3 Benefits of multi-tenancy leases for Commercial Landlords

Do you own a commercial property or are you looking to diversify your portfolio?

Have you considered a multi-tenancy lease?

As a commercial landlord, you can choose to lease your property to one company, or split the plot into multiple units and rent it to several businesses in need of smaller spaces.

Here are our top 3 benefits of multi-tenant leases in regional commercial property.

1. Cash Flow

With multiple tenants occupying your property, even if one defaults on rent (and assuming the others are paying on time) your property is still generating cash flow. It also means that if one unit is vacant, you don’t have to find another way to fund repayments, as the other tenants will still be making their rent payments. The remaining tenants will also be covering at least a portion of utilities and other costs associated with the property, minimising the dent in your finances. (RW 2020)

2. Vacancy Rates

By splitting one property into several separate units, you protect yourself from a completely vacant property. In terms of physical security, this has some benefits in that you still have other tenants in there keeping an eye on any issues such as leaks or maintenance that may arise. It also means you protect yourself against changes in the economy. By relying on one tenant, you’re at risk if their industry begins to suffer or their business slows for any other reason. A space that is able to be used by various types of businesses all at once can help you find tenants if one industry suffers. (RW 2020)

3. Sector Diversification

Your tenants will ride economic cycles or trends, but not necessarily at the same time. For example, hospitality has taken a hit due to COVID-19 restrictions which have had a huge impact across the industry. That business may share a partition with an accounting firm that’s looking to grow its operation. Multi-tenanted commercial properties benefit from this sector diversification because an underperforming tenant could be hedged by an outperforming one. But the benefit of a diversified mix of tenants comes with extra management hours and costs. (Commerical Property Australia, 2020)

With many large Australian companies looking to decentralise their workforce to allow for individuals and families to make the switch to a rural lifestyle, the demand for businesses and services throughout regional NSW remains a strong investment in the eyes of economists.