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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.

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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.

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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.

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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.

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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.

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How to do a Commercial Property Leasing Inspection

When inspecting commercial property with a prospective tenant you will need to give the person concerned a package of information that outlines the property detail. The contents and comprehensiveness of the presentation packet will assist you greatly in converting the deal to a successful lease. So let’s give some thought to the contents of that ‘packet’. We have put these separate matters in a logical order that is common in the market place.

  • Covering letter – This needs to summarise all previous conversations that you have had with the decision maker. It will thank them for letting you serve them with their leasing needs and it will then detail your understanding of the occupancy needs. From that point you can overview the properties that you are to take them to and let them inspect. Your reasons for showing them these particular properties should also be given.
  • Map of the area and greater region – Maps are always of high value in the inspection process. You need to give maps of the immediate region of each of the relative properties to be inspected and also a map of the greater region showing transport corridors and key points of business geography such as city centres, main roads, and railheads or airports.
  • Locate the properties – On your regional maps ensure that you highlight the location of the properties that you are showing. Some prospective tenants do not know where they are in relation to other parts of the town or community.
  • Property review information sheet – As the name suggests every property must have a property information sheet that is carefully constructed with key property information. Given that properties can be of different types such as office, retail, or industrial, the property information sheet will be adjusted with the relevance to suit. This will include:
  • Buildings name
  • Address
  • Area detail (site and tenancy)
  • Asking rental (for the specific space plus any supplementary rentals such as signage, car parking, storage)
  • Outgoings applicable to the deal
  • Asking lease term
  • Map of the property or tenancy
  • Photographs of the property inside and out
  • Floor plans of the space available for lease
  • Details of council zoning that effects building usage
  • Building detail to suit property type (floor loadings, height of warehouse, span detail in warehouse etc)
  • Car parking detail and access points (plus a plan of the car park)
  • Access detail and transport systems or corridors nearby
  • Improvements provided in the premises for the occupants (carpets, walls, floors, fitout configuration, electrical supply, air conditioning layout)
  • Services in the property (power, water, communications, lighting, air-conditioning, cleaning)
  • Amenities provided for occupants (car parking, showers, tearooms, toilets, common areas)
  • History brief of the property (this is general information on the age, architects, engineers)
  • Demographic overview of the region
  • Profile of neighbouring properties
  • Sample draft lease document – This is not always provided at the first leasing inspection with the tenant, but it is helpful to be able to go through the general terms of the lease with the prospective tenant. This says that you must feel comfortable with knowing how to quickly scan through a lease and look for key issues to answer simple and focused questions from the tenant. Detailed lease questions are best referred on to the solicitor acting for the landlord.
  • Inspection tools of trade – In any inspection you should carry the essential tools of trade to deal with any simple questions. These tools should be in your motor vehicle and easily accessible.
  • Measuring tape (up to 10 meters)
  • Measuring wheel (for large distances)
  • Laser pointer (to illustrate points of interest in the inspection)
  • Laser measuring device to measure rooms and internal space or height (you can get these from any large hardware store)
  • Camera (to record matters of interest or questions from the tenant)
  • Note pad
  • Mobile phone (so you can call the office or the landlord if needed)
  • Compass
  • Dictaphone for general notes during inspection

 

GOLDEN RULE: In any inspection of a property should you have any doubts or questions in your own mind regards a request for information from the tenant, do not ‘guess’ your response. Always suggest that you will get the full and correct answer that the tenant needs, and that you will come back later that day in writing with the relevant information. Legal action is not uncommon in the industry for things that have been said without due care.

BUSINESS COURTESY: After all leasing inspections are undertaken send a simple letter or email to the prospective tenant to thank them for their interest and suggest that you will be happy to help them with any further questions that arise. Also drop a note off to the landlord summarising the inspection and the outcome to date.

RECORDS: Keep separate written notes after all inspections with each potential tenant; it is surprising how this helps when you have premises that are attracting great interest from the market. Whilst it should go without saying, all prospective tenants must get entered into the office database after the inspection so that you can optimise the enquiry on other premises if necessary. Most tenants look around the market for only a short time (less than 2 months) and then make a new occupancy decision.

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How to Do a Commercial Property Management Proposal

In commercial and retail real estate, it is common to be asked to do a property management proposal to manage a property that has just been sold or leased. That is usually the best time to secure a new management. The owner of the property at that time is normally quite receptive to discussing property management strategies and services. Most property landlords do not have either the experience or the expertise to manage their property comprehensively. They have not got the latest tools and the systems to correctly manage the cash flow in keeping with the tenant mix and the lease profiles. When you have a number of tenants in the building, the entire management process becomes more complex and time consuming.

