What Tenants Look For In Commercial Buildings For Rent

“What Tenants Look For In Commercial Buildings For Rent” written by Mike Marko

Planning to start a business with commercial buildings for rent?

If you are, its a must to consider that commercial tenants have specific needs that differ from those of residential ones. Their concerns are largely about making a property suitable for housing their businesses.

Some may require alteration or heavy customization of the office space you’re renting out to them, for example.

They may also consider the space’s potential for accommodating company growth.

This tells you that commercial tenants seeking buildings for rent often have different criteria from residential tenants.

If you don’t know what these are, you may miss out on some great commercial tenancy contracts.

And that’s not something you want to happen.

To help you with that, here’s a guide explaining exactly what commercial tenants want in buildings for rent. These should help you figure out how to prepare your buildings for rent in order to attract the best commercial tenants.

Factors Tenants Consider in Commercial Buildings for Rent

Having commercial buildings for rent requires you to think about the factors that potential tenants will be checking. Such as whether or not you’re willing to work with them and if they can negotiate what they need.

But before we go over those, let us first understand what commercial buildings for rent are.

What Is a Commercial Building for Rent?

Most commercial buildings for rent are rented out as office spaces. Technically, an office space is a rented room or space appointed for administrative and business operations.

Running commercial buildings for rent has become a good investment. This is mainly because many companies now prefer to rent buildings instead of owning or constructing them.

Most entrepreneurs are now starting to invest more in office space rentals. Since they typically have less available capital than big companies, they can’t afford to purchase or build their own buildings.

That’s why commercial buildings for rent have become the go-to option for most of them.

Now as I said earlier, commercial tenants look for a variety of things when they seek buildings for rent.

Whether they’re startups or big companies seeking temporary business accommodations, they usually have fairly strict criteria.

Let’s go over them next, starting with the classes of buildings for rent.

Factor 1: Classes of Buildings

The class of the building is a huge factor that affects the amount of monthly payment.

Why? Because building classes give tenants an idea of the building’s quality.

These building classifications are used to assist tenants when they’re trying to rent a particular space. It helps them figure out if the building meets their standards, depending on how exacting those happen to be.

So building classification is among the first things tenants consider in buildings for rent. Property managers should use the classifications of their buildings for rent when developing a marketing strategy because of that.

Class A Buildings

A Class A building has a pleasing appearance and is typically situated in a high-visibility, prime real estate location.

Buildings for rent within this class are usually the ones that have the highest rent fees, for obvious reasons.

Clients are paying for the attractiveness of the building and the convenience as well as cachet of its address.

This class is good for businesses that want to impress clients. Some examples of these businesses are highprofile law firms, financial firms, and marketing and design companies.

Most Class A buildings for rent have common features such as these:

  • A high-rise style,
  • A top-notch Internet wiring system,
  • Concierge/valet services, and
  • Luxurious elevators and lobbies.

Class B Buildings

This building class is good for businesses that want a nice working space with a lower price tag.

Class B buildings for rent are as functional as Class A buildings for rent. The difference is, they may not have as much of an impact at first glance.

Some of these buildings were in fact previously Class A buildings. They were simply downgraded later on, due to wear and tear.

That said, there are also a fair number of new or recently-built Class B buildings. These were just deliberately made to be cheaper than Class A buildings.

Class C Buildings

Class C buildings for rent are generally suited for tenants seeking plain work-spaces. They tend to be more functional than attractive.

The nice thing about these buildings is that they usually have very low rental rates. They’re not ideal if your business is one that’s hugely concerned with appearances, is all.

Buildings in this class are normally older than those from the A and B classes. They’re also usually less attractive.

Take note that commercial buildings for rent within this class also tend to have older integrated technologies and systems.

For example, a Class C building’s WiFi and plumbing will usually be older than a Class A or Class B building’s.  

Factor 2: Available Space in the Building

The second thing tenants consider in commercial buildings for rent is if the building has enough space for growth.

This is a serious consideration for most businesses because they need to know if a space can continue to accommodate them if their company gets bigger.

If it can’t, after all, they may have to move out of it before the lease is up and look for another building… which is the sort of trouble most business owners wouldn’t appreciate undergoing.

There are many other situations where companies may require more space in commercial buildings for rent.

For example, they may decide to add amenities like an on-site fitness center and daycare services for their employees.

They may also need more paperwork storage space or more space for new computer equipment.

Enlivening the workplace is a way for managers to help workers improve their performance. Commercial tenants go for office spaces that have the capacity to hold such facilities.

