Shopping Centre Managers – How to Do Your Monthly Report for the Landlord

When you manage a retail property there are a lot of things going on that need control and communication back to the landlord.  That is where a good reporting system will help you greatly as a centre manager.

It is no secret that the retail property market can be a challenge at the moment with a significant shift between retail sales on the internet, versus retail sales in the shop.  It is the retailer that suffers the downturn in trade, and as a consequence they must revisit their product and service offering.  If they cannot make a go of it, then a distressed tenant soon turns into a vacant tenancy.  The landlord then suffers in loss of income.

Today more than ever before there is a strong bond between tenants, customer, landlord, and property manager.  The balance and success of a shopping centre sits in between all of them.  They all have a vested interest to make a retail property work and perform as an investment.

Whilst it is nice to have a tenant and a lease for retail shop premises, a vacant tenancy is a waste of time and energy for all concerned.  It is in the landlord’s best interest to help a tenant succeed in a retail shopping centre.  The link between the two parties is the property manager.  A good property manager knows how to help a property thrive and grow as an investment; they also know how to assist a distressed tenant get back on track with sales and customer numbers.

To keep the landlord fully briefed on the performance of a retail property, the monthly reporting system needs to be comprehensive and advanced.  Here are some of the big topics to help you structure and provide a monthly report to your landlord client.

  1. Tenant mix activity should always be tracked.  That will include the changes in a property and the upcoming lease activities.
  2. Lease rent reviews and lease options coming up should be planned and actioned early.  Do not leave these things to the last minute.  Many a landlord or property manager has been taken by surprise when it comes to a lease document that they did not fully understand.
  3. Tenant renovation will always be a priority in retail shopping and shopping centres.  A shop that looks poorly for any reason will deter customers not just for that particular tenant, but also for those other tenants that are nearby.
  4. Maintenance in the property will occur for both planned and unexpected events.  You must report on maintenance budget activity and results each month.
  5. Sales by tenant category and by tenant will give the landlord an indication of just what tenants are successful and those that are struggling.  Trend these numbers in a graph so you can see what is going on in the property.
  6. Vacancy marketing will always be important to minimise the impact of loss of rent.  Any existing or upcoming vacancy should be comprehensively marketed to attract new tenants to the property.
  7. Centre marketing to the local community will help with sales for each tenant.  There should be a marketing fund for this process.  The tenants lease should allow contribution by each tenant to the marketing fund.
  8. Income and expenditure will be updated each month for the property.  In an ideal world the income and expenditure should track closely to budget; that being said, there will always be challenges that need resolve and management.

If you manage larger retail properties, then this list will get larger and deeper.   Control will allow you as the property manager to keep the property on track as a retail property investment.

Tenant Retention Strategies for Commercial Property Management and Leasing

Any commercial property landlord today will have concerns of tenancy mix and occupancy.  The landlord will not usually want a vacancy to occur in a property, or suffer a substantial loss of income from a protracted vacancy.  So what can you do with this problem?  You can establish a tenant retention plan for the property, and it can become part of the annual business plan for the asset.

Tenant retention is simply the process of retaining your good tenants and removing your underperforming tenants from a managed property investment.  When done correctly the process can enhance the income for the property and the overall investment for the long term.  This then helps the sale of the property if and when it is to occur.

How Do You Get Started?

So how can you set up a tenant retention plan and what are the rules?  Over time you can set up your specific plan for your property and landlord, but to get things going here are some tips to build the first tenant plan and start the process.