Managing a property is not simply just a matter of collecting rent and negotiating leases. There are many strategies and systems to be applied across the property for the long term. In this way the rental and the tenancy mix can be structured or improved. A property management proposal should be prepared with due relevance to the property function and requirements. That says that every proposal should be based on the needs of the client and the challenges of the property. Here are some factors to build into your proposal structure:

  • The time involved in managing a property will vary substantially based on the needs of the client and the challenges of the property. When setting a new fee for a new client, it is wise to consider the number of hours required each week to perform the expected tasks of management. When you relate this time factor to your operational costs of the division, you will soon see the breakeven point in the fee structure. Far too many agents simply set a fee based on known cash flow without the regard for expected time input.
  • The tenant mix for the property will have both challenges and opportunities. The challenges will be in upcoming vacancies and the repositioning of sitting tenants. That is where lease management becomes really important to the property process. Opportunities will always exist in renegotiating leases with the sitting tenants to improve occupancy and potentially the market rental. Fees should be established in your proposal to cover the renegotiation activities with existing tenants.
  • Be quite clear when it comes to the reporting processes to be provided to the landlord. Some landlords can be overly demanding when it comes to the weekly and monthly property reports. If a higher reporting requirement exists, then the fee structure for the property management service should be appropriately set.

It is interesting to note that a quality property management service will only occur if you have good people within your division. That is managers with the experience and the maturity to negotiate leases, optimise income, and manage expenditure activity. Property managers of this type can be hard to find and usually demand a reasonable salary base. That being said, they will always produce better quality work across the portfolio for the clients and the agency principal. To establish and run a professional commercial property management division, you need good people; there are no short cuts.

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Cold Calling Tips for Commercial Agents and Realtors Today

When you work in commercial real estate agency, the prospecting process should be part of every working day. Cold calling is a central component of that prospecting activity. When you make the calls professionally and directly each and every day, you will produce more opportunity faster for yourself. That being said, the calling process requires diligence and personal persistence.

To get the cold call process underway within your daily agency business activities, it is wise to consider and control the following issues.

  1. Define your property market geographically so you know exactly where you need to be directing your calls. The best way to do this is on a simple map of the local region. Choose the roads and the boundaries that capture the best segments of the business and property community.
  2. Within your defined territory, determine the types of properties that you will be acting on. Typically they will be Office Property, Industrial Property, or Retail Property. Each classification of property has specific attributes that need to be understood. This is where your personal market knowledge becomes very important as you consolidate and grow your market share. You cannot be an expert across the entire property market and every property type. For this reason you need to specialise.
  3. Once you have defined your property market and property type, it is essential to study the properties that are currently available for sale or lease within that area. When you start cold calling, you will find that information of value. Some business owners and property owners will test you out regards existing listings near to them and the existing property market activity.
  4. When you decide to start making calls into your property market, you will need lists of businesses and property owners to direct those calls to. The research side of the prospecting process continues each and every day and should be merged into your diary process. Finding property owners can be a slow process however it needs to be done. Finding business owners is a lot easier and can occur from use of the business telephone book. Either way you will find the right people to talk to through consistent research.
  5. You should be prepared for two or three weeks of hard work in your call prospecting before you see significant opportunity evolving. However, the process does work and simply needs to occur each and every day. When you stop the calls cycle, you fall backwards in your momentum and consistency.
  6. To help your momentum and your call process, develop a very simple script to support your initial dialogue when you make the calls. The cold call should be a conversation and not a sales pitch. Your target from the calling process should be to create meetings with people who have an interest in local property matters.
  7. Build your database from the results of your calls. This is a personal process and should occur at the end of the day when time is less critical.

 

You can generate a lot of new business from the contact calling process. It is a personal discipline that requires practice and focus. Should you choose to develop this skill, new listings and commissions will be far easier to achieve.

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Professional Top Commercial Agents

Commercial real estate sales and leasing is a very competitive industry and the large amounts of money both in commission and in property prices make the ‘players’ of the industry compete in ways that can seem aggressive and pushy. This aggressive and pushy focus does not win you market share or better deals in the long term as the real focus should be your absolute professionalism. You must be the best in your market and people need to know that you are. Being the best in your industry does not mean ‘aggression’, but rather ‘relevance’. The more ‘relevant’ that you are, the more business you will attract. Its a simple rule but it brings major results.

