How Retail and Office Owners Can Minimize Vacancy

The pandemic upset even the most stable real estate owners. Properties with long histories of low vacancy saw tenants move out or reduce space in response to the pandemic, and office and retail owners were the most impacted. While it could take years for the leasing market to recover, there are ways that property owners can tackle vacancy problems.

“Viewing tenancy as an investment is one way,” Phil Raglin, CEO of Alpha Lease Management, tells GlobeSt.com. “By partnering with firms like ours, owners and property managers can work with tenured professionals who will either occupy each vacant space or sublease and manage it, as explained earlier.”

Securing a master lease with a leasing management company like Alpha is another way that Raglin recommends owners minimize vacancies in ta property. Setting up a master lease allows an owner to become a passive investor in the property, leaving the responsibility of the space to Alpha. “Instead of quickly scrambling to fill vacant space, which could lead to having a less-than-creditworthy tenant, owners can become passive investors by setting up a master lease with a firm like ours, which then assumes the task of making that vacant space perform,” says Raglin.

Maste leases are customizable with negotiable lease terms and rates that, according to Raglin, are based on the ideal outcome for a property. “We determine this outcome through a fintech analysis using our 16,000 data-point TALGO algorithm, which calculates the risk of leasing a property,” he says.

Master leases can be a long-term strategy for owners as well. Some lease terms can stretch up to 30 years with incremental increases in lease rate. “In most cases, existing leases become subordinate to the master lease, which allows property owners to collect steady increases while we await periodic increases from other tenants,” explains Raglin. “This structure allows active investors to become passive while providing all investors with speed, transparency, and ease.”

In addition to signing a master lease, owners can also monetize previously unleaseable spaces, like common areas, parking and rooftops. Alpha actually upgrades these areas to enhance lease-ability. “We offer this service as a CPR lease structured as a net lease, which is much more cost-effective, less risky, and deepens property value while increasing NOI,” says Raglin. “Rather than assuming the expense and risks of activating these spaces themselves, owners transfer the risk and management to us, and we provide capital investment for these upgrades.”

These leases also help to offset vacancy in a building an increase NOI, which is crucial for many owners today facing increased vacancy. As Raglin adds, “This lease structure deepens property value while diminishing owner/operators’ risk and offsetting vacancy costs in a building’s traditional leased space.”