Dan Krueger has been working in commercial real estate for about 25 years. He said he's never seen the market like it is today.
“In real estate there are certain ups and downs,” said Krueger. “Nothing, nothing like this.”
He's referring to the impact COVID-19 has had on commercial and retail property rentals. Following the stay-at-home orders across the Tri-State that brought much of the real estate market to a halt, activity has been slow to pick up, according to Krueger, who is a property manager for Towne Properties. If there is interest in leasing a property, he said, many times the interest is in a deal 10 to 20 percent below the going rate per square foot before the pandemic.
"Be prepared. Be prepared for the economics of this deal," he said is the heads-up he has heard from brokers in the area. "You might not like it, but what do you do as a landlord?”
“People that are looking for commercial real estate either to lease or to buy are expecting a deal, way more than there might have been pre-COVID,” said Joshua Rothstein, a retail specialist with OnSite Retail Group. He works with property managers and landlords as well as business owners looking to lease space.
“Frankly, property owners, whether they’re looking to lease out or sell, I think that they have acknowledged that they have to be far more flexible than ever before,” Rothstein said.
That's because both he and Krueger admit right now is a renter's market.
“It’s a little bit steeper of a dive down because we don’t know what’s going to happen,” said Krueger.
In addition, vacancies are increasing as businesses, like some restaurants and retail stores, are having a difficult time staying afloat without the ability to fill their stores and establishments with customers.
“If the restaurant is 5,000 square feet and you can only fit a fraction of dine-in customers, what am I going to do in the wintertime when these people can’t sit outside?” Rothstein said.
Those are some of the dilemmas some retail and commercial business owners currently face. However, surviving the economic downturn may depend on how nimble and versatile the businesses and property owners can be.
To lure potential renters to vacant properties, Krueger said he will try to include upgrades or make sure properties are move-in ready. He also doesn't underestimate the power of a for sale sign.
“Put the signs out. You know, the little road signs? Put them in the window. Put the banners up so there is no doubt that there is space available,” he said.
The hope is that will get them in the door. If they like what they see, then comes the terms of the lease. Again, it's a renter's market.
"That might mean free rent, too. A lot of tenants are going to ask for that,” Krueger said. “With a reasonable deal, which is a lot less than we would have thought before, most landlords would make the deal and get somebody there.”
Rothstein said property owners may need to look for different kinds of tenants also.
“Instead of seeking out those long-term tenants that are prepared to commit to a five- or ten-year lease, we have to welcome the tenants who are looking for pop-up shops,” he said. “Perhaps mask pop-ups, folks that are making and selling masks or things that are more seasonal."
He also said service providers may be a better fit for some neighborhoods versus retailers.
“You have to be able to be creative with what you’re doing,” said Krueger.