To lease commercial space or leave vacant before sale

[Khaled Seirafi]

Hi there,

My family owns a mixed use building in San Mateo, CA that we're thinking of selling in the not too distant future. It has 5 residential units and 2 commercial spaces. We have no problems renting out the residential units and one of the commercial spaces has been rented out on a NNN lease for another 2 years with a 5 year option to renew. However, we've been trying to lease the 2nd commercial space since last December with no luck. My question is does it makes more sense to leave it vacant before selling or make sure to have a tenant in there and then sell?

I recently asked a commercial agent and his opinion was that I should leave it vacant to cast the widest net for potential buyers, i.e. not to exclude business owners who would want that space for themselves but would also like to purchase the entire building to rent out. As you all know, commercial spaces have been tough to lease out. But do we run the risk of devaluing the property if that space is vacant and buyers and agents use the GRM to valuate the place?

I should note that we had a number of people contact us who represented business owners who wanted the space for their business but also were interested in purchasing the place. Any thoughts would be welcome.