By Mel Schultz Budget Analysis accounts payable, accounts receivable

Managing Accounts Payable and Receivable: Best Practices for Property Owners

Effective financial management is crucial for commercial property owners and the property managers who support them. Managing accounts payable and receivable is an important aspect of commercial real estate financial management. Properly monitoring and managing them ensures a steady cash flow, minimizes risk, and maintains strong relationships with your tenants and vendors.

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Accounts Payable and Receivable Basics

First, let’s get a better sense of what these two functions mean and how they relate to your commercial property portfolio.

Accounts Payable: Managing Expenses

Accounts payable refers to money you owe to vendors, suppliers, and service providers. It includes utility bills such as electricity, water, and gas, property taxes and insurance, loan or mortgage payments, and payments to vendors such as your landscaping, security, and maintenance companies. Managing your accounts payable ensures these people are paid on schedule, avoid late fees, prevent service disruptions, and build strong relationships with your suppliers.

Accounts Payable: Managing Expenses

Accounts receivable refers to payments that are owed to you, primarily from tenants. It includes rent and lease payments, common area maintenance (CAM) fees, utility reimbursements, parking fees, and any other service charges. Effective management of your accounts receivable ensures a steady cash flow and reduces the risk of late or missed payments.

Best Practices for Managing Accounts Payable and Receivable

To make your accounts payable and receivable more efficient and reliable, consider implementing these eight best practices.

1. Automate Your Processes

Property management software can help you optimize your processes by automating invoice processing and payment, rent collection and payment, and financial tracking. These tools reduce errors, save time, and provide real-time financial insights.

2. Implement a Clear Rent Collection Process

A clear and easy to follow rent collection process makes doing the right thing the easy thing for your tenants. To ensure timely rent payments, consider sending automated rent reminder texts and emails and offer multiple payment methods, such as online payments, ACH transfers, and credit/debit cards. Offer autopay options for recurring payments and consider implementing a late fee policy with a grace period to discourage delays.

3. Build Strong Vendor Relationships

When you have strong relationships with your vendors, work seems to go more smoothly and often, you can catch some breaks with your favorite service providers. Negotiating favorable payment terms can help you improve cash flow, and consolidating your vendor services can reduce the number of invoices you receive. Work with your property manager to schedule your payments to align with your rent collection dates.

4. Reconcile Regularly

With your property manager and/or bookkeeper, perform monthly or quarterly reconciliations. Reconciling regularly ensures all invoices, payments, and outstanding balances match financial records. It can identify and fix discrepancies before they become major financial issues and help you take quick action on consistent late payers.

5. Monitor Cash Flow and Forecast Expenses

Reviewing past trends and help you anticipate future fluctuations in your expenses and income. Work with your bookkeeper or use your app to run reports to track incoming and outgoing payments. Consider setting up a reserve fund to cover unexpected expenses.

6. Enforce Your Rent Collection Policies

Your lease agreements should clearly outline your rent collection policies, including any late fees and penalties. Send friendly reminders before rent payments are due and offer a tenant who is consistently late a payment plan to catch up. This can help you avoid extreme actions such as litigation or eviction.

7. Stay Compliant with Regulations

Compliance with applicable accounting regulations is an accounts payable and receivable management necessity. Ensure your financial records comply with local laws, tax regulations, and your own lease agreements. Keep detailed records of all of your transactions in the rare event of an audit or litigation. We recommend our property management clients work with an accountant and a financial advisor for tax planning and compliance.

8. Use a Centralized Accounting System

Finally, consider centralizing your accounting system, especially if you are managing accounts payable and receivable across multiple properties. Track all of your financial transactions in one place and reduce manual errors with automated data entry and invoice matching. Generate custom financial reports for better decision-making in the long term.

Using best practices for managing your accounts payable and receivable can help you improve cash flow, reduce your administrative burden, and build stronger relationships with your tenants and vendors. The Clarity Commercial team has expertise and years of experience helping our clients implement accounts payable and receivable best practices. Contact our team today to learn how we can help you improve your financial management.

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For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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January 27, 2025

By Mel Schultz Commercial Properties, Budget Analysis budget, forecasting

Mastering Budget Projections for Commercial Properties

Mastering budget projections for your commercial portfolio helps you manage your properties more smoothly and enjoy long-term profitability. Savvy commercial property owners and their managers leverage technology, stay on top of market trends, and proactively manage expenses by reviewing data and sticking to a strategic plan. Here are eight ways you can improve your budget projection skills and improve profitability this year.

