Many commercial property managers will understand just how important the monthly report is to the clients and landlords that they serve. The information that goes out in the report must be accurate and detailed.
It is interesting to note that many monthly reports sent out to landlords are little more than a financial report from some computer based property management system. Whilst that is just fine for a basic shed or industrial property, it will not suffice for office buildings or retail property. When a property is more complex in operation or tenant mix, then you will need better reports and not just financials for the landlord to look through. Explanation and information is required.
The other fairly common problem in the industry is that many month end reports from computer based software systems are assumed to be accurate and error free; that is a big problem and will let incorrect information reach the property owners.
Here are some of the major issues that should be reported on in the monthly report for a property management landlord.
- Income analysis should occur at month end to ensure that all provided income is accurate and expected. This will include the income received during the month from all the tenancies. Any discrepancies will need to be explained and referred to the property budget. The income commentary should also include details regards rent reviews and options that have an impact on the recovery of income. In essence, you need to provide stability for the landlord in the recovery of income. Any threats of vacancy need to be minimised. Any opportunities to increase income should be identified.
- Expenditure details should be accurate and up to date. The expenditure activity in a property from month to month can vary significantly. Whilst some expenditure will be planned and budgeted for, other expenditure will remain outside a budget and will require adjustments to cash flow for the landlord. It is very important to monitor the larger items of expenditure throughout the year. Some of those larger items will be timed to payment requirements such as rates and taxes.
- Arrears will always occur in a managed property from time to time. It is really important to monitor the arrears in any property. That will firstly be for the requirements of the income recovery and legal action. There will however be secondary situations where the landlord is in agreement to stagger the recovery of arrears over a period of time from a particular tenant. Whatever the situation is, the arrears need to be continually checked and monitored on a daily basis. The landlord should be briefed for suitable action if arrears are unexpected and unexplained.
- Lease documentation changes and tenancy updates will occur throughout the year in any managed property or portfolio. Issues such as a lease option, rent review, and lease expiry will always be management challenges for you to administer in a timely way. The best way to do this is to adopt a forward looking calendar that looks to the next 12 months and any events that occur inside the timeframe. In this way you can prepare for the process and any negotiations that are required.
- Vacancy reporting will always be important. The reality of any property market is that vacancies will occur at any time and will require addressing. It is wise to keep in close contact with tenants within the property. Regular monthly meetings with the tenants will allow you to identify any upcoming vacancy challenges. As part of that process is wise to have a tenant retention plan for each and every property that you manage.
- Maintenance matters within the property will be either planned or unplanned. You should have a budget allowance for each, and monitor the repairs or replacements to plant and equipment in the property as required.
- Tenant mix changes will occur in any property and will become more complex subject to the number of tenants that you have in the portfolio and the age of the property. For this reason you should be meeting with your tenants regularly to discuss occupancy needs, matters of expansion, contraction, and relocation. The renovation and refurbishment requirements will also come into those discussions and strategies.
- Market updates will be valuable as part of the monthly report for landlords. In reporting to the landlords, you can advise them of shifts in market rental, vacancy activity, incentives, and leasing enquiry. Throughout the year there will always be changes to these factors in commercial and retail property.
So this list is not finite and complete. It does however give you an idea of the complexity of a good monthly report for a moderate to large commercial or retail property.
I go back to the earlier point; there is no point in sending out just the property financials to property management landlords, given that there are many other things going on in the average commercial or retail property needing to be fully explained to the client.
It is the quality of the property management service that you provide that will justify your property management fee and ongoing reappointment as property managers.
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If you are starting a commercial real estate business or perhaps you are to be working in one as a salesperson, the key to building brand and identity is in getting lots of signboards into your territory and onto the best listings. Your name is everything when it comes to finding and converting the business. People must know you as a local property expert; signboards give that perception.
Whilst this may seem a bit obvious, the fact of the matter is that it is largely overlooked as a base strategy in building market share.