Now is a good time to ask yourself how professional you think that you are now or you can be this year in commercial real estate. So what does professional mean for the commercial real estate market in your area? Would you use yourself to market and sell property locally based on your skills and knowledge? If the answer in ‘no’, then ‘We have a problem Houston’.

Getting Professional with the Right People

Let’s create some rules for you on this. Getting up close and professional with the sellers, their ideas and their motivation is critical in the prospecting, listing and closing process of commercial property.

  • Information must be a daily process for you in your commercial real estate business. All the information gained every day about and in the market should be captured and included on an appropriate series of detailed forms that are relevant to the property types and your market.
  • When you capture data for a property, make sure that the client sees your diligence in the information gathering and analysis process. Use your professional processes obviously and in full view of the people that matter.
  • Record your property information and market intelligence as both hard copy and later as part of a computerised listing data bank. The more you know about your market and can easily draw on later, the more business you will find and attract in the long term.
  • If you do not have the advantage of a specialised commercial property software solution for collating your data then use a simple spreadsheet. The process is easy and effective and you can use it anywhere and at anytime.
  • Spreadsheets can be sorted and manipulated to give you the sales and leasing information that you need conveniently and concisely. You can even do this in front of the client as a point of difference in your discussions.
  • Computer and software literacy in the industry is now the ‘norm’ and not the ‘exception’. At the basic minimum today, you should be very conversant in using commonly available software such as ‘MS Word, Excel, Publisher, Outlook, Adobe Acrobat PDF, and Access’. We put ‘Access’ on this list as it is a very powerful and flexible database tool that is so versatile and talks to all other major Microsoft programs.
  • If you have some spare money in setting up or growing your commercial real estate business and want to get a database program to collate and control your customer relationships, then try the commonly available ‘Goldmine’ or ‘ACT’. They are well proven globally and cost effective for the individual. You can trial these programs from the web for 30 days to see that they suit your needs.

So let’s now move on to the keys to effective relationships in commercial real estate.

Relationship Building

Here are six simple ways that you can start to build your relationships consistently and professionally in commercial property sales and leasing.

  1. Property is very much a person-to-person business. Whilst your clients or prospects may be attracted in the first instance by your firm’s name, advertising etc., eventually people trust and deal with people (not firms, or organisations). Consequently, your personality, approach and attitude are very important to your success. You are ‘in-charge’ of these factors and only you can do something with them.
  2. You should not attempt to adopt artificial characteristics or mannerisms that do not come to you naturally. If you are in any way ‘artificial’, the client will see that you are not being yourself and will see weakness in your processes. Nevertheless, you must be able to provide your client with the QUALITY SERVICE that he or she demands, hence adjustment of your skills and actions may be necessary. Clients in commercial real estate will typically be astute business people who are used to dealing with specialist professionals and will accept nothing less. To help with this aspect you can and should adopt a daily practice process of the critical skills of communication and market knowledge that you need to draw on frequently with the properties in your market. This will help fast track your success in listings and deal conversions.
  3. What, then, does your Commercial and Industrial client demand? Clearly, he or she wants someone with expert knowledge. Firstly the whole basis of the client retaining you is that you possess a level of expertise and skill that the client has not got himself, and that these aspects are significantly better than your competitors. Secondly, the client will seek a friendly, confident, businesslike approach from an agent who appears well organised, successful, and well presented. They want someone who is creative and enthusiastic, willing to LISTEN to the client’s requirements and, most important of all, to instigate timely ACTION to fulfil them. Sometimes in this process it helps to think of the things that you would expect of an agent if you were a client. The client has to have confidence in you to help them. It is not all about price and commission; it is about your ability and relevance to achieve the result that the client wants. If you lack in ability and relevance in your market segment then start to practice and improve your weakest points as they alone will hold you back and hinder your conversions.
  4. In Commercial and Industrial Property Marketing, never be pressured into making rash statements or opinions. The sector is complex and the vendor will respect you taking a little more time to research the particular property and to prepare a comprehensive marketing submission prior to securing a listing. If in doubt on any property proposal or related question, do not answer or respond immediately, but rather seek the extra time to get the right detail that you need.
  5. Proposals and submissions should include fully detailed relevant matters and recommendations. That will include things such as marketing proposals and strategies, timing, market conditions and opportunities, advertising budget, commission, anticipated market value, and target market. The submission should, without padding, reinforce your ability to carry out the work and facilitate action that will secure the listing for you. A key component of the proposal process is identifying and then handling the worries and concerns of the client. If you do this in the proposal or submission to the client then you will be all that much closer to closing the listing.
  6. Submissions and Proposals to the client must be completed in a timely fashion and then followed up regularly and professionally until a decision is made. Once the listing is secured, it is then essential for all later contact, negotiations, and final agreements to be supported and documented clearly and correctly. This extends throughout the marketing period, the inspection process, the negotiation, and the contact or lease. When you do this correctly you build a high level of trust with the client and this is invaluable when it comes to the actual deal, the future and other transactions with the same people.

