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  • Writer's pictureJason Huett

The Problem With Commercial Real Estate Sales and How to Fix It

Updated: Feb 11


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Commercial real estate is an essential component of the business world — it houses offices, retail shops, factories, warehouses, and countless other enterprises.


Yet, if you visit any commercial real estate brokering website, you'll likely come across buildings that have been on the market for extended periods of time —12, 18, 24 months, or longer.


This raises a crucial question: Why do commercial buildings sit vacant for so long in so many cases?


In this blog post, we'll delve into this issue, present statistics on the average time it takes to sell a commercial property, discuss the traditional framework used by commercial real estate brokers, and propose a solution that leverages the power of marketing to address the problem.


The Vacancy Problem


The real estate market is dynamic, with properties changing hands frequently in residential markets. However, the commercial real estate sector often faces challenges of properties sitting vacant for extended periods. To understand the magnitude of this issue, let's examine some statistics.


According to data from the National Association of Realtors (NAR), the average time on market for commercial properties is significantly longer than that for residential properties.


NAR reported that the average time it took to sell a commercial property was approximately 8 to 12 months. This period could extend even further for properties in specific locations or with unique characteristics.


A graphic of a bucket leaking money

It should also be noted that this range is likely longer — it doesn't necessarily take into account commercial properties that have been de-listed and re-listed, making the true metrics murky.


The Traditional Framework of Commercial Real Estate Sales (i.e. The problem with the commercial real estate sales process)


To comprehend why commercial properties linger on the market, it's essential to examine the traditional framework employed by commercial real estate brokers. This framework typically consists of three passive activities:


Graphic of "for lease" sign

Sign on the Property: Placing a "For Sale" sign on the property itself is a conventional approach. While it may attract local attention, it relies heavily on passive interest from potential buyers who happen to pass by the property.



Graphic of a commercial real estate brokering website

Listing on MLS and Other Commercial Listing Sites: Brokers list properties on Multiple Listing Services (MLS) and various online commercial real estate platforms. While these listings are essential for visibility, they often become part of a vast inventory, making it challenging for properties to stand out.


Graphic of a woman using a phone

Word-of-Mouth and Networking: Brokers rely on their existing network and word-of-mouth to find potential buyers. While networking is a valuable tool, it can be limited in reach, and it may not effectively target the right audience for a specific property.





Why This Approach Falls Short


The traditional framework for selling commercial real estate is outdated and insufficient for several reasons:

  1. Passivity: The primary flaw in this approach is its passivity. It waits for potential buyers to stumble upon the property or hear about it through word-of-mouth. In today's fast-paced world, relying solely on passive tactics is inadequate.

  2. Limited Reach: Placing a sign on the property and listing it on commercial websites might attract local interest, but it may not reach the broader audience necessary to find the right buyer. Commercial real estate often requires regional or national reach.

  3. Ineffective Targeting: Word-of-mouth and networking can be valuable, but they do not provide the precision needed to target specific buyer profiles or industries that might be interested in a particular property.

How to Fix the Problem: A Shift from Sales to Marketing


Sales and Marketing graphic

The solution to the vacancy problem in commercial real estate lies in shifting from a sales-centric approach to a marketing-centric one. To do this effectively, brokers must understand and embrace the principles of marketing. Here's how this shift can be accomplished:

  1. Locating Potential Buyers: Instead of waiting for potential buyers to find the property, proactive marketing efforts can identify and target potential buyers or tenants. This involves market research, data analysis, and leveraging digital marketing tools to reach a broader and more relevant audience.

  2. Proper Messaging: Marketing professionals are skilled at crafting compelling messages that resonate with the target audience. This involves highlighting the unique features and benefits of the property, creating visually appealing materials, and tailoring the message to the needs and aspirations of potential buyers.

  3. Nurturing Potential Buyers: Marketing isn't just about the initial contact; it's about building relationships over time. This means engaging with potential buyers through various channels, providing valuable information, and addressing their concerns and questions. It's a process of nurturing leads until they are ready to make a decision.

  4. Leveraging Technology: Modern marketing relies heavily on technology. Brokers can use advanced data analytics, digital advertising, social media, email marketing, and virtual tours to showcase properties effectively. Technology enables a more dynamic and interactive approach to engaging potential buyers.

  5. Collaboration: Collaboration between brokers, marketing professionals, and property owners is key to success. Working together, they can develop comprehensive marketing strategies that maximize the property's exposure and appeal.




Conclusion


The problem of commercial buildings sitting vacant for extended periods can be solved by rethinking the approach to selling commercial real estate. The traditional framework, which relies on passive tactics, is no longer sufficient in today's competitive market.


By embracing marketing principles, brokers can actively locate potential buyers, craft compelling messages, nurture leads, and leverage technology to increase the chances of selling commercial properties in a timely manner.


To address the issue of prolonged vacancies in commercial real estate, it's time for the industry to recognize that successful property sales require more than just a "For Sale" sign and a listing on an MLS. It requires a strategic and proactive marketing approach that resonates with the needs and desires of potential buyers.


In doing so, commercial real estate professionals can unlock the true potential of their properties and contribute to the growth and vibrancy of the commercial real estate market.


To your success,


Jason Huett

Collaborative Commercial, LLC.

CEO | CMO


Does this content resonate with you? If you are interested in learning more about our data-driven approach to CRE sales, get in touch with us here.

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