  1. Tenant retention is a specific process of a quality commercial or retail property management process.  It is necessary that you look at all your tenants in the property today and decide just who the good ones are and who are the ones that you really do not want over the long term.  What are your reasons for selecting tenants in either group?  You will need some rules to help you choose.
  2. Respecting the terms and conditions of the existing leases you can manage the poor tenants out of the property at end of their leases; the object being here to offer the space to other existing good tenants in the property, or find new tenants to fill the void.  Given that this is a critical process that will impact the income for the property, it should be a factor of consideration each year as you revisit the business plan for the asset and the landlord.
  3. Set some target market rentals that should be used with new tenants to the property and or existing tenants when they renew their occupancy.  Get a property valuer to help with the setting of the right market rental benchmarks.  Give due regard to gross and net rentals, plus required incentives to encourage a tenant to take out a new lease.
  4. Establish a standard lease for the property to control the terms and conditions for the property each time you do a new lease.  The standard lease should match the specifications of the property and the investment needs of the landlord.  A solicitor should help the landlord with this document.
  5. Monitor all existing leases that are coming up for rent review or expiry inside of the next two years.  As the dates draw nearer, the negotiations can start based on the tenant retention plan and the property decisions already made.
  6. Check with all your good tenants frequently to ensure that they are happy in occupancy and that they are not under pressure for expansion or contraction.  If they are, then you want to be working with them on that as early as possible before another landlord offers them another tenancy space elsewhere.

A tenant retention plan is a good strategy for any landlord or property manager.  It sets the scene for a controlled growth of property performance for the landlord.

How to Farm Your Commercial Real Estate Market Today

Mapping and Planning

The best way to control your long term activities as a commercial real estate agent is to get a street map of the area and then work the geographic location in stages. Essentially you need to understand your area in great detail and have a solid awareness of the following matters:

  • property ownership
  • tenants and decision makers therein
  • property zoning and potential changes there to
  • property prices by property type and region
  • property rental by property type and region
  • property outgoings by property type and region
  • lease detail and tenancy detail for all major and targeted properties
  • a lease expiry profile for all major buildings and for the region
  • regional business demographics
  • regional population demographics
  • regional economic demographics
  • road changes and major traffic flows
  • other competition properties and listings
  • other agents in the area and their listings
  • recent sales results in the area
  • Details of properties that have been sold approximately three years ago and beyond, as these are the next properties that will enter the sales arena for disposal.
  • Details of properties that have been leased approximately three years ago and beyond, as these are the next properties that will have a need for leasing services.
  • Details of property owners that bought property about three years ago in the region as they are most likely to be sufficiently cashed up to acquire again soon.

This information will help you understand future opportunity and position your services such as sales, leasing, and property management.

How to Negotiate Commission in Commercial Real Estate Today

In commercial real estate agency activities, you will know the importance of commission to the agent and to the business. A commission and your fees should be clearly supported by a legally accurate and enforceable appointment to act. That appointment should be signed by the client before you take any action on the property.

The client that signs the appointment should be the person that is legally entitled to do so. Whilst this fact may seem so basic, many agents and salespeople will bend the rules when it comes to agency appointments and suggest that they will get them signed later at a more convenient time.

Do the right thing

There is only one time to have an agency appointment signed, and that is at the start of the relationship between the agency and the client. Any work on the listing should not commence until the agency appointment is correctly confirmed and acknowledged by all the required parties. That being said, it is remarkable how so many agents overlook the requirement of the agency appointment or its accuracy. At the end of the day, this simple action can threaten the ability of the agency to recover the fees and charges applicable to all of your hard earned efforts.

Show me the money

When you have a confirmed and accurate agency appointment involving particular fees and charges relating to marketing, get those monies up front and into the appropriate agency bank account before the marketing commences. Many agents have been left out of pocket due to the attempted avoidance of costs and fees by the client after an unsuccessful sale or lease situation. In a tougher property market, not all listings will sell or lease quickly and effectively. On that basis every listing needs to be correctly structured, confirmed, and in place before the marketing and promotion of the property commences. Failure to do so is fraught with danger. Do not give the client any opportunity to avoid their costs, expenses, and obligations under the appointment to act.

