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Vacancy is a crucial factor in buying and selling commercial properties. When researching a property, determining the vacancy rate for the property in its primary marketplace can help determine the price point of the listing. Below are five factors that impact vacancy rates in commercial properties. 

The national economy has a large impact on vacancy rates. As an example, a fall in unemployment may lead to more people in the marketplace buying goods, which leads to an uptick in retail sales, and then an increase in the manufacture of those goods. A rise in unemployment would have the opposite effect. 

If financing rates drop, investors are more likely to build competing space. Likewise, if the cost to build commercial space increases, the return on investment for the new space decreases and leads to less investors building. A decrease in the rate of growth space makes for less supply on the market, which ups the demand and reduces vacancy rates.

The local economy can affect the business cycle in positive or negative ways. This can either lead to new business start-ups and expansions, or to businesses closing and downsizing. If a major employer in an area shuts down, higher vacancy rates may be expected because the suppliers of the major employer have a reduced need for space. Alternatively, quick growth in a market area could cause a major increase in the rental rates as demand for space and supply available decreases. Overall, it can be noted that vacancy rates often follow market cycles. 

Throughout the country, there are movements that pressure zoning boards to restrict or limit the construction of new commercial properties. When this is an issue in an area, the demand for existing spaces goes up, as does the rental rates. In turn, the vacancy rates will decrease. 

Overbuilding can lead to higher vacancy rates. Investors may believe there is a shortage of a particular type of commercial spaces and build more in order to fill that gap. The construction of new commercial spaces, however, can hurt the lease of existing space. Even an increase in supply when the demand is holding steady can reduce the rental rates of a space and therefore increase vacancies. 

Leases are a fundamental part of commercial real estate. Including important information such as the length of the contract, amount of lease payments, who is responsible for maintenance of the property, and more can make ownership of a leased commercial property run much more smoothly for both the lessor and lessee. Below we are sharing 11 important clauses to consider adding to a commercial lease. 

1. Property and Liability Insurance. Every commercial lease should detail who is responsible for liability insurance and what each will cover. Generally speaking, Landlords maintain a policy on the building they own, and tenants maintain a policy on their contents.

2. Repairs and Maintenance. Spelling out who is responsible for repairs and maintenance can be a lifesaver for commercial leases. It's a good idea to spell out who is responsible for repairs and maintenance, and if there is a differentiation between major repairs, such as a new roof, and maintenance for responsibility. Be sure to be as specific as possible!

3. Property Improvements. Who will pay for improvements on the property? Will it be the tenant or the landlord? Will the landlord work out a deal where they pay for improvements at the time they are made, and then charge the tenant over time in their rent payments? Is the tenant allowed to renovate the space they occupy? To what extent? If they tenant is allowed to renovateor otherwise improve the space, do they need written permission from the landlord?

4. Renewal Term. At the end of the lease term, will the lease automatically renew? Will the lease convert to month-to-month until the next lease terms are figured out, or will the lease simply end and the tenant is to leave?

5. Security Deposits. Is a security deposit required? If so, how much? How will the security deposit be returned, and under what circumstances will it not be returned? 

6. Common Area Maintenance Fees. Many commercial properties have common areas that need to be taken care of. How does this factor in to the lease for the landlord and tenant? Who takes up the slack for the common area maintenance fees? 

7. Right to Sublease. Does the landlord want the tenant to be able to sublet the space? Will the landlord allow it under certain circumstances? 

8. Tenant Care of the Property. The landlord likely has an idea of how they want the property to be maintained under the lease. The tenant should be on the same page with the landlord with their care of the property. Make sure this is detailed and understood!
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9. Lease Termination. Can both the landlord and the tenant cancel the lease before the lease ends? If so, how much notice must be given by either to terminate? Are there ramifications or fees for this?

10. Landlord's Right to Enter Property. Does the landlord have the right to do maintenance, repairs, or simply check on their investment if notice is given to the tenant? If so, how much notice must be given?

11. Remedies. If the tenant or landlord breach the contract, what remedies do they have for reconciling the situation?