Table of Contents

1. Understand Budget Basics

Mastering Budget Projections: Key Strategies for Success

A commercial property budget contains several important components. Tracking these components will help you understand where your money comes from and where you are spending it. A commercial property budget should include the following items:

Operating expenses, such as maintenance, utilities, landscaping, security, and insurance.
Capital expenditures, including large-scale improvements such as roof replacements, structural repairs, and HVAC upgrades.
Revenue streams, such as rent, parking fees, advertising, and other services you offer.
Reserves for contingencies, including funds for emergency repairs and legal fees.

2. Leverage Historical Data

If you have data from prior years, leverage it to find trends and patterns in your revenue and spending. This can help you establish more realistic baselines for future budget projections. Consider reviewing seasonal variations in utility costs or maintenance, historical occupancy rates for your buildings and how they impact revenue, and trends in vendor pricing.

3. Monitor Market Trends

Local real estate and economic data can give you a picture of where your market is headed. When Clarity Commercial works with clients on budget projections, we take a close look at market trends. We consider economic factors such as interest rates, inflation, and property tax changes as well as the local competition’s rental rates and amenities. Last, we take a look at what tenants are demanding from their spaces. All of these factors contribute to local market trends and should be considered when making budget projections.

4. Implement Financial Technology

Property management software and other financial tools can automate calculations, generate reports, and offer you real-time insights into your portfolio. We use technology that empowers us to automate expense tracking, forecast different models, and integrate our accounting software so our financial records are accurate.

5. Anticipate Occupancy Fluctuations

Any good budget projection anticipates fluctuation in occupancy rates, as occupancy rates directly affect your revenue. We recommend most budget projections include a healthy vacancy buffer to cover potential downtime. Your list of expenses should also include marketing and tenant retention efforts.

6. Include Maintenance Expenses

Sometimes, we see property owners plan for major capital improvements in their budgets, but neglect to include costs for regular maintenance. However, including regular maintenance costs in your budget projections can save you money in the long run, as maintenance can avoid costly big repairs down the road. Be sure routine inspections for your buildings’ systems are included in your budget, as well as snow removal and landscaping.

7. Adjust Your Budget Dynamically

Budget projections are predictions, not actual reality. That’s why it pays to review your projections regularly and make adjustments. We conduct quarterly budget reviews to stay on top of changing market conditions, react to a changing economy, and to uncover opportunities to renegotiate vendor contracts.

8. Communicate Your Budget Goals

Whether they are your property manager, your spouse, your business partner, or investors, you need to communicate your budget goals and budget projection with the key stakeholders in your portfolio. This will ensure that everyone is working together toward your goal for your properties. Budget projections take time and experience to master. The Clarity Commercial team has expertise and years of experience helping our clients make plans for their properties and increase their profitability. Contact our team today to learn how we can help you master budget projections

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations, and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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November 26, 2024

By Mel Schultz Tenant/Landlord leasing, Property Management, tenant perks

10 Tenant Appreciation Ideas

Most marketers agree that it is more cost effective to retain a current customer than to find and sign on a new one. The same is true of tenants. Showing your appreciation for your tenants can help you create a positive environment at your property, strengthen your relationships with your tenants and improve tenant retention.

Here are 10 tenant appreciation ideas for property owners who want to build stronger relationships with their tenants this year.

Table of Contents

1. Host a Tenant Appreciation Event

Consider hosting quarterly, semi-annual, or annual tenant appreciation events. Cater lunch, host a happy hour, or arrange a seasonal gathering where your tenants can relax, network, and feel that you value them.

2. Offer Complimentary Coffee or Breakfast

An easy and cost-effective way to improve your relationship with your tenants and show you care about them is to offer them something for free. Complimentary coffee and/or breakfast can boost your relationships with your tenants. Small treats go a long way (think bagels, muffins, and fruit).

3. Provide Free Wellness Classes

Your tenants may be interested in offering their teams wellness opportunities (or taking advantage of these opportunities themselves). Be a hero and arrange for weekly yoga, meditation, or fitness classes at your property. Or, offer discounts on gym memberships or wellness app subscriptions for your tenants.

4. Give ‘Em a Gift Bag

A gift bag is an unexpected and appreciated way to show you care about your tenants. The holidays are a natural time to give your tenants gift bags, but you can present gift bags to your tenants at any time of year (for example, their lease anniversary). Gift bags should have a personal touch and may include branded mugs, snacks, notebooks, or gift cards.

5. Simple Shoutouts

Sometimes, the simplest thank you is also the most effective. Highlight your tenants on your social media pages or in an email. Create a space in your lobby to showcase your tenants’ services, achievements, and recent milestones.

6. Host a Lunch n’ Learn

Many tenants will jump at the chance to attend a free professional development event. Lunch n’ learns fit the bill—arrange a guest speaker, order lunch, and help your tenants grow their professional skills.

