Adding Value Is The Key Where Supply Exceeds Demand
- Date: Sunday 6th March 2011
No landlord wants to find themselves in a market where the number of units available to let is larger than the number of tenants out there looking to take on a lease. This means empty units, costs that can’t be recouped, properties not being adequately cared for and, generally, just extra management hassle for landlords.
This is the situation I found myself in earlier this year at my industrial estate out at E-Net Park, Linlithgow. A number of empty units had been on my agents’ books for months but they just weren’t shifting. Nothing ‘bad’ was being done – we were asking a fair market rent and the units were brand new and offered great accommodation. BUT, nothing ‘exceptional’ was being done to market these units either and that’s exactly what I came to realise was required in this current market. Tenants over the last few years have had the pick of the crop when it comes to choosing premises to match their requirements perfectly. My units, as good as they were, just sat amongst the rest of the selection of other good properties out there and the tenants weren’t biting (not even nibbling!).
In business, you’ve got to be able to think outside the box and try to see things that other people can’t see – that is your opportunity to exploit and make money. In this case, we thought outside the usual landlord / tenant letting box and considered the types of businesses which were doing well during the credit crunch. The answer came to us – Ebay businesses. With their next to nothing overheads, discount priced goods attractive to the cash strapped public and latching onto the reputable and trusted Ebay name, it is not hard to see how Ebay retailers have been making big profits at a time when other businesses have been struggling. But how could I attract such businesses into my units, after all, the lack of rental overheads was one of the main attractions to them and reasons for their success. For start up businesses the rental outlay is such a big commitment that it puts off many.
Again, thinking outside the box, we came up with the next part of the answer; and this is where the added value element comes in. As an Ebay business grows and becomes more and more successful, it faces a ‘catch 22’ situation – no, make that 2 catch ‘22 situations’. Firstly, the lack of retail premises means that the Ebayer’s house gets taken over by mountains of boxes of goods which they’ve bought and await purchase orders. Secondly, the Post Office becomes the Ebayer’s home from home as they struggle there daily with stacks of boxes, spend hours queuing and a fortune on stamps. The Ebay Village concept strikes out both of these problems in a oner and gets my units let, whilst still enabling the Ebayer to enjoy the advantages of running an online business.
So, here it is: I have come up with a USP which I can offer to tenants and give them added value when they rent a unit from me. This is a Unique Selling Point which makes my product stand out from all the rest and is therefore more attractive to potential tenants. As there are a number of units in my industrial estate, I have been able to do a deal with a courier company for reduced carrier charges, and the more carriage I give them the lower the rates become. By focussing on the Ebay business which depends so much on carriage, I allow my tenants to take advantage of these reduced carriage costs and the more Ebay tenants there are, the lower their carriage costs are. Suddenly their rent is off-set by their carriage savings and essentially they are getting a retail unit in which to store their goods for FREE. Also they now have hours of spare time not having to go to the Post Office but instead can focus on building their business. And the best part from my point of view as a landlord is that my units are let which was the whole point of the exercise in the first place. Having started 2010 with 20% vacant units at E-Net Park, Ebay Village is now 80% occupied and offering its tenants a great deal.
Tip from Shaf – Keep on your toes
It’s always difficult to admit that a winning strategy is starting to fail because circumstances have changed. That’s why people let their businesses drift and then diminish when the economic cycle changes. Don’t let it happen to you. Take a hard look at all the markets you address. Look for those that are showing signs of a downturn due to economic conditions. Think outside the box to find another market that is growing and that could replace the one you are in.
The old cliché is true, I’m afraid. You can’t stand still. If you are not making progress you’re about to take a step back
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