Convert Commercial month-to-month leases to annual leases

[Brian Wheeler]

Hello everyone, 

I am currently looking at a value-add office building. The value is converting the current tenants who are all on a month-to-month lease into annual leases and filling current vacancies. Most tenants have signed these leases 2-3 years ago and still occupy the building which shows their commitment to their space and would make a case of asking them to sign an annual lease. Obviously the risk is that in attempting to convert these leases you lose some occupancy (the building is currently at 63%) or worse case all of the current tenants. I deal mostly with annual leases in value-add deals so converting month-to-month leases are a new avenue for me. Can anyone share insight into converting these leases and the best course of action?

Much appreciated,

Brian 

[Gaspare U.]

@Brian Wheeler I would wait till the vacancies are occupied with tenants that signed a lease. Then I would approach each M to M individually and discuss their commitment to stay and sign a lease. Also, if you can try and stagger the termination dates. Don't have them both expire the same time. Try and spread them 6-12 months apart.