7. Seasonal Raffles or Contests

Monthly or quarterly contests or raffles can help you stay in touch with your tenants and offer them something valuable without breaking the bank for you. Popular giveaways include gift cards, tech gadgets, or local experiences such as spa treatments or tickets to events.

8. On-Site Vehicle Services

If most of your tenants drive to your property, consider offering free or discounted vehicle services. This could include a free valet for tenants and their guests or regular visits to your property by a mobile car detailing service.

9. Surprise Monthly Treats

Special delivery! Surprise your tenants with monthly sweet treats delivered directly to their suites. Seasonal snacks, candy, a small plant, or other gifts are fun and unexpected and show your tenants that you care.

10. Develop a Tenant Perks Program

If you’ve already implemented several of these tenant appreciation ideas, consider taking your appreciation offerings to the next level and develop a tenant perks program. A perks program could include monthly wellness classes, discounts to local businesses, valet service, professional development, or other discounts of freebies you think would be attractive to your tenants.

Looking for more tenant appreciation ideas? The Clarity Commercial team is full of ideas of how to retain and attract great tenants. For professional commercial real estate management, contact Clarity Commercial today.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

October 29, 2024

By Mel Schultz Market Trends 2025, leasing

2025 Commercial Real Estate Market Trends

Is the commercial real estate market finally rounding a corner? Many CRE professionals believe 2025 will be a better year for commercial real estate than the last few years. Understanding trends in the real estate market can help you build a more profitable portfolio.

For a detailed look at the CRE trends for 2025, we took a close look at Deloitte’s 2025 Commercial Real Estate Outlook. If you want to read the entire thing, here’s the link. But if you don’t want to take a half-hour out of your day to digest global CRE trends, then we’ve got a great summary for you. Read on.

Table of Contents

Overall Optimism for the 2025 CRE Market

At the heart of the Deloitte outlook is a survey of commercial real estate professionals from around the world, including those in North America. Deloitte’s most recent survey found that 68 percent of respondents expect the global commercial real estate market to improve in 2025. This is significant, as just 27 percent of respondents to last year’s survey had such optimism.

Globally, professionals see improvements in a number of CRE fundamentals, including leasing and transaction activity, rental growth and increased property prices, and improved availability of capital.

In North America, 72 percent of respondents expect to see improvements in leasing in 2025. This includes increases in rent as well as leasing activity, leading to lower vacancies. Nearly as many respondents also believe property prices and transaction activity will improve, while 69 percent expect improvement to the lending market, including a decrease in the cost of capital and more capital availability.

Specific Areas of Improvement

Let’s take a closer look at specific areas of improvement. Generally, real estate professionals believe financing will be easier and less expensive to obtain for borrowers, though the numbers will vary by geography and property type.

Globally, respondents indicated that the industrial/manufacturing, digital economy, and multifamily housing markets present the greatest opportunity in 2025. Optimism for the industrial sector is primarily driven by manufacturing space demand in the wake of the COVID-19 pandemic and its related supply chain issues. In the US, other factors include companies reshoring manufacturing operations to the United States from abroad and the CHIPS and Science Act driving demand for semiconductor manufacturing.

Demand for properties to house data centers and other internet and telecom-related enterprises continues to rise in North America and across the world. Real estate professionals are also bullish on properties designed for the life sciences as well as self-storage facilities.

Offices Still in a Slump

However, Deloitte survey respondents were less optimistic about office space in 2025. These lower expectations were driven by persistent elevated vacancies and more expensive financing costs. As a result, there could be more consolidation of lower-value properties if valuations continue to decline.

Sustainability Investments Continue

Property owners and developers will continue to make sustainability improvements to their properties in 2025. While some of these professionals feel sustainability is core to their business strategy, an increasing number will choose sustainability improvements due to their modest financial returns. What’s more, sustainability improvements may help portfolio owners avoid asset obsolescence and extend the profitability of their book.

What are your predictions for the 2025 commercial real estate market? We’d love to hear about what you’re seeing on the ground, and if it aligns with what professionals across the country and around the globe are observing. Whatever is in store for us next year, the Clarity Commercial team is here to support you. For professional commercial real estate management, contact Clarity Commercial today.

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For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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September 25, 2024

By Mel Schultz Property Maintenance snow removal

Winter Maintenance and Snow Removal Tips for Minnesota Commercial Properties

Is your Minnesota commercial property ready for winter? September is a good time to put together your snow removal and winter maintenance plan. Clarity Commercial can help you learn what your property needs and arrange a snow removal vendor so you know your property will remain accessible and safe through the winter months.

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Prepare Your Snow Removal and Deicing Plan

Work with your property management company to determine your snow removal and deicing plan. Getting your contract in place now means you won’t need to scramble and arrange service when the first snow falls. Clarity Commercial can recommend a snow removal vendor who can serve you and your property all winter long.

