Commercial Properties: 5 Diversification Strategies to Reduce Vacancy

Vacancy is one of the biggest issues facing commercial real estate investors. Empty units don’t just mean lost income; they can also damage valuations, reduce foot traffic for remaining tenants, and raise red flags with lenders.

The risk is real and growing. Moody’s, a trusted authority in real estate and credit markets, predicts that vacancy rates will hit 24% by 2026. This could wipe out $250 billion in commercial property value.

That’s why more investors are leaning into multi-tenant strategies, and why mixed-use developments are some of the most profitable commercial property types in 2025.

Because multi-tenant properties are leased to more than one occupant, investors can spread the risk and increase the chance of economic stability.

In this post, we’ll break down five smart diversification strategies to help reduce vacancy risk and keep your property performing, even through market disruptions.

1. Have a diverse mix of tenants

One of the best ways to protect against vacancy is to lease to tenants across different industries.

For example, a successful multi-tenant retail property might include a grocery store (recession-resilient), a fitness studio (experience-driven), a local café (community-oriented), and a professional services office (because office space investment isn’t obsolete).

If one sector experiences a downturn, others may hold steady. This keeps the overall asset performance healthier.

Tip: Prioritize tenants with different peak traffic periods to ensure steady activity throughout the week. For instance, office spaces will have heavier footfall during the day, while restaurants will be busier in the evening.

2. Vary lease lengths and renewal cycles

Staggering lease expirations means you won’t have multiple vacancies at once, and gives you the chance to adjust terms based on market trends. Having one-third of leases expire each year (in a three-year cycle) gives you flexibility to update rents, respond to consumer demand, or reposition spaces based on market conditions.

Having managed downtime also provides a chance to boost rental revenues by giving units a facelift. If you need inspiration, check out our advice on commercial property renovations that deliver the best ROI.

Tip: Include early renewal incentives or flexible extensions to keep good tenants and avoid downtime between occupancies.

3. Balance anchor and inline tenants

Anchor tenants bring stability and traffic, but smaller tenants add adaptability because they’re more agile. A well-balanced tenant mix can reduce dependency on a single large occupant while offering the potential for quicker lease-up of smaller spaces if vacancies happen.

Watch out for: Over-reliance on a single anchor. If they leave, it could impact co-tenancy clauses and reduce the draw for others.

4. Consider complementary, not competing, businesses

A diversified tenant base shouldn’t cannibalize itself. Instead of multiple sandwich stores, think about services that complement each other: like a dry cleaner, dentist, yoga studio, and a salon. This creates a hub effect that encourages cross-traffic and longer dwell times. You can see it at play in retail strip malls across the country.

Bonus: Complementary tenants often support each other informally, leading to better retention and a stronger community feel.

5. Explore flexible space configurations

Designing units that can be combined or divided makes your property adaptable to changing demand. For example, two small retail units could be leased together as a larger café, or an office space could be co-leased by hybrid-working professionals.

Future-proofing: Flexibility helps you respond to emerging tenant needs, especially in uncertain economic climates.

Multi-tenant pitfalls: what to avoid

Even with a flexible approach, some common mistakes can increase your exposure to vacancy risk:

• Leasing too many units to one industry: Putting all your eggs in one basket—like filling a retail center with only food businesses—might seem like a safe play in the short term. But if that industry takes a hit (e.g., new regulations, inflation pressure, staffing shortages), it can cause a cascade of vacancies. Diversification only works when it’s truly diverse: across different industries, customer types, and revenue models.
• Overbuilding fixed walls that limit space flexibility: Rigid floor plans can box you in (literally!). Spaces that can’t be easily reconfigured limit your options for new tenants, especially as demand shifts toward hybrid or shared-use models. Flexible designs with movable partitions or modular layouts make it easier to adapt to evolving needs without costly renovations.
• Letting multiple leases expire at the same time: When lease expirations stack up in the same month or quarter, you risk a sudden drop in occupancy (and a scramble to fill units all at once). This also reduces your flexibility to respond to the market. Staggering lease end dates allows for smoother transitions, better resource planning, and consistent income flow.
• Ignoring lease structures that limit renewal options: Lease agreements that lack flexibility—like hard exit dates with no renewal options—can push good tenants out. Likewise, unclear or overly complex renewal clauses may discourage tenants from staying. Build in clarity, flexibility, and incentives so tenants have a reason to stay (and you avoid unnecessary turnover).

Resilient real estate starts with smart planning

You can never fully get rid of vacancy risk in commercial real estate, but with smart diversification strategies, multi-tenant commercial properties can keep a good cash flow even when markets shift. The key is to think like a portfolio manager: balancing short- and long-term returns, hedging exposure, and keeping enough flexibility to pivot when needed.

At Express Capital Financing, we specialize in providing Lite Doc and Full Doc loans tailored to your needs. Whether you’re acquiring a mixed-use property, refinancing a retail center, or funding renovations to attract diverse tenants, we’re here to help you succeed.

Having the right financing in place is just as important as having the right tenant mix. Ready to reduce risk and take on new opportunities? Contact us today to get started!