Signboards on property listings are the cheapest form of advertising, and yet the most effective in your local area. Given that most of your sales and leasing deals will come from your local area, the signboards are really important.
So what can you do to start a signboard strategy? Try some of these:
- When you get an exclusive listing, make sure that you also get vendor paid advertising and place a very good signboard on the property.
- Target the quality properties in your area that really drive the enquiry. When you attract the enquiry from the market, you can convert more of the deals.
- Look at all the redundant properties in the area that could be prime spots for redevelopment. Identify the owners and see if a project can be possible in the site. Project sales and leasing brings massive market dominance over time.
- Vacant land in your area should be identified and the owners spoken to. It is likely that a signboard could be placed on the property.
- Any listings with other agents that have been on the market for some time are likely to come up for expiry soon. Talk to the property owners to see if they are receptive to another agent taking over the listing.
- Should you take on ‘open listings’? It is a hard question to set a fixed answer. Over time you should eventually avoid open listings as they are largely uncontrollable stock and the clients are hard to work with; essentially they will listen to and work with any agent that spins them a story. Desperation does not drive your market share.
- Maintain your signs with a signage upgrade strategy so that the signs are replaced and freshened up monthly. In this way they will send a quality message to the local property owners and business proprietors. There is nothing worse than a faded, neglected, or graffiti covered sign on a property.
Your property market opportunity will be built on solid foundations of action and planning. Nothing of relevance comes from random focus and action. Start your planning process and build on the steps that you need to take.
If you want more tips on commercial real estate, you can get them in our Newsletter on this site.
It is an interesting fact that most property solicitors acting on behalf of a client in a leasing situation will never really visit the subject property to understand the factors of occupancy and property performance. They simply create a lease based on previous standards and their experience as a property solicitor.
This is not to say that solicitors don’t know what they’re doing, but it is to suggest that some solicitors need to take more time in understanding the properties that the client owns. Every property should be regarded as unique and different. The factors of occupancy that apply to each tenancy can be quite specific.
Here are some factors that would apply to a standard lease situation:
- Decisions need to be made regards the rental type to be used in the lease. The rental type could be either gross or net, and that will have impact on the recovery of outgoings for the landlord.
- The the amount and recovery of outgoings in the property will change over time given the age of the premises and the value of the property. The lease document needs to allow for these two factors.
- Each vacant space will have unique factors of presentation and remediation. At the end of the lease there will also be issues relating to the making good of the premises. The make good clause should specifically talk to the factors that the particular tenancy and occupancy create.
- In every lease occupancy, careful consideration should be given to the time frames that apply to negotiating rent reviews and lease options. Both of these issues create critical dates that will need action and response by the landlord and the tenant. Failure to act and respond by those critical dates can expose either of the parties to unnecessary risk and obligations.
- The duration of a lease will have a direct relation to the cash flow for the landlord. In a property with multiple tenancies, there can be a potential threat of vacancies occurring at the same time in close proximity to each other. Excessive vacancy in the one property and at the same time, can frustrate the leasing process, increase vacancy downtime, and increase the financial impact of incentive on the landlord.
- Incentives are usually required for the leasing of premises to new tenants. That being said, the landlord needs to discuss with their solicitor the best types of incentive that will suit the property and the investment over time.
So there are a number of factors to consider when it comes to leasing vacant premises. On that basis the landlord should be encouraged to select the correct solicitor who has the time to investigate the attributes and pressures that apply to each particular property. In that way the landlord will get a lease that clearly matches the investment cycle and the cash flow that they require. This will also help the commercial property agent when it comes to lease negotiation with potential new tenants.
In commercial real estate agency sales and leasing you will always have competing agents crossing into your territory and trying to take your clients and listings. The only way that you can handle the problem is to be better than the competition in the ways that really matter to your customers and market. Here are some ideas for that:
- Prospect for new clients each and every day. Over time you will need to fill the gaps in your database because some clients will move on for many different reasons.
