In Search of Tenants

Cutting Through the Clutter

© Jay Nelson

In 2023, Jay Nelson, CCIM, and his partners took over management and leasing of the Manchester Building, a 128-year-old former biscuit factory in Fargo, N.D., which was converted to office space after the factory closed in 1960. Nelson is a commercial and investment specialist with Archer Real Estate Services.

When Archer assumed management responsibilities for the Class B building, it had a 45% vacancy rate in a downtown submarket where the vacancy rate was 15%. “The building was underperforming, despite advantages such as free parking and a roughly $15 per square foot price advantage compared to new construction,” Nelson says. “We weren’t the first firm to list this building, and we could track its history and see that the tried-and-true methods hadn’t worked.”

To cut through the office marketing clutter, Archer used pop culture references to attract young, startup tenants. One of the first ads read, “We think we’re the oldest office building downtown that can claim to be zombie-free for 128 years.” The humor worked.

“We got calls from business associates who saw the ad,” Nelson says. “These people had never called me about an ad before.” Another ad played off a Dolly Parton quote: It takes a lot of time and money to look this cheap. “We spun that to tout the Manchester’s low leasing rates,” he says.

Structuring Space to Fit the Target Audience

The conversation pivots to a more serious tone when showing prospects the building, emphasizing building amenities and Archer’s hands-on management style. The pop culture marketing strategy paid off, with the building vacancy rate down to 15%, comparable with the rest of the city. To attract new tenants, Archer also converted a large suite into a business center where tenants lease a small office from month to month and share common areas. Within 45 days, that space was fully leased with nine offices, generating income from space that had sat empty for eight years.

“We worked with tenants with no leasing history and didn’t bother to check creditworthiness,” Nelson says. “We figured if they were only there for a month and then got behind, we’d cut our losses.” This thinking was spot on. The Manchester attracted tenants who came into the building on a month-to-month lease, but when their businesses took off, Archer moved them to a long-term lease elsewhere in the building.

Aside from leasing success, Nelson believes the model has paid off in other ways. “It demonstrates our ability to decrease vacancy rates and increase rental rates. We can go to potential owners and say, ‘Let us do that for you.’”

Bucking Conventional Wisdom

Jackie Delay

At a time of historic office inventory, spending money to create speculative suites might seem counterproductive, but that’s not the experience of Kristy Daniel, SIOR, and Jackie Delay, who work as a team at Elford Realty/CORFAC International in Columbus, Ohio, representing owners, buyers and tenants. Office tenants value amenities either onsite or within walking distance to help recruit and retain employees. “Even with that, landlords have to act fast and off er more competitive economics to get a deal done,” Delay says. “Because we represent tenants and landlords, we understand both perspectives and use that knowledge to guide and develop creative deal structures.”

“Responding in part to the ‘flight to quality’ in commercial space, some landlords are proactively creating elevated speculative suites that will suit the average tenant,” Daniel says. “These spaces are partially renovated with high-end finishes, based on owners’ understanding of what most tenants need, such as conference rooms and kitchens. This helps tenants envision themselves in a space, giving us an edge on a prospect that may have otherwise passed.”

Kristy Daniel, SIOR

To increase their chances of signing a prospective tenant, the team sometimes sends unsolicited proposals on behalf of a landlord client. “On occasion, it has worked,” Daniel says. “Minimally, it’s a gesture of our interest and a valuable exercise in anticipation of finding the right tenant. We find that on any listing, having proactive conversations with our fellow brokers, businesses and municipalities can be the differentiator that leads you to the right user,” she says.

The team tries to mitigate as much out-of-pocket cost as possible through negotiations on rent, tenant improvement allowances, and other concessions when representing tenants. “Furniture is one variable that can tip the scales when comparing options,” Delay says. “If a tenant can use any furniture left in a space, it can mean material cost savings and an accelerated timeline.”