When you set up a contract with your snow removal company, be sure to clearly define your expectations for their service, including when snow is cleared and deicing frequency. Identify your high-traffic areas and ask your snow removal company to prioritize them. Don’t forget to include your ramps and handicap parking spaces to ensure your building remains accessible to everyone.

Put Snow and Ice Removal Equipment in Place

Most snow removal companies bring and use their own equipment, but having a few shovels and some salt at your property can be helpful for those unexpectedly slippery mornings or surprise dustings of snow. Inspect last year’s equipment for wear or damage and replace it if necessary. Visit your local hardware store to purchase salt or sand and keep it in your building’s vestibule for ease of use. Or, ask your snow removal company to provide salt for you to use.

Protect Your Investment by Deicing Regularly

Deicing not only makes it safer and easier for your tenants and their guests to enter and leave your property, it also protects you against slip-and-fall risks. Slips on ice can lead to some hefty hospital bills. Regular and thorough deicing of your property through the colder months is a part of any property owner’s risk management plan.

Inspect Your Outdoor Lighting

Winter days are short, and you and your tenants will rely on your outdoor lighting to stay safe entering and leaving your building. Test the bulbs in your outdoor lights now to ensure they are in good working order, and consider upgrading to LED bulbs, which work great in the cold, last much longer than conventional bulbs, and save you money on your utility bill. If the exterior of your building is looking dim, add more outdoor lighting to improve visibility and reduce slip-and-fall risks.

Prep Your Roof, Gutters, and Storm Drains

Roof clearing should be part of your snow removal plan, especially if you have a flat roof. Clear gutters and storm drains now to ensure melting snow and ice have a place to go during thaws. During these preparations, decide on where you’d like your snow removal company to pile your snow and communicate that with them.

Communicate Your Snow Plan with Tenants

Once your winter snow removal plan is in place, let your tenants know what to expect for snow and ice removal. Encourage your tenants to report slippery spots or other snow-related hazards so you can deal with them quickly. Watch the weather forecast and warn tenants when bad weather is coming.

Winter is right around the corner. Now is the time to prepare your snow plan and hire your snow removal company. For professional commercial real estate management support, contact Clarity Commercial today.

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For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

August 21, 2024

By Mel Schultz Tenant/Landlord lease agreements, negotiation

10 Commercial Real Estate Terms You Need to Know Before Your Next Lease Negotiation

If you are new to commercial leasing, haven’t negotiated your lease in a while, or are in the middle of negotiations and don’t know how to read the agreement, we’re here to help. Understanding essential commercial real estate terms can significantly impact the outcome of your negotiations. Here are 10 important commercial real estate terms you need to know, along with detailed explanations and examples that will help you navigate your lease agreements more effectively.

Table of Contents

1. Triple Net Lease (NNN)

A triple net lease (NNN) is an agreement where the tenant is responsible for paying their share of the operating expenses of a property, including property taxes, insurance, and maintenance. These expenses are in addition to the base rent. For instance, if the base rent is $2,000 per month but the operating expenses total another $500, the tenant’s total monthly obligation would be $2,500. The landlord typically retains responsibility for structural issues and non-operating expenses (leasing commissions, tenant improvements, legal, marketing, etc.). It’s crucial to clarify these terms during negotiations to avoid unexpected costs.

2. Gross (Full Service) Lease

Unlike in a triple net lease, in a gross lease, the landlord is responsible for the property’s operating expenses such as maintenance, insurance, and property taxes. The tenant pays a single rent amount, which simplifies budgeting. For example, if the agreed rent is $3,000 per month, that amount covers all expenses, unlike NNN leases where costs can fluctuate. This type of lease is often preferred by tenants who want predictability in their expenses.

3. Base Rent

Base rent is the minimum rent required in the lease agreement. The base rent excludes expense recoveries such as utilities, property taxes, and maintenance fees. For example, if a lease states a base rent of $1,500, this amount does not include any additional costs incurred during the lease term. Understanding this distinction is crucial, as the total cost of occupying a space can significantly exceed the base rent when additional expenses are factored in.

4. Common Area Maintenance (CAM)

In a multi-tenant building with net or triple net leases, tenants pay a share of the cost of maintaining the common areas as part of operating expenses. Common area maintenance (CAM) costs typically cover the maintenance of the lobby, hallways, parking lot, and landscaping. For instance, if the total CAM expenses for a building are $10,000 and there are ten tenants, each tenant would be responsible for $1,000 of those costs. It’s essential to understand what is included in CAM fees to avoid unexpected charges.