All of the above matters are not difficult but they do demand attention and diligence. The rest is up to you.

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Tips for Auctioning a Commercial Property Today

City buildings on river

Even when the commercial property market is slow and difficult, there are certain advantages in the auction process that should not be overlooked or underestimated. The greatest advantage for all concerned is that the auction process gives momentum to the serious buyers that are available today and those that are looking for property to purchase.

Even in the toughest of property markets, there will always be buyers available for most quality properties. The auctioning of a property is a very focused method of sale; it is implemented over a period of 6 to 8 weeks. During that time the appointed salesperson, the agency, and the client all have a vested interest to implement the strategy required to create buyer interest.

If the client is serious about taking their quality property to the market, then an auction process is worthwhile considering. The property may sell on the day or it may sell soon thereafter. Importantly the salesperson in the auction process has done the necessary work to flush out a few potential buyers that will be lodging offers as appropriate.

series of charts in commercial real estate presentations
Commercial Property Presentation Strategies

 

 

Realistic Auction Clients

The client or owner of the property that is to be auctioned has to be realistic regards expected current market prices; that conditioning or information process is really the job of the salesperson to provide and implement. The client needs to be fully informed regards the factors of the local property market as they apply to the property type and the method of sale.

 

Unconditional Contract of Sale

Another clear advantage of the auction process is that the resultant contract is normally unconditional and will proceed to a precise and timely settlement. The factors and delays of due diligence and subject to clauses that you see in normal contracts do not normally apply in auctions between the time of sale and settlement. That being said, the client must ensure that all relevant facts and property details are accurate and correct prior to the auction marketing and inspection process. The bidders on the auction day need to be fully informed about the property prior to the placing of their bids.

 

Auction Success Rates

The auction success rates will vary from time to time in your local area based on the amount of enquiry and the number of people that attend the property auction on the day. That being said, every property that is taken to auction has to be taken through a serious amount of marketing and deliberate attention to detail so that the correct amount of enquiry can be generated. Here are some clear strategies and tips that can apply to the auction of listing and marketing process.

  1. The auction method of sale is a timed strategy designed to flush out the buyers in the market. Genuine buyers always exist for a quality property; you just need to find them.
  2. The momentum of an auction should be timed across a period of 6 to 8 weeks. Most of the marketing campaign should be expended in the first half of that time period.
  3. Create a quality information memorandum relative to the property prior to the commencement marketing. When people make enquiries, and they are suitably qualified, you need to be sending out the information memorandum quickly and efficiently.
  4. Depending on the property, there may be a need for confidentiality relating to the information memorandum that you are to issue. This is normally the case when you’re dealing with larger properties with extensive tenancy details and matters relating to financial performance. On that basis, you may need a confidentiality agreement to be signed prior to providing the information memorandum and inspecting the property with qualified prospects.
  5. Design a comprehensive marketing campaign that is targeted to a specific target audience and regional location. Most purchasers of commercial property today come from the same general region and the key asset under promotion.  Get to know all of the local people in your property market that could be active.
  6. Check out the prices for similar properties in the region over the last two years. Identify any competing properties that will be on the market at the same time as your subject property.
  7. Get all the necessary reports and documentation together that support the function of the property, the improvements, the tenancy mix, and the property ownership. All of this should be done prior to any marketing commencing. Remove any hurdles or problems as part of this preparation process.

In any commercial or retail property market and at any time, the auction process is worthwhile considering as an alternative method of marketing. If that is to be the choice applicable to the subject property then the property owner, the agency, and the salesperson need to establish a firm mutual strategy of auction marketing, inspection, and promotion to get the correct message of the property out to the targeted audience. If the client wants a timely result in selling their property then the auction process is worth considering.