Unsigned or incomplete

When it comes to the marketing of a property without the appropriate agency appointment, the client is in the box seat when it comes to manipulating the end result fees commissions and charges. Many a client has taken the opportunity of stepping away from financial obligations due to an incomplete agency appointment; many clients will give the agency appointment documentation to a good solicitor with the sole purpose of finding a loophole where they can avoid paying full commissions and fees.

Whilst many agents have learnt the bitter lesson of incomplete or incorrect documentation, do not put yourself through the financial pain or inconvenience. Do not give your clients any reasons or opportunities to avoid paying their financial obligations.

Handling the requests for discounts

Every so often you will come across clients that believe they are due for a discount on the commission charged at the completion of the deal. They will claim that they have some valid reason for discounting your commission contrary to the terms and conditions of the agency appointment. If this has not happen to you yet, it is only a matter of time. You must have your answers ready.

The correct and full commission is that which is allowed in the agency appointment. That is the fee to be charged. The agency should not be out of pocket for any reason whatsoever providing of the transaction was successfully and correctly handled by the salesperson.

What does the salesperson think?

If the salesperson believes that a fee should be discounted for some particular valid reason, then let that salesperson take the full impact of the discount in their percentage of the overall fee. In other words the agency should not be out of pocket because of the actions or concerns of the salesperson; the salesperson should take the financial hit if they really want to process a discount at the request of the client.

Do a great job and avoid the problem Professional business practices involve fair and reasonable commission’s fees and charges for the services provided. If you do a good job in the promotion, marketing, and negotiation of a property listing, there will not be a dispute or request for discounts on commissions and fees. Stay on the right side of the service equation and help your clients achieve the desired results.

How to Do a Commercial Real Estate Sales Pitch Today

When you have met with the commercial real estate prospect you’ll have a reasonable understanding of their needs and demands. At this point you need to understand whether you really want to work for them and take on the listing.

What to Consider?

You will now need to consider the attractiveness of the property and its liquidity factor to buyers. Most particularly the liquidity factor is the ability to move the property quickly in the current market. To achieve this awareness, ask yourself the following questions –

  1. Are the tenants in the property attractive to an incoming purchaser?
  2. Are the leases in the property supportive of rental growth and opportunity?
  3. Are the leases in the property professionally prepared by a solicitor and registered on the title?
  4. Is the property located in an area where tenants want to be located?
  5. What do the neighbours think of the existing property?
  6. What rental types and levels of rental are acceptable in the market and does this property provide them?
  7. What comparable properties existing in the area and remain unsold or vacant?
  8. What is the future of the other developments in the area and is there an abundance of development land nearby which will soften the potential price you can achieve?
  9. What are the supply and demand factors for lettable space in the region?
  10. What is the history of the property and the building?
  11. Are there any environmental issues that can jeopardise the sale?
  12. Has the building been on the market before and if so for how long and at what price or method of sale?
  13. How would you best market the existing property given the business sentiment and environmental and economic conditions?
  14. What is the best time of year to sell the property?
  15. Are there any vacancy factors or short term leases in the property which need to be rectified before moving towards sale?
  16. Given the current building, what is its future life cycle and who will therefore be attracted to the building in its potential sale?
  17. What is the best way to sell the building in a timely fashion that will achieve the best price?
  18. What amount of vendor advertising will you need to impact the market?
  19. What is the existing time on market for current sales stock?
  20. Have you been able to fully inspect the property and the precinct to completely understand what you are dealing with?
  21. Have you identified and inspected all property documentation including leases, and titles that are relevant to the property selling?
  22. Are there any existing incentives with the current leases on the property which will need to be handled and extinguished as part of the sale settlement?
  23. What is the target market for the property?
  24. Do the leases for current tenants generate any weaknesses for the sale?
  25. Are there any encumbrances on the property or in the region that impact the property in any way?

Given all of these issues, you will be able to establish a reasonable opinion as to the saleability of the property. The most important question you then need to satisfy his whether you really want the listing. Can you see that the listing will really sell? Do not waste time on stale or unsaleable stock.