Commercial Real Estate – Beware of Tenants That Don’t Tell the Whole Truth

Commercial Real Estate - Beware of Tenants That Don't Tell the Whole TruthIn commercial real estate leasing or property management, you will come across tenants inquiring about vacant space just about every day. Whilst it is nice to have the enquiry, qualification is the key before you move on the matter.

To get the space leased as soon as possible, it is essential to understand the history of the tenant and their relative strength that they can bring to the building. Tenants will not always tell you the whole truth when they first enquire regards the property vacancy.

Here are a couple of issues which are very common in commercial property management and leasing when you take the enquiry from tenants.

Are they looking at other property as well? It is very common for tenants to look at a number of properties in the local area. They sometimes use the negotiation of one property against the other as a point of negotiation on reducing rental. Other agents may also claim the introduction of the tenant to attract commission in a lease deal.

The time that you spend with a tenant may very well be a waste of time if they have a number of other properties on the inspection or negotiation agenda. They can also be working with a few agents.

To deal with this issue, it pays to question the tenant deeply regards their awareness of the local area and what they have been looking at. Here are some key questions:

What do they know about the local area regards transport, regional demographics, community infrastructure, services and amenities, and business activity? What properties have they looked at recently? When do they need to move? What is the absolute ‘must have’ that will impact their leasing decision? Are they working with any other real estate agents locally? If so who? What do they know about rentals in the local area? Are they currently leasing premises elsewhere which will impact their decision on relocation?

Have they got the financial capability? There is no point inspecting a property with a tenant if they do not have the financial capability to pay the rental. The qualification of tenants should occur over the telephone initially and then in a meeting before any property inspections are arranged.

Here are some questions to assist with the tenant qualification process:

Are they paying rental on other property and if so what are the details? What is the size of their current premises? What rental guarantee or bond can they contribute to the new lease that they negotiate? What requirements do they have of the new property in fitout design, incentives, and services and amenities? Get details of their previous landlords and seek approval from the tenant to contact and verify the facts from the other landlord the occupancy detail. How long has the tenant been in business in the local area or elsewhere? Get some business history and evidence of business performance from the tenant and their accountants and or financiers. Seek agreement from the tenant to talk to their accountant’s regards business performance.

Whilst it is great to have an enquiry for a new lease in your vacant property, always qualify the tenant before you start giving away a property detail and arranging inspections. The landlord that you act for would expect such simple levels of business qualification.