You’ve likely heard some version of the line, “it’s what’s on the inside that matters.”
Typically used as a reference to how human character is superior to physical beauty and aesthetics, the sentiment also rings true in the world of commercial real estate.
For tenant reps, landlord reps, investors, and building service providers, the tenants and space within a building inform its “character” as much as any external measure.
Defining the “Character” of a Building
When we say “character,” we are referring to the level of opportunity—the relative value—associated with the property’s ability to generate revenue.
While there’s always a literal structural value to a building, the working variables and unique traits (i.e. tenants) are what form its true value.
Different types of professionals will seek very different traits.
Maybe you’re looking to find new space for a client as a tenant rep.
Maybe you’re looking to fill vacancies for an owner.
Maybe you’re an investor researching the current and future income that a property can generate.
Maybe you’re a property management company trying to understand the internal needs of a building.
Maybe you operate a carpet cleaning business and are seeking new office clients.
Whatever your version of “maybe…” might be, an understanding of who is occupying space in a building can allow you to properly assess the opportunity available to your business, whether it’s from an investment, lease, or servicing standpoint.
How can you see who occupies commercial buildings?
In the world of retail, for example, this isn’t entirely difficult to discern.
But what about other business properties like office buildings, warehouses, large retail centers, and mixed-use buildings?
Reonomy’s property intelligence platform lets you identify buildings based on who the occupying tenants are.
Additionally, you can use the platform to dive in and analyze all the commercial tenants in a building and see specific details tied to the business in the space.
Note: The platform does not give access to information on residential tenants.
How to Find Commercial Tenants on Reonomy
Identifying Specific Tenants
On the Reonomy platform, you can identify commercial properties in your market based on the name, website, or type of tenant in the building.
Search tenant types by NAICS and SIC codes, search company names, or simply enter a web address if you have such information.
Upon searching, you’ll be given a list of all the properties that meet the criteria you’ve entered.
Identify Tenants in a Specific Geography
You’ll likely want to focus on a specific market of some kind.
Aside from your tenant qualifications, you have plenty of options to narrow down your list of results to a geography and property type (if you prefer).
Any level of granularity works. Focus on an entire state, city, or county, or narrow it down to a specific neighborhood or street.
From there, choose from a long list of asset classes and sub-classes (selecting all that apply, allowing for any combination).
With an asset class selected, set specific ranges for the size and age of your ideal building and lot.
So, for example, with the above criteria, you could identify:
- Every grocery store in Dallas, TX
- Every CVS in the Los Angeles-Long Beach-Anaheim, CA MSA
- Every Dunkin’ Donuts in the Garment District neighborhood of NYC
Get Owner and Tenant Contact Information
Now you can dive into analysis, and look at in-depth information on individual properties, tenants, and owners.
Analyze the building and lot in depth, see the owner details and contact information, and see the current tenants of the property, again with associated contact information.
Below is a snapshot of the Tenants tab of a property:
Here, you can see decision-maker and property manager contact information, along with information regarding the tenant themselves, like their website, year started, and NAICS and SIC codes.
Finding Owner-Occupied Commercial Properties
Within the Ownership tab, you can also add a filter to only see owner-occupied properties, in case you’d like to find certain occupant types that are also associated with ownership.
As mentioned above, you’ll be able to see available contact information for the owner and tenants.
In some cases, the contacts will be the same, but that will not always be the case depending on the hierarchy of the business tenant.
For example, the owner-occupied Ohio office building below has matching decision-makers for property ownership and the associated tenant company.
Property Ownership Tab:
Property Tenant Tab:
All of this information together lets you understand properties, owners, and tenants on multiple levels, and allows you to get incredibly specific when personalizing your pitch—not to mention while reaching out to them directly.
You can dig in further with building and lot measures, as well as by analyzing the other properties in that owner’s portfolio to reach out and prove that you’re a seasoned expert in the industry.
Buying and Selling Commercial Property with Tenants
Buying and selling commercial property with its existing tenants can add a bit of baggage to any transaction, making it extra important to put in the necessary due diligence on the tenants.
Buying a Commercial Property with Tenants
Buying a commercial property with existing tenants can be incredibly lucrative, but requires heavy research regarding who the tenants actually are, since you’ll have to abide by the lease agreements already set in place.
If you’re looking to buy and hold a property, the tenants are as much a driver of long-term success as the location and surroundings of the property.
Acquiring a property with tenants allows for a more hands-off investment approach, especially in the case of a net lease or tenant-managed property.
Plus, you don’t need to spend the time filling any vacancies as a new owner. You can start generating income immediately.
On the other side of the equation, just because a tenant pays the rent on time, does not mean they’re joyous to work with.
The con is not knowing the real people behind the tenants you’d be inheriting.
While screening new tenants can be time-consuming, it also gives you the control to bring the right companies at the right time.