The key to profitability in commercial property management is figuring out how to utilize and get payment for all the rentable space in your commercial buildings for rent.

Make sure commercial tenants see why every bit of space is worth paying for in their contract. Point out the convenience of not having to move accommodations should their company undergo growth in the future.

Factor 3: Location of the Office Space

I already talked about location when I mentioned building classifications. But it’s important enough to deserve a section of its own.

Location is another big consideration for commercial tenants seeking buildings for rent. Depending on where the buildings for rent are, more or fewer tenants may be interested in them.

Buildings for rent in developed areas tend to command higher rents. The same for those in the business districts.

 Tenants also tend to prefer a location in a safe neighborhood. That’s why you can expect to get more rent for a building situated in an area with a low crime rate.

Property managers must take into account certain features of the property’s location in order to strategize how they should market the property.

As a landlord, the following are some examples of location-related features you should mention when advertising for tenants for buildings for rent.

Near Public Transportation and Major Highways

An accessible building is valuable for the tenant, their workers, and their customers. A location that is easy to find is important for businesses.

Market accessibility to a neighborhood, ease of use, and office space and other buildings and business in the area.

Near Business-related Needs

Nearby structures may attract specific business. For instance, if the location is near a courthouse, you may attract a litigation firm.

Knowing how to accommodate the needs of a specific business as per your location helps make commercial buildings for rent marketable.

Near Amenities

Tenants look for nearby amenities that will make their customers and workers happy. An office space at a walking distance to restaurants, cafes, gyms, and more is attractive.

You can expand the area if needed to show accessibility to all sorts of services in marketing commercial buildings for rent.

Factor 4: Clear Lease Arrangements

Make sure to clarify everything while negotiating lease agreements with your tenants.

Explaining the terms and policies of using your office space for rent would minimize misunderstanding.

Giving agreements that fulfill the needs of your tenants would establish their trust and confidence in the tenancy.

Cost is a big concern for tenants, so be sure to discuss it with utmost clarity. Keep in mind that provisions must be clearly spelled out in the lease and agreed to by both parties to the lease.

Also, property managers must state all agreed-upon clauses between the potential office tenants and property managers for transparency.

Lease Term

It’s better to offer certain terms to find the best tenants, either short term or long term. If short-term, offer incentives to sign long-term later.

Know that a longer lease increases the bargaining power of tenants, while short lease terms have a lower chance for price cuts of other fees. Even so, you should always be versatile with commercial buildings for rent.

Common Area Maintenance Charges (CAM)

CAM covers the cost of common/shared areas such as property insurance, property taxes, utilities and general maintenance.

Make sure youre fair and charge by sq/ft or the % of the building the tenant is renting.

For example, if the tenant is only renting 50% of the building, you should charge only 50% of CAM costs to that tenant.

Availability of Building

Vacancies due to low demand are possible with commercial buildings for rent. If a lot of spaces are vacant, the price may be negotiated. On the other hand, popular spaces may be scarce and more expensive.

Develop strategies to keep clients on long-term leases to avoid vacancy periods with commercial buildings for rent. Being prepared helps you quickly provide a smooth turnover process.

Factor 5: Condition of the Building

Inside and outside attractiveness is normally the final and main reason a company will decide to engage commercial buildings for rent.

Spend time in customizing and updating all areas of your building to encourage tenants to come to you.

The building’s security is an important variable. Property managers should ensure the condition of the office space is suitable for the potential tenants.

Tenants may inquire if their space is customizable. In some cases, they also consider if the office space is ready for moving in or not.

So make sure that each of the buildings for rent that you’re offering is fully prepared for a tenant move in.

Final Thoughts on What Tenants Look for in Commercial Buildings for Rent

Today, we have talked about commercial buildings for rent and all the factors tenants consider when seeking one.

They include the class of the building, its location and access to buildings nearby, the condition of the office space, and of course the lease.

Depending on how your commercial buildings for rent rate in these areas, you may be able to charge more or less for commercial renters.

At any rate, this should have given you an idea of what commercial tenants will be looking for in commercial buildings for rent. If there’s anything else that concerns you about commercial buildings for rent, leave it in the comments section below.



Suggested Articles:
1. Why Execute Tenant Background Screening?
2. Keeping The Value Of A Commercial Building For Lease
3. Basic Property Manager Obligations During A Business Lease

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Article: What Tenants Look For In Commercial Buildings For Rent?

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