Strategy to secure commercial tenant

Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes

Hey All, new here (internet forums period actually). I own a commercial office/warehouse building and recently lost my tenant to them purchasing their own location. Problem is, my broker (also my best friend), specializes in residential and has simply thrown the suite up on loopnet ONLY fielding phones calls with his fingers crossed. Oh and he also has a 4'x8' out in front "For Lease".

Specifics: The space is a 11,500 sq ft comprised one fourth office and the remainder warehouse. I pay everything so no NNN. Demographics: 3 big neighborhoods surround with 20k+ vehicles passing by on 4-lane daily. 1151 N Loop 336 E Conroe, Tx 77304

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Ash Patel

Full time investor · Cincinnati, OH · Member since 2013 · 405 posts · 312 votes

10y

Clyde,

I believe @Joel Owens is too professional to say that no one can screw up a commercial deal better than a residential realtor. I have experienced this first hand. Mix that with being your best friend and you don't need a forum to tell you that you how this will end.

Most of my properties are fairly unique like the one you are working with so I always market them myself. With a 20k traffic count, put up a giant banner on the building or close to the road. Market it all over social media, pound the pavement etc. I had a very similar space and there are a lot of options you have. If you have the time and inclination to market the property yourself, do it. If not, find a good commercial broker.

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Your residential guy isn't going to have the network a commercial leasing broker would.
When he put on Loopnet did he create a free account or a paid lister account?? If free only about 9 to 10% of Loopnet members see the listings. People can also pay to be premium searcher to see the free listings as well.
Loopnet is a part of Costar and they have gotten crazy with their rates now.I remember the days a few years ago when premium searcher with 4 listings was 69.95. They charge like over 300 a month now for the same thing. After Costar acquired them the rates became jacked up overnight.
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
Yeah Joel I know my broker isn't the best choice for me and that's what I hope to find eventually. He does list my property with the paid subscription and does the "highlight" and everything but that's it! Very frustrating.
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Pat G.
Rental Property Investor · Northville, MI · Member since 2015 · 179 posts · 92 votes
10y
Clyde:
Check with your city's Chamber of Commerce and the Economic Development people for your state or county and ask them what businesses are looking to expand or move into the area. This you already know... Look for a commercial broker that specializes in your type of building. Drive around and look to see who is listing other buildings like your type and contact them. Friends or not, who is paying the mortgage each month?
Do some research and find out what is the growing industry in your area, be it autos, tech, medical, etc. and then contact the real estate division of those companies to see if they are thinking of expanding.
Change to another use, i.e. self storage, vehicle storage, boat and RV storage, etc. I noticed in Google Maps a lot of homes behind and across the street and down the road.
Good luck
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Clyde office and warehouse is more geared toward Costar. The Loopnet parent company since they merged.
There are services on there to show tenants coming due with leases expiring. Very expensive service and probably not worth it for your guy to get versus what he will make on this deal.
Those 4' by 8' signs run about 300 to 400 bucks and are not cheap if they have the posts in the ground.
I only focus on transactions for commercial as PM or leasing work is a low return and high expense and time job.
You are offering a co-op right for tenant rep broker?? Have your guy pound the phones and call the commercial leasing brokers in a 25 mile range area. They have the network and might have a tenant for the property.
Go to SIOR online and there is a search feature there for office and industrial brokers.
The attorneys usually handle the leases for negotiation and signing.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Look up Mark Creason on here as well. Emersons Commercial does millions of sq ft in property management and leasing and based in Dallas so might have some possible tenants.
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George Tak
Rental Property Investor · Dallas, TX · Member since 2015 · 29 posts · 10 votes
10y
Clyde,
Have your broker go to CoStar and list the property. It is free to list there. CoStar's members are mainstream commercial agents whereas LoopNet's members are other than mainstream. It costs ton of money to get a membership with CoStar and so most "part-timers" don't buy membership to CoStar. One word of advise: please use a commercial agent when it's a commercial property. You want to go to a foot doctor instead of a hand doctor when you have an issue with your foot. In the commercial real estate world, there are mainly 5 different fields (retail, industrial, office, multifamily, and raw land), not just one as in the residential world. Therefore, to narrow it down more, you need to find an agent who specializes in the warehouse (industrial) field.
I don't know where you property is and I don't know how it looks like; and so I am not talking about your specific property here. But it is common for office warehouse to be vacant for a long time. That's because industrial tenants look for price and convenience before location, location, location. In addition, the combination of warehouse space and the office space has to fit with the tenant. If a potential tenant likes your warehouse space and but don't like your office space, then you don't have a lease, and vice versa.
Lastly, be flexible in TI (Tenant Improvement) you're willing to provide to your potential tenant. That's another deal breaker.
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Ash Patel
Full time investor · Cincinnati, OH · Member since 2013 · 405 posts · 312 votes
10y
Clyde,
I believe @Joel Owens is too professional to say that no one can screw up a commercial deal better than a residential realtor. I have experienced this first hand. Mix that with being your best friend and you don't need a forum to tell you that you how this will end.
Most of my properties are fairly unique like the one you are working with so I always market them myself. With a 20k traffic count, put up a giant banner on the building or close to the road. Market it all over social media, pound the pavement etc. I had a very similar space and there are a lot of options you have. If you have the time and inclination to market the property yourself, do it. If not, find a good commercial broker.
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
Thanks and I appreciate the info. Its taking me a while to respond because I'm still processing everything. Joel as far as it being worth it to my broker to enlist in Costar, not sure why as he made $40k on me in commissions when I bought the building 3 years ago. I actually rode with my broker to the bank when he was given the property as a foreclosure to list by the bank. Naturally after we left he wanted to see it so we drove right to it, I said I wanted it, and then bought it.
I get it by now, I need to get a commercial broker. I didnt come out and say that in my first post because of the forum "rules" against soliciting for a "mentor". Where do I find a good commercial broker specializing in warehouse/office space leasing in my area?! I'm in desperate need. I have no problem taking the listing elsewhere. I own many other residential properties that my residential broker has listed at any one time so I wont feel bad at all.
As far as TI go I just went through that with the suite right next to the one available now. I did my own thing right or wrong and I think it was right. I landed an international tenant on a long term lease by simply splitting the capital buildout with him which cost upwards of $70k through free rent and then contract re-negotiated to higher rate based on buildout.
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
One other thing I forgot to mention is time. My time specifically. I don't have much of it at all and would rather find a competent commercial broker. My daughter works for me full time managing my properties but she doesn't touch my two commercial properties due to lack of experience. Most of time is tied up with my other commercial property on a big recreational lake. I'm developing it as a "park model" rv park.
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George Tak
Rental Property Investor · Dallas, TX · Member since 2015 · 29 posts · 10 votes
10y
You should drive around your property and look at for lease or for sale signs. There's usually one or two dominant commercial company in the neighborhood. I would approach them. If you're still desperate, I can look at my CoStar for you and recommend some to you tonight, if you want. Please contact me and let me know your I don't have access to it right now because I am outside.
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
I drove around a bit just from hanging out with my broker I have run across some of the other "big" commercial brokers and wasn't that impressed. J Beard is a big one in my area but his properties (at least in my area) stay on the market so long that his signage ends up falling over and deteriorating in the Texas weather. I think their too big to give every listing/client the attention it needs/deserves. Not to say that there all like that but I would like to be picky and find a tailored broker for my specific situation/area/property. If you have a recommendation that fits this then by all means I would greatly appreciate their info and would give a healthy kickback once a lease is secured. Thanks
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George Tak
Rental Property Investor · Dallas, TX · Member since 2015 · 29 posts · 10 votes
10y
I am also picky about who I refer. So, normally, I wouldn't have done anything. But, I am just trying to help you out because you're part of BP. Others have helped me and so I am just paying my debt to BP.
Don't worry about a healthy kickback. Actually, I am a commercial and a residential real estate broker and so I accept commissions for a living. But this one is free.
I just hope I can refer you a good agent. Well, I will be in touch tonight.
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Mark Creason
Real Estate Lender and Broker · Dallas, TX · Member since 2013 · 966 posts · 500 votes
10y
Originally posted by @Clyde Myers Jr:

