To help commercial clients trying to keep costs in check, Legacy fixed common area maintenance (CAM) charges. “When they’re not firm, tenants can’t really do a budget,” Morrison says. The company also works with existing tenants at properties it intends to sell. “Normally, when a project sells, that resets the taxes to a new rate and pushes up CAM charges,” he explains. “We’ve decided not to bill tenants for taxes and insurance, or at least to put a cap on them.”
These may seem like small changes, but they yield big returns. First, the efforts create goodwill with residents who believe Legacy “feels their pain.” Second, the gestures provide a little bit of certainty in an increasingly uncertain environment.
Legacy also offers concessions such as additional stalls or vouchers for free parking. “We even do dedicated employee parking spaces, which really helps minimum wage employees who don’t want to pay $10 a day for parking,” he notes.
Other popular concessions offered by landlords include reduced or free rent periods (usually one year or less), flexible move-in dates, and higher improvement allowances, particularly for older buildings.
“It’s a resident’s market, so savvy landlords will change their tactics knowing they must fill the vacancies,” says Roxanne Register, managing partner/broker for ReCor Realty Advisors of Boca Raton, Fla. ReCor handles commercial leasing for the 13,000 square feet of retail space at Fort Lauderdale, Fla.’s Satori.
Because residential tenants also feel the pinch, many apartment managers offer free rent for one month or quarter on new or renewed leases. At Satori, they begin working renewals 120 days prior to expiration to ensure re-signing. They also require 60 days’ notice, Cohen says, “providing ample time to pre-lease the unit prior to the vacating date.”
What’s more, Satori’s leasing agents work closely with residents in dire straits. “Residents who experience a job loss or pay reduction are offered the opportunity to relocate to a smaller apartment,” Cohen adds. Breaks such as this help keep units full and residents loyal, which also leads to referrals. And when they’re back on their feet, these residents will likely move back into higher rent units.
3. TAKE CARE WHEN SELECTING PROSPECTS. With fewer residents in the marketplace, it’s tempting to accept all prospects just to fill the space. Not so fast.
“The most common mistake developers make is thinking that any tenant is a good tenant,” says Patti Pearlberg, vice president of asset management for Atlanta-based Coro Realty Advisors. Among the mixed-use projects developed by the company is Buckhead Place in Atlanta, an in-progess, multi-phase development that includes 155 luxury apartments and 9,100 square feet of office and retail space. “If the [commercial] tenant doesn’t fit the mix, or if the [residential] tenant doesn’t want the uses and services in close proximity, then you are just asking for trouble,” Pearlberg says.
For business tenants, it’s important to seek “credit-worthy or one-of-a-kind tenants rather than chains that have already saturated the market,” says Mockingbird Station’s Baker. “You want to put someone in who can survive the long haul.” And draw customers.