5. Escalation Clause

Escalation clauses allow landlords to raise rent. It is common for landlords to increase rent to keep pace with inflation. For example, a lease may specify that rent increases by 3% annually. This means if your starting rent is $2,000, the rent would increase to $2,060 in the second year. Periodic rent increases can be stated as fixed percentages or dollar amounts, or variable tied to changes in the Consumer Price Index. Being aware of these clauses is vital for long-term financial planning.

6. Tenant Improvement (TI) Allowance

Landlords may offer to pay for some or all of the costs to make the leased space suitable for the tenant’s business needs. This is known as a Tenant Improvement (TI) allowance. For example, if a tenant plans to open a restaurant that requires significant modifications, the landlord might offer $50,000 in TI to cover renovations. Read more about tenant improvements here. Understanding TI allowances can be a negotiating tool for tenants looking to customize their space without incurring all the costs themselves.

7. Percentage Rent

Percentage rent agreements are sometimes used in retail leases. In these agreements, the tenant pays the landlord a base rent plus a percentage of their gross sales once sales pass a stipulated threshold. For example, a tenant might pay $1,500 in base rent plus 5% of sales exceeding $100,000. This arrangement can be favorable for landlords in high-traffic areas, as their earnings increase with the tenant’s success. It’s essential for tenants to understand how these agreements work and how to project their sales accurately.

8. Usable v. Rentable Square Footage

A commercial lease typically outlines usable and rentable square footage. Usable square footage includes the space that is exclusively for the tenant. Rentable square footage is the usable square footage plus a prorata portion of the building’s common areas. For instance, if a tenant occupies 1,000 square feet and the common areas account for another 200 square feet, the rentable square footage would be 1,200 square feet. It’s crucial for tenants to understand these measurements to avoid paying more than they should for their space.

9. Right of First Offer (ROFO)

When a lease provides a tenant the right of first offer, the tenant has the opportunity to lease additional space or purchase the property before the landlord offers it to another party. For example, if the landlord decides to lease an adjacent space, the current tenant gets the first chance to negotiate terms before the property is marketed. This clause can be advantageous for tenants looking to expand their operations without uncertainty.

10. Holdover Tenant

Leases often include clauses that govern what happens when a tenant’s lease term is expired. A holdover tenant is a tenant who remains on the property after the lease term expires without the landlord’s consent. The lease clause stipulates the rent rate and conditions that govern any holdover period, typically at a higher or punitive rent. For instance, if the original rent was $2,000, the holdover rent might increase to $2,500. This ensures the landlord is compensated in the event that a tenant remains past their lease term, and encourages the tenant to renew or leave promptly.

Commercial Real Estate Terms You Need to Know | Clarity Commercial

If you’re in the middle of lease negotiations or searching for your next tenant, Clarity Commercial can help you negotiate favorable terms. For professional commercial real estate management support, contact Clarity Commercial today.

Finally, educating yourself about current trends in commercial real estate can provide you with an edge in negotiations. For example, understanding the implications of remote work on office space needs can guide your decision-making process in today’s evolving market. By staying informed, you can negotiate more effectively and secure a lease that aligns with your business goals.

Furthermore, building relationships with landlords and property managers can also be beneficial. Open communication can lead to better negotiations and can foster a more positive leasing experience. For instance, landlords may be more willing to negotiate terms if they know the tenant is committed to a long-term relationship.

Additionally, it’s important to conduct thorough due diligence before signing any lease agreement. This includes understanding the local market conditions, potential growth of the area, and other factors that could impact your business operations. For example, if you are leasing retail space, consider the competition in the vicinity and the overall foot traffic in the area. These factors can greatly influence your business’s success.

Understanding these terms is crucial for anyone involved in commercial real estate, whether you are a tenant or a landlord. Each term plays a significant role in lease negotiations and can affect the overall cost and usability of the leased space. As you navigate the complexities of commercial leases, consider consulting with a real estate professional who can provide valuable insights and guidance tailored to your specific situation.

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For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations, and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices. Our team at My Clarity Commercial is dedicated to providing top-quality real estate management services.

In addition to our affiliations, our team also holds relevant certifications in real estate management. This includes certifications such as CPM (Certified Property Manager), ARM (Accredited Residential Manager), and CAM (Certified Apartment Manager). These credentials showcase our expertise.

July 18, 2024

By Mel Schultz Tenant/Landlord diversification, lease agreements, tenant retention

10 Ways to Maximize Your Commercial Real Estate ROI

Commercial real estate in the Twin Cities has been on a rollercoaster ride since 2020. The impacts of the pandemic continue to affect many commercial real estate markets in Minneapolis and St. Paul. Here are a few ways savvy property owners can maximize the ROI of their CRE portfolios.

