For Leasing Commercial Real Estate in Gentrifying Areas of DTLA, Price is Often Not the Problem
As a commercial real estate broker in Downtown LA, I talk to commercial owners and managers of property in Downtown Los Angeles all the time. When an owner has a vacant space and wants to work with me I see my role as getting their property leased within 90 days. If I show it to five qualified people and they do not lease, there’s something wrong funky with one of the 5 causes. As I wrote in a previous blog entry, there’s 5 things that cause space to get leased. The biggest one of these 5 causes for properties in gentrifying areas of Downtown LA is often not price. Typically, the issue is lack of value which relates to many things including style, safety, and simplicity. If you own commercial real estate in Downtown LA in a transitioning/gentrifying area and you follow the recommendations in this article, you will make more money from your property than you can imagine. Your return on investment in this market will be far better by improving value over lowering price.
To recap, here’s those 5 causes that cause properties to get leased. One, marketing exposure. Two, time. Three, adding value. Four, lowering price. And five, improving sales presentation. For me, marketing is never the problem. If it’s in Downtown LA I can market their property more than anyone else can in Downtown LA. Time? No one has time. Sales? Most of the time spaces lease themselves, but a sales person does make a difference, and I’m not a bad salesman. These typically have not been an issue. Price? Price has not been the problem. People in Los Angeles can afford very high rents. The most common problem I see that keeps properties in gentrifying areas of Downtown LA from leasing is lack of value in terms of style, safety, and simplicity for potential tenants. If you want gentrified tenants for you un-gentrified property, this is what you need to know.
Business owners are looking for value! They educate themselves. They look around at different spaces and get a gauge on what’s available for what. They pay attention to details and compare those details. Also, business owners have minimal standards! You can have a crappy building for $.25 a square foot, and still no self-respecting business owner is going to want to relocate their business there. So yes, the problem is value!
Business owners care about their image just like they care about what kind of clothes they wear. Does the property have a style that you can argue for aesthetically? For gentrifying properties, creative companies are the most likely tenants. Yes, people like shabby warehouses, but if they are the type that’s willing to pay $5000 a month for a creative office space or retail space in Downtown Los Angeles, they are going to need the space to be crisp, clean, and polished. The key is to make the property stylish, make it cool, make it what business owners would want to align their image with.
Safety is also a spin-off of value. Safety is a big concern, especially for people not familiar with Downtown Los Angeles. People that live here feel comfortable, but some people are shocked simply by homeless people asking them for money. Shocked and afraid! People who have not lived in the Historic Core for a while and find themselves among homeless people, the drug addicted, and/or the mentally ill members of Downtown LA, often freak out. I see it all the time. Just because you might be use to these type of people, most other people are not.
Regardless, for everyone, safety is important. When you add exterior lighting, security cameras, and a security guard the safety concern is a lot less problematic. If people are concerned about the safety of your property, they’re probably going to drive by it or walk around there at night to ease their concerns. If it is pitched black around your building, they obviously are not going to feel safe!
Also, business owners care about amenities. Does the space have HVAC? Is there a conference room in the common areas? Are the bathrooms and common areas clean? Does the exterior of the building look well kept? Does the lobby give a good first impression? Often times, it doesn’t matter how cheap the space is, a lot of people simply will not rent without certain things.
Last but not least, and a spin-off on value, make the move in simple. The less the tenant has to do to make the space work for them, the better. If it’s not move in ready, you cannot show them it does indeed work for them. Make your property safe, don’t tell people you can. Make it convenient, don’t tell people you can. People are untrusting these days more than ever, especially in real estate.
For instance, lots of gentrifying properties don’t have central HVAC. Well there’s good news, there’s other options for AC. Best case scenario, buy the portable AC’s or one of the other AC options out there. Moreover, install it for them or maintenance! You can charge them a monthly fee, like the Spring Arts Tower does. Show them it cools the space down.
Do not tell them they can buy the AC and it will cool the space down. They will think, “Where will I buy an AC and how will I install it? That sounds complicated. Gosh, that’s another thing to do and worry about. Wait a second… oh shoot I just remembered I need to go pick up my kids from school. Crap I think I left the curling iron on!” Show them! People do not have time or patience. Tenants will make the easy convenient choice because they have a hundred other things on their mind. The money you’ll save from having the space leased and not vacant will definitely make you more money than doing the opposite.
The most common thing I hear from owners of properties in transitioning areas is this: It’s okay, we can do those improvements once we find a tenant. NO! You need to make your property cool, not tell people you can make it cool.
Also, creative people are surprisingly uncreative at times, when looking for Downtown LA real estate. Also, most people want to move within 30 days. If it’s going to take you three months to get the improvements done, the “I’ll make it cool” response, makes no sense in principle! These people will have rented somewhere else by the time the owner is done with the improvements. Also, since these tenants shop around, why would someone lease at your property that you tell them you’ll make it cool when someone down the street has made the property cool already and they could move in now if they wanted to?
So to recap
My name is Donegan McCuaig. If you’re looking to buy, sell, lease, or manage property in Downtown LA give dtlarealestate.com a call now. Thank you!