Buying a property with its tenants is a bit riskier.
Selling a Commercial Property with Tenants
Selling a commercial property with tenants can also be a bit more difficult because you’re going to have to find a buyer who is willing to take on those tenants, thus bringing more weight to your sales pitch.
A workaround for this is to use a tenant search tool like Reonomy and find potential buyers that own properties with similar tenants to your own.
You can do this by identifying buildings with similar tenants to that of the one you’re selling.
So, say you’re trying to sell a strip mall that includes a variety of tenants—a mom-and-pop pizza parlor, an AT&T store, a Dick’s Sporting Goods, and a barber shop.
To find owners that own similar properties, you could, for example, search Reonomy using relevant tenant NAICS or SIC codes:
|Tenant||NAICS Code||SIC Code|
|Pizza Parlor||“Limited-Service Restaurant”||“Pizza Restaurant”|
|AT&T||“Wireless Telecommunications Carriers”||“Cellular Telephone Services”|
|Dick’s Sporting Goods||“Sporting Goods Stores”||“Sporting Goods and Bicycle Shops”|
|Barber Shop||“Barber Shops”||“Barber Shops”|
Likewise, if you prefer, you could also search for “AT&T,” or “Dicks Sporting Goods,” in the tenant name search bar.
How do you discern who is looking to buy?
You can spot owners that have some cash on hand by identifying those that have recently bought or sold a property.
From there, it is simply a matter of conducting the necessary due diligence and reaching out directly.
Listing a Commercial Property with Tenants
Below, we’ll continue on to take a look more generally at the different types of commercial tenants and the rights they are afforded.
Commercial Tenants Overview
There are many layers to the commercial leasing process, both from the owner’s point of view, and the point of view of the tenants.
It’s obviously crucial for tenants to understand their obligations as a paying occupier of building space.
But for CRE professionals, it’s also important to understand tenants and the leasing process in order to fully understand what it takes to buy, sell, and service commercial properties.
There are a few different commercial tenant types, and with each types comes different rights for those tenants.
Commercial Tenant Types
To consider the different types of commercial tenants is mostly to consider the difference between business types, asset types, land uses, and lease types.
Commercial tenants can also be measured by their level of obligation to a property’s operating costs.
That could include single, double, or triple net lease tenants, for example, modified gross lease tenants, percentage lease tenants, and so on.
Percentage lease—a lease where a percentage of monthly sales go to the owner of the property—tenants often include retail businesses.
Net leases allow owners to pass down property operating costs to tenants.
Which reminds us of a commonly searched question across the web…
“Do commercial tenants pay property tax?”
While the real answer to that is, “it depends,” the fact is, commercial tenants can be obligated to pay property taxes in the case of a net lease.
Single, double, and triple-net simply represents the layers of payments obliged to the tenant.
Each “net” represents another cost that falls on them.
Net leases include a variety of business types, but are mostly for those who prefer to have control over the property they operate out of, as that control is granted in taking on extra financial burdens.
Full-service leases are made up mostly of industrial properties and office buildings, and are when the landlord takes on most of the property’s operating costs.
Commercial Property Tenants Rights
Based on the lease terms and asset type, a business tenant will have specific rights associated with their property occupancy.
These rights are afforded them given they fulfill their obligations to the owner.
Rights are associated with the type of lease the tenant has on the property:
Are they just paying rent?
Are they taking on a triple or double net lease and absorbing much more of the cost of the property?
In a general sense, commercial tenant obligations are the same as any residential tenant—pay the agreed upon rent, maintain the property/unit, and follow any other specialized rules agreed upon in the lease (for example, paying property taxes or other additional costs).
Upon signing that lease, a commercial tenant earns the following rights:
- Lease Terms
- Necessary Maintenance
1. Leasing Terms
As long as a tenant is paying their dues, they are subject to the agreed upon length of their lease—even if the owner decides to sell.
Within the confines of their lease and, of course, law enforcement, commercial tenants have the right to conduct their business as they please within the space they are leasing.
Furthermore, based on what is specified in a lease, a landlord may or may not have the right to enter a tenant’s property to conduct random inspections and examinations.
3. Necessary Maintenance
Unless a tenant has an absolute net lease (which is not very common), both them and the owner will be responsible for some level of property upkeep.
The balance of who does what will vary from case to case, however.
From a tenant’s perspective, they have the right to necessary maintenance on behalf of the landlord, in case unforeseen or inconvenient problems arise.
Understanding Properties from the Ground Up
To be the best broker, investor, or service provider in the industry, it’s important to have a holistic understanding of each and every one of your prospects.
While success is predicated on big ideas, the biggest ideas of all come from having more information at your fingertips.
Understanding properties all the way down to the individual tenant could be the factor leading you to higher levels of success.