In retail terms, one of the biggest headaches in maximizing commercial real estate investment revenues is like trying to prevent any inventory from idling on the warehouse shelves. If we have properties available for rent, the last thing we want is for them to be unoccupied. So how do we maximize our utilization? There are a number of things to consider:
1. Don't overcharge
Supply and demand are very basic market forces, but it's amazing to see how many commercial real estate investors fail to take them into consideration when setting rental rates. While you certainly don't want to undercharge and leave money on the table, there is an optimum rate that will result in the highest occupancy of your property.
2. Develop your brand
As a caveat to the point above, there is a way to increase prices without adversely impacting demand. By developing a great reputation on the property management side of your investments, this added value will increase the attractiveness of your properties. The Trump Organization does this very well.
3. Let them come to you
Start a waiting list. Many commercial real estate investors with full occupancy stop looking for tenants only to find themselves having to work hard when units become available. Wise investors will prepare for this by continuing to advertise and cultivating relationships with potential tenants.
4. Develop all your relationships
Making friends with potential clients is great, but do not overlook your existing partners. Keeping current tenants are happy is one of the most important things to keep your love affair alive. If they're happy, they're more likely to stay. Satisfied tenants are also more likely to recommend you to their partners.
5. Offer your existing partners deals on your unused inventory
You can keep your tenants happy and maximize your occupancy by offering the use of your unoccupied units to them at a discount for a given amount of time while you try to find permanent tenants with an lease continuation option. This also makes units attractive to prospective clients as they see a unit in use, and removes the appearance of desperation on your part, strengthening your negotiation position.
6. Look outside your property
Helping to make the community that it’s in a more attractive place can increase demand for your property. If more tenants want to move to your area, then you're more likely to be able to rent your commercial real estate holdings to them, and at a higher rate. Try and have regular meetings with the other investors and property managers in your area to discuss how you might work together to make your area more attractive.
7. Warning: Be careful of bad tenants
We have been talking thus far about maximizing occupancy, but it is important not to overlook the fact that you only want the best tenants. Having a delinquent tenant will cause more headaches than it is worth. Sometimes, it is wise to wait it out and keep an unoccupied property until the right fit comes along.
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