from a few weeks to almost a year. Listen to your current tenant’s concerns and explore ways to overcome minor issues if you can, to help keep them.
2. Presentation - fill the holes, paint the walls, clean the carpet, landscape the grounds and keep everything in shipshape order - don’t let the cobwebs settle.
3. Don’t be greedy – cashflow is central to your investment in an industrial and commercial property. Simply put, if it is vacant there is no cash flow, and often this is caused when a lessor is unrealistic about rental expectations.
4. Market the property – I like to say, “You don’t see Gerry Harvey buying $10,000,000 worth of lounges and sitting back waiting for a customer to walk-in.” You must be pro-active and use the latest marketing and public relations tools to get as many eyeballs to your property.
5. Know your competition – how many buildings comparable to yours are in your area? As part of your research, find out what rents and prices they are achieving.
These are five simple steps that can help you increase the occupancy rates of your commercial property. However, I’d urge you to be patient and to seek professional help too. Commercial agents, such as Raine & Horne Commercial, have the contacts and expertise to help you maximise the returns from your commercial property.