Table of Contents

1. Do Your Research on Commercial Real Estate ROI

Before you make adjustments to your lease terms or update your buildings, be sure to do your research. Complete a competitive analysis to understand what surrounding properties are doing to attract tenants and adjust your strategy as needed. If you’re hoping to attract a specific type of tenant, such as a medical device manufacturer or healthcare provider, take the time to learn more about these potential tenants and their specific needs.

2. Optimize Your Lease Agreements

When’s the last time you took a look at your lease agreement? If it’s been a year (or a decade), it’s time to review and optimize your agreements. If you do not already include regular rent reviews in your agreement, consider adding a clause that allows you to adjust rents according to market conditions. You may also want to consider adding flexible leasing options to your agreements to attract a wider range of tenants.

3. Improve Property Appeal

If it’s been several years since you’ve invested in upgrades at your property, now’s the time to make a few updates that can help you make more money in the future. Spruce up your landscaping, update your interior design, and stay on track with your maintenance plan. Cost-effective updates can make a big impact in what you’re able to demand in rent and maximize your investment in improvements.

4. Retain More Tenants

Retaining tenants is a lot more cost-effective than attracting new tenants. To retain more tenants, make sure you’re providing an exceptional tenant experience. Keep the lines of communication open and address their concerns promptly. Consider offering incentives for tenants to stick around, such as improvement allowances, flexible renewal terms, or property amenities.

5. Invest in Sustainability

Your portfolio’s sustainability plan is a great place to increase your portfolio’s ROI. Smaller projects such as installing energy-efficient lightbulbs and water-saving fixtures can help you save money on energy costs. You may also choose to install more efficient HVAC equipment to cut your energy bill further. Not only do these updates help you save money, they can attract environmentally minded tenants.

6. Diversify Your Revenue

If rent makes up 100 percent of your portfolio’s income, it’s time to diversify. Diversifying your portfolio helps you weather downturns in the market and makes your income more predictable. One way to diversify your revenue is to offer additional services, such as event space rentals, rentals for pop-up storefronts, or storage space. Consider adding advertising and retail to common areas to additional revenue to your portfolio.

7. Invest in Technology

Smart building technology, access control, and property management software can all help you work more efficiently and increase your revenue. Smart building technologies optimize energy use and maintenance tasks. Smart access control systems track visitors to your property in real time so you can improve security. Property management software gives you a bird’s-eye view of your portfolio so you can draw insights from tenant behavior and your properties’ performance.

8. Expand Your Portfolio

A strategic acquisition can help you grow your portfolio’s revenue. The ideal property complements your existing portfolio and has the ability to grow with minimal improvements. Looking in another market can help you diversify your portfolio and capitalize on opportunities outside of your current area.

9. Review Your Finances

A simple budgeting and forecasting exercise can help you understand if your budget is on track and forecast future expenses and income. A little financial checkup can help you uncover areas where you’re spending too much and reduce unnecessary expenses.

10. Outsource Your Property Management

One way to optimize your time and ensure that you’re making smart choices in regard to vendors is to work with a property management company like Clarity Commercial. Our professional team can help you with everything from budget forecasting to fixing a lightbulb. We work with the best vendors in the area to ensure projects are completed at your properties on time and for the best value possible.

Like we mentioned last month, the CRE market is on the upswing in many areas, but we’re not out of the woods yet. Clarity Commercial can help you make smart investments that will maximize your revenue and diversify your portfolio. For professional commercial real estate management support, contact Clarity Commercial today.

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For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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June 20, 2024

By Mel Schultz Tenant/Landlord leasing, occupancy costs, sustainability

5 Ways to Lower Your Occupancy Costs

We’re halfway through 2024, and it looks like multifamily, retail, and industrial properties are bouncing back from last year’s slump, while office vacancies continue to rise. If you’re looking for ways to cut your costs as your portfolio recovers, we have five ideas on how you can lower occupancy costs to improve portfolio performance. These tips are valuable not only for landlords; your tenants can use these tips to reduce their own costs and mitigate the need to look for another space once their leases are up.

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1. Reconfigure Your Space to Lower Occupancy Costs

Hybrid work is driving changes in the configuration of office space. Private workspaces are going empty, while demand for collaborative spaces in offices has risen 40 percent since 2021. Over the last few years, tenants have been cutting space or reconfiguring their spaces to accommodate more coworking, teleconferencing, and flexible work.

As a landlord, you can capitalize on these trends by reconfiguring your existing spaces to make them appealing to tenants who are looking for more collaborative spaces or a reduced overall footprint. One large office suite could transform into two suites with flexible space. You may also consider investing in common area improvements that appeal to companies offering hybrid work, such as collaborative work areas and high-speed WiFi throughout your building.

