You just got the call. Your tenant isn’t renewing. Lease is up in six months. Now what?
This is one of the most stressful moments for an industrial property owner. Especially if it’s a single-tenant building. Your income is about to go to zero and you’ve got decisions to make.
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Renewal Status: Has the tenant explicitly indicated non-renewal, or is the lease simply approaching expiration? -
Lease Term Remaining: How many months/years are left? How much runway to find a replacement? -
Tenant Industry: Is the tenant in a growing industry or a declining one? (Growing = easier replacement, declining = harder) -
Market Rent Comparison: What are comparable spaces renting for today? Is your ask-rate still competitive or outdated?
Your options
Option one: find a new tenant yourself. This means marketing the space, showing it, negotiating a lease, possibly doing tenant improvements. If you’ve done this before and you have the time, go for it. But it typically takes 4-8 months for an industrial space to re-lease, depending on the market and the building.
How to Minimize the Damage
- Start re-leasing 6+ months before expiration, not after
- Build flexibility into remaining lease term (renewal options, rate resets)
- Document tenant satisfaction and renewal discussions
- Get market comps so your ask-rate is competitive
- Clean up deferred maintenance before tenant leaves (don’t force buyer to fund upgrades)
What Kills Re-Leasing Speed
- Waiting until lease expires to start marketing
- Asking rents higher than current market can support
- Building in poor condition or delayed maintenance
- Specialized space that won’t work for other tenant types
- Unknown tenant departure (market hears bad news before you disclose)
Option two: hire a broker to lease it. They’ll charge 4-6% of the total lease value as a commission. On a 5-year lease at $8 NNN on 10,000 SF, that’s about $20K. Not cheap. But if you don’t have the time or expertise, it’s money well spent.
Option three: sell the building. This is where I come in.
Why selling might make more sense
Every month the building sits vacant, you’re paying property taxes, insurance, utilities (gotta keep the heat on or the pipes freeze), and maintenance. On a 10,000 SF industrial building that’s easily $3K-5K per month in carrying costs. Six months of vacancy is $20K-30K out of your pocket with no rent coming in.
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Plus there’s the TI cost for the next tenant. Could be minimal if they’re a contractor who just needs the raw space. Could be $10-20/SF if they want offices built out. On 10,000 SF that’s up to $200K.
When you add it all up, the cost of re-tenanting can be substantial. Selling to me at a vacant discount might net you more money in less time when you factor in all those costs.
How I price vacant industrial
I figure out what the building will earn stabilized, then subtract the lease-up costs. It’s math, not mystery. A vacant building in Raleigh with strong fundamentals might trade at 15-20% below its leased value. In a weaker market, maybe 25%. But you’re getting cash now instead of spending money for months hoping to find a tenant.
Seller takeaway
If your tenant has indicated non-renewal or the lease is approaching expiration, don’t wait. Call Roth Capital at 704-600-3839. We can either help you stabilize the lease, re-lease to a new tenant, or evaluate selling before the market adjusts for the vacancy risk.
If you just got that non-renewal notice, don’t panic. But don’t wait either. The sooner you figure out your plan, the better your outcome. Call me. 704-600-3839.
Ready to explore your options?
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