How do you shorten a commercial vacancy?
You shorten a commercial vacancy by working out what each empty month costs you, then pulling the levers in order: widen the reach of your marketing, fix the presentation, use incentives that remove the occupier's barriers, and only then cut the rent. Going direct to the businesses the property suits is usually the fastest of these. Scayled's Campaign does that for one property, building the list of businesses most likely to lease it, naming who decides at each, flagging the ones that need space now and writing the emails. Agents remain a good option too, and starting before the unit is empty beats every other lever.
- What does each empty month cost you?
- Is your marketing reaching enough of the right businesses?
- Does presentation and fit-out shorten the vacancy?
- Do incentives like rent-free work better than cutting the rent?
- When should you cut the asking rent?
- How does going direct to occupiers shorten the vacancy?
What does each empty month cost you?
Put a number on it before you decide anything else. Start with the monthly rent you are not receiving. Then add the costs you now carry that the tenant used to pay: property tax or rates, building insurance, service charge or common area costs, utilities, security, and the maintenance needed to keep the unit lettable. Depending on your market, some of these get relief on empty property and some do not.
As an illustration, a 20,000 square foot warehouse let at $12 per square foot per year is $240,000 a year, which is $20,000 a month in rent alone before any outgoings. Use your own figures, but do the sum. Owners who know their monthly cost of vacancy make faster, better decisions about incentives and price, because they can see what each month saved is worth.
That number is the budget for everything below. A lever that costs less than the months it saves is worth pulling. A lever that costs more is not, however tempting it feels when the unit has been empty for a while.
Is your marketing reaching enough of the right businesses?
Diagnose before you discount. Count the enquiries, viewings and offers since the unit came to market. Few enquiries usually means a reach problem, not a price problem: not enough of the right businesses know the unit exists. Plenty of viewings without offers points to price, specification or presentation instead.
Listings on LoopNet, Crexi, realcommercial.com.au, Rightmove Commercial, Bayut or the main portal in your market, plus a board on the building, only reach businesses that are actively searching and happen to look, which is why vacancy marketing beyond the listing portals matters. Widen reach by telling local tenant rep brokers you will pay an introducing fee, by asking your agent which occupiers they have approached directly, and by contacting businesses that suit the property but are not searching yet.
Reach is often the cheapest lever, because it costs effort rather than rent. Cutting the price of a unit that the right businesses have never heard of does not make them hear of it.
Does presentation and fit-out shorten the vacancy?
Often, yes. Occupiers usually have a deadline, and a unit that is ready to move into wins against one that needs months of work. Basic make-good pays for itself quickly: clean and repaint the warehouse, fix the roof and the doors, upgrade to LED lighting, clear and repair the yard, and bring the office and amenities to a tidy standard.
Bigger works are a judgement call. A power upgrade, extra loading doors, or splitting a large unit into two smaller ones can open the property to a much larger pool of occupiers, but only if that demand exists. Ask agents and look at the businesses around the property before spending, because speculative fit-out aimed at a tenant who is not in the market adds cost without saving a month.
Make sure the marketing shows the improved unit. New photographs of a clean floor, a clear yard and a bright office do more for enquiries than a paragraph claiming the unit is well presented.
Do incentives like rent-free work better than cutting the rent?
Incentives are usually the better first move. A rent-free period, a fit-out contribution, a stepped rent that starts lower, landlord works, or more flexible terms such as a shorter lease or a break option can close the gap with an occupier while keeping the headline rent, which supports the value of the property and sets the evidence for the next deal.
Choose incentives that remove the occupier's real barrier. A business worried about the cost of moving responds to rent-free or a contribution to fit-out. A business unsure of its growth responds to a shorter term or a break. Ask what is stopping them rather than offering everything at once.
Compare any incentive to your monthly cost of vacancy. Three months rent-free on a five-year lease that is signed four months sooner than it otherwise would be is a straightforward win. The same three months offered to an occupier who would have signed anyway is simply a discount.
When should you cut the asking rent?
Cut the rent when the evidence says you are above the market, not because time has passed. If businesses that suit the unit are viewing it and choosing comparable units nearby at lower rents, price is the problem. If nobody suitable is viewing at all, a price cut is unlikely to fix it on its own.
Do the arithmetic. A 5 percent cut on a five-year lease costs you 5 percent of 60 months of rent, which is three months of rent spread over the term. If it fills the unit three or more months sooner, it pays for itself. If the unit would have let in a similar time anyway, it is a permanent loss, and it lowers the evidence for every other unit you own nearby.
Check achieved comparables, not asking rents, before you move. Valuers, recent deals in your own portfolio, and local agents' market reports are the evidence that matters.
How does going direct to occupiers shorten the vacancy?
Going direct removes the wait. Instead of hoping the right business sees a listing, you build a list of businesses the property suits, around it and across the market, find the person who decides at each, and contact the ones with signs of needing space first: volume hiring, contract wins, new sites, funding or a lease ending. The first conversations happen in the first week rather than whenever an enquiry arrives.
The strongest version starts before the unit is empty. As soon as you know a tenant is leaving, start the outreach, so viewings can happen during the notice period and the next lease can begin close to the day the last one ends.
To hand the leasing campaign off for a single property, use The Campaign from Scayled. The address and a short brief are all it needs; from there Scayled compiles the businesses most likely to lease the space, identifies the person who decides at each, puts the ones that need space now at the top and writes each email in the owner's name. Focused covers the strongest 100 to 150 businesses from US$449 in about three working days, and Full covers 250 to 350 for US$749 in about five. Set against the cost of one empty month, it is usually the cheapest lever on this page.
Find Who Will Lease Or Buy Your Property.
Send the address. Scayled finds the 100 to 350 businesses most likely to take the space, the person who decides at each, the ones already showing signs of needing space, and writes every email. One property, one payment, from US$449.