Selling a tenanted commercial property couldn’t be easier. We absolutely love to buy tenanted commercial properties because they are income producing from day one and aren’t costing money in terms of business rates, insurance, and maintenance.
We are ready, willing, and able to purchase any type of commercial property from a small shop to a large warehouse and anything in between.
We see tenanted commercial as assets and that’s why they always carry a premium as opposed to an empty commercial property that carry liabilities.
As professional commercial property buyers, we understand the importance of keeping great tenants in situ with no desire to break their lease and no indication that they will forfeit their lease.
In this article, we will look at the benefits of selling a commercial property with tenant.
Be careful who you listen to
If you approach a commercial estate agent, they will advise you to allow the lease agreement to come an end before selling your property particularly if the lease is due for renewal in the next 12 months. Unfortunately, an empty commercial property is less appealing with rates liability, insurance, repairs and dilapidation costs. Your commercial estate agent will only have their interests are heart – so that they do not have to call your tenant and arrange a time to show any potential buyers.
A commercial property with strong tenants in situ is much more than just an investment – it is a working business model. The appeal of a tenanted property can be further enhanced by proving there’s a strong history of payments, via bank statements, and no history of arrears.
An empty commercial property will always be seen as a going concern. Don’t worry, we will still buy an empty commercial property.
Documentation is key
Having evidence of a strong occupancy rate is key to successful sale. Whether you have an office with multiple tenants or a row of industrial units, if you can demonstrate that your commercial space is running at maximum occupancy, this is a very positive sign.
Conversely, if a potential buyer sees only 60-70% of a building being occupied then he/she is very likely to consider offering you substantially less than your asking price.
Leases ending soon with no intention of renewing or no expression of interest from any potential tenants can weaken a commercial property’s appeal. Equally, if tenants get the wind of the fact that you are selling, they may not be comfortable with uncertainty of building a relationship with a new landlord.
If documentation demonstrates 85-100% occupancy rate, then any potential buyer will immediately realise that this is a proven and profitable business model.
Any commercial property investor is interested in calculating their return on investment and if you can show forecasted monthly income, it can make selling your tenanted commercial property a very smooth experience.
Lease length figures
Service office spaces are known for offering short term leases with just one month’s notice required to leave, and often very minimum length of lease – around 3 to 6 months.
If your commercial property has multiple tenants, how long they are likely to stay is a key metric. It is not a problem if you have a turnover of tenants as long as you have a high occupancy rate. Longer leases of at least 5 years give a sense of stability and a far attractive proposition.
In longer leases, it is best to measure how many tenants are still in occupancy at the end of the lease, how many left at their break clause period and how many tenant decided to extend their lease.
‘Hands off’ commercial property landlords, do not wish to frequently market a property, show new tenants as they will have to appoint a commercial agent, and this will eat into their potential profit.
The forecasted rental income is great but the real measurement any commercial property investment is currently banked income. As a commercial property seller showing your rental income being collected verifies your claim.
We’ve been shown fake bank statements when we have requested proof of rental income by dishonest sellers.
What happens to a commercial lease when a property is sold?
When a commercial property is sold with tenants in situ, their lease is binding with their new landlord. As a result, new buyer can’t simply acquire the property and raise the rent. Rent can only be increased either by rent review stipulated within the lease or once the lease expire.
The risk is that your tenant could choose to find alternative accommodation for their business. The most obvious issue will be loss of rent. There’s a strong possibility that word will spread around the community that new landlords are overcharging rent, and this could deter any potential tenants.
This is the worst-case scenario when you are selling a tenanted commercial property via open market. It is important that you are presented with a balance view.
Looking at this from marketing perspective, which sounds better – “5,000 square feet of office space available” or “Office space currently producing £20,000 per month with 90% of lease agreements signed for the next five years?”.
What’s your relationship like with your tenants?
If you are selling your commercial property with existing tenants on the open market, any potential buyer will want to know what to expect from the tenants and understand their plans. Naturally this reduces the risk for any commercial landlord.
However, it makes it very difficult for viewings and potentially you could fall out with your tenants. This is because they may have to stop what they are doing during the viewing or be concerned that a rival firm maybe snooping around for any sensitive information. This is where Property Saviour offer you a real alternative when it comes to selling a tenanted commercial property.
Seamless sale of any commercial property
If you do have the documentation or you are trying to sell a commercial property with no formal lease agreement in place, we can still help.
Property Saviour are professional commercial property landlords. Depending on your situation, we can agree to buy a property based on its photos and a description of condition which may not need a viewing. This can be ideal if your property is occupied with tenants. We keep any disruption to their trading activity to absolute minimum.
We are the buyers. We are not commercial estate agents involved and the best part is that you do not have to pay any fees or wait several months for a sale.
Our cash offer means you can sell today and complete the sale within 3-4 weeks. We will also pay £1,500 towards your legal fees too.
Whether you wish to sell a tenanted commercial property or you have a vacant commercial premises, Property Saviour are ready to buy it with our own cash. There are no delays.
Tenanted commercial properties tend to attract a higher offer when compared with an empty commercial property. This is because they are income produced and considered to be ‘well looked after’ by their current tenants.
You do not need to give notice to your commercial tenants if you wish to sell. We will buy your property discreetly. Nobody needs to know that you have sold your property.
Once you have completed the sale, you can inform the tenants and introduce ourselves if you wish to do so.