2. Dig into Your Analytics

Your books can tell you a lot about the health of your portfolio. They can also help you find ways to cut your occupancy costs. Clarity Commercial can review your books with you to reveal your top costs, project future investments, and find opportunities to reduce current expenses.

3. Reduce Capital Expenses

In our review of your books, we may uncover ways to reduce capital expenses and cut future occupancy costs. Investments in many building improvements and upgrades can be converted from capital expenses to operating expenses once they are complete, turning them from investments into services you provide your tenants. An example of this would be installing solar panels on your building. You may be able to further reduce capital expenses by making early commitments on equipment orders and bundling smaller projects or recurring projects together.

4. Automate with Smart Technology

Smart technologies not only make it easier to manage your buildings, they reduce costs and can lead to increased tenant satisfaction. Your building engineering, HVAC, janitorial, security, landscaping, and access control can all benefit from smart technology improvements. These improvements help you cut your energy costs, more efficiently allocate your resources, and track occupancy levels.

5. Make Sustainability Improvements

Sustainability improvements are not only attractive to tenants, they help you reduce your operating costs and help you anticipate future regulations and mandates from your city, county, or state. Examples of sustainability improvements include switching to LED lighting, automating HVAC systems to improve efficiency, investing in solar power, implementing a recycling and composting program, and installing EV charging stations in your parking areas.

The CRE market is on the upswing in many areas, but we’re not out of the woods yet. Clarity Commercial can help you make sense of your books so you can uncover cost savings opportunities. Our CRE experts can help you make smart investments in the building improvements that will attract and retain tenants. For professional commercial real estate management support, contact Clarity Commercial today.

a building with a parking lot - Occupancy Costs

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

Sustainability Practices in Commercial Property Management

April 24, 2024

By Mel Schultz Commercial Properties, Commercial Property Management energy efficiency, sustainability, tenant retention

10 Sustainability Practices in Commercial Property Management

When you can save money managing your property, it’s a win. When you can save money and keep your tenants happy, it’s a win-win. And when you can also help the environment, it’s a no-brainer.

If you implement one or more of these sustainability practices for your commercial property portfolio, you can save money and the planet while improving tenant satisfaction. When tenants are satisfied, they are more likely to renew their leases. Plus, sustainability practices can be a big draw for environmentally minded new tenants.

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1. Energy Efficiency Upgrades

Many commercial property owners start with energy efficiency upgrades when they implement sustainability practices. An energy-efficient upgrade can be as simple as gradually replacing your lighting with LED bulbs or installing programmable thermostats in your tenant suites. Or, you might choose to upgrade to a high-efficiency HVAC system or install Energy Star appliances.

Investments in more energy efficient fixtures can dramatically reduce your energy use and save you money on your utility bills. Depending on the credits and rebates available, you may be able to save on your tax bill, too. Plus, your community or state and federal government may have money available to offset the cost of installation. Clarity Commercial can help you decide which energy efficiency upgrades are the best choice for your property.

2. Water Conservation Fixtures

Your property’s water bill can be a major expense every month, especially if you have water-hungry tenants. Water-saving fixtures such as low-flow toilets, faucets, and irrigation systems can help you conserve water wherever possible. If water conservation is something you’re particularly passionate about, consider investing in a water recycling system that reuses water from your faucets and other fixtures to irrigate your landscaping.

3. Waste Reduction and Recycling

One easy way to improve sustainability at your properties to enroll in and encourage your tenants to participate in your community’s recycling and composting programs. Install recycling and composting bins in your facility to make it easy for tenants to recycle and compost whenever possible.

4. Sustainable Landscaping

Looking to save money on your landscaping bill? Swap that water-thirsty, high-maintenance lawn for native, drought-tolerant plants. Not only is a more natural landscape more attractive than a lawn (or worse yet, concrete), it can pull double duty capturing stormwater runoff. You can also incorporate outdoor common areas into your landscape design so your tenants can enjoy the garden.

5. Indoor Air Quality Improvements

Indoor air quality is vitally important to the health and productivity of your tenants and their employees. Improve the air quality at your property by choosing low-VOC (volatile organic compound) paints and other finishes when updating common areas or helping with tenant buildouts. Inspect and maintain your ventilation systems to ensure adequate fresh air and comfortable humidity levels.

6. Green Cleaning Practices

Green cleaning products can also improve your building’s indoor air quality. Ask your Commercial Property Management team to swap to green products or hire a vendor who embraces green cleaning practices.

7. Smart Building Technology

Smart building technology can help you save on electrical and HVAC costs. Occupancy sensors can automatically turn off the lights and turn down the heating and cooling when rooms are vacant. Automated HVAC systems can be programed to optimize energy use based on occupancy and patterns in usage, too.

