Don’t Buy the Risk. Fix It First.

One of the biggest mistakes I see in commercial property is investors buying short WALE assets and hoping the lease sorts itself out after settlement.

Hope isn’t a strategy.

If a property has 6 months remaining on a lease, the market sees risk.

If that same property has a newly signed 5-year lease, the market sees stability.

The building hasn’t changed.

The tenant hasn’t changed.

But the value absolutely has.

Here’s how sophisticated investors stabilise a commercial asset before they own it.

The Problem With Short Leases

When a commercial lease is close to expiry:

Valuers factor in leasing risk

Banks tighten lending terms

Buyers demand higher yields

The tenant holds negotiating leverage

In simple terms: uncertainty gets discounted.

And in commercial property, value is driven by income certainty.

The Strategy: Stabilise Pre-Settlement

Instead of inheriting lease expiry risk, you negotiate with the tenant during due diligence and secure a longer lease term before settlement.

The objective:

Convert a 6-month remaining lease into a 5-year term before you complete the purchase.

You’re effectively transforming the asset from “lease expiry risk” to “stabilised income” before you take ownership.

How It Works in Practice

1️⃣ Get the Asset Under Contract

Negotiate appropriate due diligence and settlement periods that allow time to engage with the tenant.

You need control of the deal before you start restructuring it.

2️⃣ Engage the Tenant Strategically

This is not about pressure. It’s about alignment.

Ask:

Is this location important to their business?

Have they invested in fit-out?

Would relocation disrupt operations?

Are they profitable?

For many tenants, certainty is just as valuable as it is for you.

3️⃣ Structure a Bankable Lease

A clean 5-year lease might include:

Market rent

Annual CPI or fixed increases

Option terms

Appropriate guarantees

Commercially acceptable clauses for lenders

Sometimes a modest incentive is required.

Often, the valuation uplift outweighs the cost.

Why This Creates Immediate Value?

Commercial property is typically valued using:

Value = Net Income ÷ Cap Rate

When lease term increases, perceived risk reduces.

Reduced risk can compress the cap rate.

That compression alone can create substantial equity — without touching the building.

You’re not renovating the property.

You’re renovating the income profile.

The Bigger Picture

Commercial property isn’t about buying buildings.

It’s about controlling cash flow and managing risk.

The most sophisticated investors don’t passively accept the lease profile they’re given.

They reshape it before settlement.

Short lease → Long lease

Uncertainty → Stability

Risk → Bankable income

That’s how you move from speculative buyer to strategic operator.

Control the income first.

Then buy the property.