HEADLINE: Think in the box INTRO: A vacant retail property runs the risk of becoming worn-out shell and difficult to sell. Instead of finding buyers, it’s better to first lease it out and then let the buyers walk in, says Manju Bisht The discussion around the current real estate woes has largely centered on a stalled housing market, loaded with unsold inventory, bank defaults, and a lack of buyers. Things aren’t much better in the commercial real estate world either, which is just now getting media attention, thanks to Real Estate Investment Trusts, or REITs. The good news about tough economic times, however, is that they breed ingenuity. Like the one where retail property owners tired of holding on to their vacant shops have thought upon a novel idea. Instead of zeroing in on buyers, theyre channelizing their energies towards renting out their outlets. “It’s easy to sell a retail property that’s already leased out,” says a Noida broker. He says having a property empty isn’t healthy: “You have to pay maintenance, mortgage, taxes and you feel you are keeping something unused and without any profits and probably just debt.” After all, few things may appear as unattractive or wasteful as empty property – it tends to attract vandalism, the unwelcome attention of squatters, the appearance of dereliction and a general atmosphere of an area being run down. “If it’s rented out, we assume that it’s being maintained and it will not become an eyesore or depress neighbouring property values,” says Kamal Manchanda, Promoter, Brand Realty. In general, a vacant property becomes a problem when the owner abandons the basic responsibilities of ownership, such as routine maintenance. Moreover, for the owners of vacant retail space, the loss of income and the effect of vacancies on other property is a big concern. Manchanda says properties may become vacant for a variety of reasons, some of which are relatively benign. “But it’s for sure that the healthier the rental income, the greater the sum a buyer will pay for it. Also, if the buyer is purchasing a property with a tenant already in place, the terms of the lease and the quality of the tenant will represent some value.” For example, a lease with 15 years left to run, to a blue-chip company would be worth more in investment value than a lease at a similar rent but only three years left until expiry and to a company that is facing financial difficulty. “The longer the lease, the more assured it is; therefore, the more valuable the income stream is,” says Manchanda. Commercial real estate experts say it is time for the owners of vacant spaces to think creatively about how to fill. For instance, a very large retail space can be subdivided into smaller spaces to interest small-business owners. A mini-mall with places for several interior retail stores could be an attractive and less expensive alternative for entrepreneurs. “Despite your desperate hopes and prayers, business isnt just going to wander into your way,” says another broker. “You need to think in the box to rent it out and then try finding buyers. The right strategy for investors is to grab a property for cheap and aggressively go for tenants.” And in putting something so valuable back into use, you may feel that sense of satisfaction and achievement that accompanies the completion of a project well done. Bringing your once empty property back to life is likely to be a celebration of the difference all your imagination, creativeness and hard work has been able to achieve – there may be a lot to be said, therefore, it may be a good idea to include a celebratory treat for yourself and your team at the end of all your travails.
Posted on: Wed, 08 Oct 2014 07:02:03 +0000
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