Incentive strategies like a free year of rent for tenants, a $50,000 bonus for a leasing broker and an open-house raffle of a plasma television are emerging as ways to fill commercial real estate vacancies in an economy where tenants are hard to find.
Nick Easton, owner of the Cavern Club building on First Avenue, is one owner trying to sweeten a potential deal. He's trying to sell the building that includes several connected bars and dance floors, two apartment units and the Blind Pig bar and music venue.Enlisting the services of broker Jim Chaconas of Colliers International, Easton has dropped the price to $2.845 million for the 25,000 square-foot building, and is offering buyers' brokers a $50,000 incentive. The building was originally listed at $6.875 million in fall 2007.
"I think the price now is reasonable, so I said 'Let's give a broker incentive,'" Chaconas said. "I want everybody in the world to see it ... there needs to be a reach outside of Ann Arbor."
Easton and Chaconas said the unique nature of the building - which was extensively rehabilitated by Easton, partly using furniture and fixtures he had collected during his previous work as an antique dealer - and Easton's desire to move to northern Michigan were as important factors in the lower pricing and incentive as the current economic conditions.
A few blocks north on First Avenue is the McKinley Technology Center, a 22,000-square-foot office building that recently lost its major tenant, Xoran Technologies. McKinley had an open house scheduled there for today, at which a plasma TV was to have been given away, and brokers who attend would be offered added incentives.
McKinley's national leasing director April Davis said brokers who come to the event would receive an additional $500 for renting 4,000 square feet within four months, $1,000 for 8,000 square feet, and $2,000 for 12,000 square feet.
"The timing is primarily because we lost our largest tenant," Davis said. "We would like to get it re-tenanted as soon as possible ... I guess it's a way to get broker attention."
She added that McKinley had done a similar event for a building in Akron, Ohio, when it lost a large tenant, about two years ago.
"It's just a way to get people in front of it," she said.
Public relations was a secondary concern for the McMullen Company's wild west party at its Valley Ranch Business Park in May, said Ted McMullen. But he admitted that drawing attention to the company and its properties was a beneficial side effect of throwing the networking party.
"Let's face it, from the pictures taken at the party, to the invite before the party ... you're going to be thinking of McMullen," he said. "But I would honestly say that's not the driving factor."
At the same time, McMullen said that every time he's had a wild west party, which is about every five years, the building in which it is held is fully leased within a year.
According to the company's Web site, it has about 47,000 square feet of availability in three buildings at the business park.
On the tenant side, aggressive pricing and incentives including a year's free rent on a long-term lease are two of the strategies that have resulted in some success for one broker in Saline. Jason Myers of Michigan Commercial Realty was part of a group that purchased the former home of R &B Tools, a 33,840-square-foot building on Woodland Drive.
He was offering one year free rent on a six-year lease for the full building, or pro-rating the incentive for users taking smaller spaces. He recently leased about one-third of the building.. But Myers also said it was the building itself that attracted the tenant, with private offices as well as lab space, as much as the pricing or incentives.
"The decisions to drop down the rents and offer incentives were not a desperation move, it was more of a market move," he said. "The market is what it is, there are a lot of vacancies out there, and we felt we could get very competitive and still make out OK."
Contact Dan Meisler at (734) 302-1721 or danm@mbusinessreview.com.