8. Bike Racks, EV Charging & Transportation Incentives

Installing bike racks and EV charging stations at your property and offering transportation incentives are easy additions to your Sustainability Practices in Commercial Property Management. Bike commuting is on the rise, and people need secure places to park their bikes once they arrive at your building. EV charging stations could help your tenants make the switch to electric vehicles and possibly electric fleets. Transportation incentives can encourage tenants to carpool and use public transportation.

9. Renewable Energy

It is easier than ever to switch your buildings to renewable energy. It may be as simple as asking your utility company to put you on their renewable energy or solar energy plan. Or, you may want to invest in your own renewable energy systems. Solar energy systems, geothermal, and other renewable energy solutions can reduce your reliance on the grid and possibly make you money sending energy back to the grid. They can also lower your building’s carbon emissions.

10. Tenant Education & Engagement

Optimize the sustainability practices you implement with a tenant education and engagement program. Explain to your tenants why you’re making sustainable upgrades. Host a walkthrough your building to show off the new HVAC system or rooftop solar project. Run a contest to see which tenant can recycle or compost most of their waste. Provide feedback on the success of water and energy conservation efforts. The more you can engage your tenants with your sustainability practices, the more successful they will become.

Improving the sustainability at your buildings can save you money while attracting and retaining tenants and protecting the environment. Clarity Commercial is your partner for sustainability improvements. For Get in touch Contact Us today to learn how we can help you choose and implement the right improvements for your portfolio.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

March 26, 2024

By Mel Schultz Commercial Properties, Commercial Property Management budget, leasing, maintenance, Property Management, tenants

Attract New Tenants with These 5 Alternative Uses for Vacant Commercial Space

If you’re struggling to fill vacant commercial building alternative uses this year, you’re not alone. Many commercial property owners are finding it challenging to attract traditional tenants for their offices, retail, industry, and other space.

To survive in a hard market, it is important to think outside the box. Here are a few alternative uses for vacant commercial space that could help you land your next loyal tenant.

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Commercial Building Alternative Uses

1. Life Science Labs

Life science companies require a mix of office and laboratory space. If you’re willing to work with the tenant on the build-out, your vacant office space may be the perfect future home a biotechnology, food processing, or medical device firm. Your existing building may be a more attractive option to the right company than ground-up new construction.

2. Medtail

In a similar vein, your retail space may be the ideal home for a new medical office. The medtail model puts outpatient services in a retail setting. Not only is this convenient for consumers, it can open up an entire new tenant market for you. Medtail build-outs are relatively straightforward, and the new tenant may attract other medical businesses to your property.

3. Eatertainment

It’s eating. It’s entertainment. It’s eatertainment. The Twin Cities is home to several eatertainment venues (think CanCan Wonderland in St. Paul or Punch Bowl Social in the West End). If you have a big space to fill, a tenant that plans to combine a restaurant or bar with sports, music, or other social activities might be the perfect fit.

4. Glamping

If you have vacant land in a rural area that is awaiting development, consider marketing your property to potential glamping tenants. Glamping, or glamorous camping, is an increasingly popular way for non-outdoorsy people to enjoy the outdoors. Your acreage may be the ideal spot to attract vacationers.

5. Pickleball

Pickleball was 2023’s fastest-growing sport in the United States, so why not capitalize on the trend? Pickleball courts are popping up in empty big-box stores and other properties with tens of thousands of square feet. This is a great opportunity for commercial real estate owners looking to repurpose their vacant spaces.

For those who are unfamiliar, pickleball is a racquet sport that combines elements of tennis, badminton, and ping pong. It can be played both indoors and outdoors on a smaller court than traditional tennis, making it accessible for all ages and skill levels. The game’s popularity has exploded in recent years due to its ease of play and social nature.

With the rise in demand for pickleball courts, Commercial Building Alternative Uses owners are taking advantage of this trend by converting unused spaces into dedicated pickleball facilities. These spaces can range from empty storefronts to large warehouse buildings – as long as there is enough space to fit the necessary dimensions of a pickleball court.

For businesses looking to attract more customers or provide additional amenities for their tenants, adding a pickleball court can be a smart investment. Not only does it offer a unique and fun activity for patrons and residents, but it also presents opportunities for hosting events and tournaments that can bring in revenue.

Pickleball courts can also be a valuable addition to hotels and resorts, providing guests with another form of entertainment during their stay. They can even be used as an attraction for corporate team-building activities or family gatherings.

If you’re struggling to attract tenants, Clarity Commercial is here to help. Our property managers can help you market your portfolio and find the ideal tenant, even if they are outside the box. Contact Us Clarity Commercial today for expert property management advice.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.