- Your current clients and contacts should be nurtured as part of a system of contact with relevant information. Market information can always be shared with your prospects to help them understand just what is going on with local property.
- Use the telephone each day as part of a contact and prospecting process. You should generate at least 2 meetings per day from your call contact process.
- Split your clients and prospects into categories of relevance and interaction. Some of your clients will be of higher long term value than others. Your benchmarks for client categorisation should be set on property type, level of property requirement, and repeat business.
When you look at the actions and results of top agents, it is the quality of the listings that takes them above everyone else. Invariably top agents will have better properties listed on an exclusive basis.
It is the good properties that produce the solid and real enquiry from the market. When you think the commercial property market is tough and slow, you simply do not have enough of the top quality listings. If that is the case, take a serious look at your prospecting efforts and lift them to a new level.
It takes about 3 months to change your listing focus and that can only be done through new levels of prospecting. Top agents will have weekly targets that help keep them on track. They will know the numbers that they must maintain to get the local listings and the right levels of enquiry. Here are some typical benchmarks that a top agent will work to:
- Numbers of outbound calls on a daily basis to new people they have not spoken to before.
- Constant contact with existing people in their database on a weekly basis.
- Conversions of calls to meetings.
- Conversions of meetings to listings or opportunities
- Conversions of listings to exclusive control
- Selling or leasing of exclusive listings
- Time on market for different property types and price ranges.
The commercial real estate industry is not really hard or different than any other sales related industry; it just takes real focus and directed effort. When you do this the benefits soon occur and strengthen your market share.
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In this property market there are certainly some challenges for commercial property investors and business owners. Occupancy costs are rising or remain substantial, and locating tenants can always be a challenge if there is a high vacancy factor in the local area. Supply and demand will always be a concern for commercial or retail property owners and investors.
In essence, the local business community is the backbone of the income generated from commercial property; when the economic environment becomes frustrating or slows down, the business community can take a conservative viewpoint. That will then have flow through to the occupancy trends and rental payments in commercial property.
The local property market will recover from these challenges, however the issues exist now and there are some real opportunities for specialist commercial real estate agents in this type of property market if they respond to those challenges. A keen eye for opportunity is required. A diligent process is required to take the right action.
So exactly what are the challenges and how can we turn them into those opportunities that we need? Here is a list of issues that we commonly see around the commercial property marketplace:
- Too many businesses not fully utilizing their available occupancy space. They are then looking for sub tenants or situations of lease assignment. That will allow them to ease the burden of any rental payments. The abundance of space that’s available in any sub leasing situation will create a lower secondary market of rental. That lower rental can destabilize the market rental in quality properties.
- Property owners are struggling with vacant space. Too much vacancy space can mean tenant volatility and downward pressures on market rental.
- The levels of market rental vary substantially between properties in the same category because of the higher levels of vacancy in the local property market.
- The incentives that apply to new leases create a wide gap between effective rents and or face rents. Many landlords are offering incentives to entice tenants to their property.
- The supply of new space to lease from new property developments is undermining the leasing situation in other established properties.
A top commercial real estate agent can see opportunities in these situations. Behind all of these challenges and issues, are the facts of property occupancy that relate to successful businesses and tenants in the local area. There are successful businesses out there; get to know their property requirements and build a strong relationship for the times that they will need to change property location or property type.
A successful top agent in this market will focus on the relationships that they have with the business community and successful property owners. Getting to know the local businesses and all of the decision makers behind them will help with any future lease opportunities and lease placements. This is where your database as an agent becomes so important to the future listings and commissions that you generate.
So the message here is that the existing property market has opportunities for those real estate agents that look creatively into the issues and challenges. Get to know the local business proprietors and their requirements when it comes to property occupancy, property purchase or sale, and any relocation requirements.
The commercial property market doesn’t disappear, it just changes. As real estate agents, we can adjust to those challenges and adopt our services to improve situations for business leaders and property owners.
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