For commercial brokers, investors, and building service providers, tenant information is among the most insightful when researching an asset or an owner.
When determining the opportunity associated with investing in, selling, or servicing a property, understanding the tenants is absolutely crucial.
This article is an overview of commercial tenants, tenant rights, and how you can use Reonomy to discover who the tenants are in a commercial property.
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.
From an analysis standpoint, looking at the different types of businesses can bring some insight into the type of services a property may need or how the owner should be approached with a pitch.
For example, a cleaning company may see that a building has many similar office tenants. Instead of pitching a single tenant, they can try to win the entire building.
Owner Occupied Commercial Real Estate
In a lot of cases, commercial property owners will also occupy some or all of the space that they own. These are referred to as “owner occupied,” properties.
This is very normal for standalone businesses, retail, industrial, duplexes, and other multi family properties.
Owner occupied real estate is beneficial for the owner because it allows them to bring in an extra stream of revenue while still building equity through the property itself. It is a great option for small business owners of any kind.
From a third-party tenant perspective, owner occupied properties are considered lower risk due to the owner’s multi-layered involvement in the property, which naturally shows a higher level of commitment to the property.
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
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.
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.
Finding Who Occupies Commercial Buildings with Reonomy
Now, let’s say you’re looking to find out who the tenants are in a commercial property.
With Reonomy, you can easily search properties anywhere in the U.S. and identify who the current tenants are, along with the contact information of that businesses decision makers.
Search and Find Your Target Properties
On Reonomy, you can start either by searching a property or owner that you’re familiar with, or start completely from scratch to identify new properties and owners.
Using the Location, Asset Type, and Building & Lot tabs of Reonomy’s web app, you can:
- Search properties in any state, city, MSA, county, zip code, neighborhood, or on any street (or search using an exact address).
- Search for any commercial asset class, multi family property, or land parcel, including many sub-class options for each.
- Filter your search for buildings and lots of a very specific size and age.
Whether you’re an investor looking for luxury office buildings in Miami, a broker looking for warehouses in Oklahoma City, a solar installer looking for new land owners, or a roofer looking for churches in Opportunity Zones in San Antonio, Reonomy can help you easily sift through the market to find the properties and owners of greatest value to you.
All is takes is for you to visit the location tab and enter your desired geographical filters:
From there, you can choose from a long list of asset classes and sub-classes:
Once you’ve chosen an asset class and a location, you can add further specifics as to the size of the building and lot you’re looking for, as well as whether the property is in an Opportunity Zone.
With all of this in place, you’ll be given a list of results only of the properties that meet all of your search requirements.
Get Owner and Tenant Contact Information
From there, you can dive into individual property profile pages.
There, you can 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.
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.
If you already know an address or the name of an owner you’d like to search, you can run a quick property owner search to pull up that owner’s portfolio and see the tenants of all of their properties, owner-occupied or not.
You can do this by instead using the Ownership tab to begin your search.
Here, you can search by an individual person’s name, or you can search for an LLC.
In either case, you’ll be given all of the properties associated with that owner, along with the other LLCs and other individuals that are also associated with those properties — including the contact information of the people behind the LLCs.
Finding Owner-Occupied Commercial Properties
Within the Ownership tab, you can also add a filter to only see owner-occupied properties.
So, whether you’re searching for a specific owner name or not, or even if you’re searching for specific tenants, you can quickly weed out the properties where the tenants are not associated with ownership.
You’ll again be given a list of properties when adding this filter, where you can see the contact information for both the owners and tenants of the property.
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 property, tenants, and owners.
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 running a commercial tenant search by name or by tenant type.
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.
Similar to our aforementioned examples, once you apply the above filters, you’ll be given a list of properties that match, where you can sift through to identify owners that are likely to have cash on hand.
You can do that by searching for property owners 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
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.
And in today’s CRE landscape, data affords professionals the ability to access nearly any point of information on properties and the people associated with those properties.
While success is predicated on big ideas as well, 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.