Specifics: The space is a 11,500 sq ft comprised one fourth office and the remainder warehouse. I pay everything so no NNN. Demographics: 3 big neighborhoods surround with 20k+ vehicles passing by on 4-lane daily. 1151 N Loop 336 E Conroe, Tx 77304
Why do you pay everything? You should convert this into a NNN lease. Thanks for the shout out Joel.
Mark
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
Hey Mark, yeah I wish it was NNN believe me BUT it basically came down to me getting a tenant. This is very embarrassing but the tenant that just left after their 2 year lease was up paid me .25 sq ft only and no NNN because I needed a tenant so bad. The 11,500 sq ft space is the lion share of my building and at the time it had already gone months unleased so I basically had to settle.
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Adam Rich
Property Manager · Columbus, OH · Member since 2013 · 7 posts · 14 votes
10y
Clyde,
Business owners seeking your type of space are going to be relatively small businesses. They will likely be doing some searching online themselves, possibly not even using their own broker. Do you have a high quality craigslist ad up? Excellent interior and exterior photos, floor plans, awesome lease term descriptions, maps. I'd be happy to review your ad if you post the link.
If you stick with your broker, I would make sure you are getting a discount in exchange for the resume building and also ensure your bldg is listed on the most commonly used commercial listing sites for your area (paid and unpaid).
Commercial LESSOR side brokers can help in two main ways among several other minor ways: advertising to find a tenant and helping with lease negotiations/drafting. I would try finding a CCIM in your area: http://ccim-find.webauthor.com/
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George Tak
Rental Property Investor · Dallas, TX · Member since 2015 · 29 posts · 10 votes
10y
Most industrial spaces are not NNN. Very few. Most of them are industrial gross. Adam, I think you meant SIOR, not a CCIM.
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Ryan McGowan
Engineer · Victorville, CA · Member since 2015 · 27 posts · 11 votes
10y
If you know what kind of tenant you want, approach them. I am putting together a pro forma for a new construction commercial building, and I have not hired an agent for the pre-leasing tenants. I knew a few businesses that were doing great in lousy locations that go month-to-month, and I just stopped in with some sales materials. The idea of getting the same rate or even a little higher, but having a location with great visibility and nicer building that would allow them to do more business made it a no-brainer. Yet they weren't scanning loopnet or asking brokers for space. They were just concentrating on running their ship. For them it was an opportunity that fell from the sky, and they took it. They didn't shop around, and they didn't compare with other locations, and I think I'll have all the tenants lined up before escrow will close.

But it does take your time to go to these places. However, you probably don't live and work in a biosphere, and have to get in your truck and go places on a daily basis. So when you are driving through town, make an extra stop by these places that could benefit by leasing from you. You could even stop in just to ask what they are paying for their lease out of curiosity. Naturally they are going to ask why you want to know. Just tell them you're buying the XYZ building, and want to get an idea of what the rates are. If they are interested, they will let you know without you asking. And if they aren't interested, they may know someone that is. Bring business cards.
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Martin Z.
Glendale, CA · Member since 2013 · 303 posts · 67 votes
10y
A mailer campaign should be something for you to consider, you or your broker send out a flyer/mailer to every commercial warehouse in the geographic area. The occupants of the addresses you send to may be considering up or downsizing. Allocate a healthy budget for the mailer campaigns, every month your property sits vacant, you're losing way more $$$. If you're interviewing commercial brokers, ask them how they'll be marketing your place. Typically, a com broker will just list on costar and loopnet, put up signs, and wait for calls to ring in.
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Shane H.
Investor · Wichita, KS · Member since 2015 · 769 posts · 279 votes
10y
Looks like you're closer to Houston. Maybe you can get a good commercial broker referral there?
A friend of mine who has acted as a good sounding board and mentor started his own commercial firm in DFW - not sure if he'd have tenants looking out your way but maybe worth giving them a phone call.
Vision Commercial Real Estate - Roger Smeltzer is the owner - smaller boutique firm with a few other sales associates/brokers working for him as well. He'd treat you right if you were a client or maybe be able to steer you to someone else. You can google him and find the website or his Facebook page. Unsure if I can post a link to his site. He's an OSU Buckeye fan so don't hold that against him. HA
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Waylon Themer
Banker · Dallas, TX · Member since 2013 · 158 posts · 129 votes
10y
@Clyde Myers Jr CREAM is a good networking group of commercial brokers and real estate service providers in Montgomery County. Here is a link to their broker list http://www.creamtx.com/business-directory/wpbdm-category/real-estate-agentbroker/page/3/ . I am in Houston and I have met numerous hungry brokers at groups like this. I don't have many contacts in Montgomery county or I would point you toward one. I looked at your property in loopnet. If they are partitioned, you may consider marketing the three suites separately in addition to your current listing. It would expand your hits to people looking for smaller space or just somewhere to store inventory and equipment for their home-based business. It might be easier to get $750 a month for each storage space and $3500 for the office/loft as opposed to $5000 for the whole enchilada. It does look like you are priced very competitively.
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Todd Faulk
Real Estate Agent · Magnolia, TX · Member since 2015 · 40 posts · 15 votes
10y
@Clyde Myers Jr, are you still needing help with your property? I have someone who I have used several times and a good guy. You and I are neighbors so let me know if I can help.
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Ben Moores
Investor · Houston, TX · Member since 2015 · 10 posts · 6 votes
10y
Clyde,
No matter what you do I would absolutely recommend advertising in the greensheet as well as craigslist. I'm local and have a property that sounds similar. Getting that big unit leased can be tough at times.
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
**UPDATE**
Found a commercial CCIM broker with a Phd. of all things and hopefully she will be great. She has already shown my building 3 times to prospects and is waiting to receive feedback from one who is very interested. Thank you to everyone here who had input to aide in my success at finding a competent commercial broker. Thank You all very much
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
10y
How much are you asking in rent, Clyde? What kind of lease?
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Clyde Myers Jr
OP
Investor · Conroe/Willis Houston Metro, TX · Member since 2015 · 30 posts · 3 votes
10y
Asking $8 sq. Ft. And doing NNN for sure this time. Basic commercial TREC lease.
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