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Negotiating Fees and Commissions as a Commercial Real Estate Agent Today

When it comes to commercial and retail property services today, the fees and commissions that we negotiate are critical to the performance of our property agency business, and its stability over the long term.  Whilst discounting fees and commissions may be an option, it should not be a normal activity when it comes to working with clients or taking listings.

Far too many agents provide discounts as a factor of encouraging the listing.  The fact of the matter is that discounts do nothing towards helping the client with a satisfactory sale or lease as the case may be.  When it comes to a competitive situation between agencies in attempting to win the listing, it is better to provide real strategy and points of difference as part of your service offering, than any discounting for the client.

Here are some rules that can apply to the commissions and fees in your listing processes.

  1. Establish a significant and comprehensive marketing campaign that is funded by the vendor.  Give the client a number of alternatives to consider when it comes to marketing.  Invariably and in most cases, you will see the client select the middle ground when it comes to marketing costs.  Show the client a number of alternatives when it comes to the marketing of commercial and retail property today.  Tell them what works, and show them the results that they can achieve.  Drill down on the facts so that they know exactly what the recommendations are.
  2. Do not discount your commission to attract a listing.  The fact of the matter is that property commission is a reward based fee.  If the client wants a successful outcome, they will understand the value of a fair fee for service.  If they still want you to provide a discount, and you still want to take the listing, then discount your available services as part of the process.  Lower commissions deserve less focus and marketing activity on the part of the agent.  Does the client really want a sell or lease their property?  If they do, discounting the commission is not part of that process.  Show them the real savings and service that they will achieve when they have your total focus as a specialized local property agent.  If they still want a discount, then you have not successfully and comprehensively sold your experience and relevance to the client when it comes to the particular property.
  3. Consider the other fees that will be incurred as part of the transaction preparation.  It may be that certain fees will need to be recovered prior to any marketing effort and promotional activity.  This is certainly the case when it comes to preparing an information memorandum for the particular property.  Many agents recover the cost of the information memorandum up front, given that it will take them a few days to put the document together.  It is not unusual to see a fee between $1000 and $2000 for this document preparation.

Do not be too eager to provide discounts.  Be focused on your specialised value as a local commercial or retail property agent.  Top agents do this all the time.  It is hard for a client to ignore or walk away from a top agent.  In the end result, the client wants a satisfactory property outcome within the earliest possible time frame.  That should be the focus of your listings sales pitch or presentation.

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Commercial Real Estate Agents – Property Sales and Leasing Strategies that Matter

The services we provide as the local commercial or retail real estate agency are quite specific and special.  The local property market will change throughout the year, as will the supply and demand for premises.  On that basis, we are the experts to help the clients that we serve.

Sales and leasing strategies for commercial and retail property will change throughout the year.  Each and every prospect should be entered into a database so that we can build on all future opportunity when the right property comes along.  Your diligence here will help your commission conversions and future listing opportunity.

Local property market information will come in many forms including prices, rentals, future developments, and the supply and demand for new space to occupy.  The clients that we serve cannot hope to cover those issues themselves.  That is where we step in as the experts and property strategists.

Top agents know how to package the negotiation for the best outcomes and results for the client.  These agents know what the market is doing, and how to package the right transaction for the clients that they serve.

Here are some tips to help you design your services for your local commercial and retail property clients.

  1. Local market information will vary throughout the year; you will see changing results in both sales and leasing activity.  This local market activity will be setting the necessary benchmarks and the market rentals or prices as the case may be.
  2. Local business sentiment, together with changes in the business community will have impact when it comes to property occupancy, sales, leasing, and rental returns.  It is our job to accumulate the necessary market knowledge and strategy to help the clients that we serve.  Optimising property occupancy and rental returns will help the eventual sales equation and resultant price.
  3. Rental strategy is quite specific to the location, the property type, and the intentions of the landlord.  In most cases, the rental should be set with the landlord prior to commencing any marketing effort relating to the particular property.  Standards and differences will apply when it comes to gross rental, net rental, incentives, rent reviews, and lease options.  We are the experts to help with these factors.
  4. Monitor the lease terms and conditions that apply to existing properties in the local area.  Business sentiment will have impact on existing negotiations and marketing strategies that you apply to each and every listing.  The supply and demand for local property will have immediate impact on the starting rental for any leases.  The same for pressures apply when it comes to the sale price.  On this basis, you need to know the differences between asking prices or rents, verses the facts and outcomes in finalised and completed transactions.
  5. Outgoings and operating costs will need to be recovered when it comes to lease occupancy.  The decisions you make here will have impact on the landlord and the rental structure of the lease document.  Local market standards, and the particular elements of the property may influence you when it comes to gross or net rental.  Importantly, the operating costs for the property should be recovered as part of the lease structure, so make the right decisions when it comes to rental type and outgoings recovery.
  6. Tenant mix strategy will shift and change throughout the year.  Tenancy mix decisions become important when you are working with a property containing multiple occupants in close proximity.  The duration of leases, and the proximity of those leases to other tenants need to be considered as part of each lease negotiation.
  7. The permitted use for each lease and tenant occupancy should be well considered and controlled.  Is quite important to ensure that the permitted use described in each lease that you negotiate is very specific and tight.  Too much latitude here  will allow the tenant to change the focus of the business and the offering to their customers.  This also has impact on any future lease assignment or subletting situation.  The permitted use will also have relevance to the tenancy mix strategy and any tenant retention plans that you implement.
  8. Vacancy and lease management should occur throughout the year.  Staying well ahead of any lease events and critical dates is quite important.  Prepare the landlord for any negotiations well in advance.  Have due regard for the local market conditions and the benchmarks established by other similar properties nearby.

It is easy to see why the services we provide as commercial real estate agents are regarded as specialised and unique.  That is why we charge a significant fee for service.  The clients that we serve can benefit significantly from the factors of our negotiation and finalised transactions.

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Location Based Market Intelligence in Commercial Real Estate Agency

When it comes to selling and leasing commercial property today, it is really important that you understand the factors relating to competing properties in your local area.

Prices and rents for commercial and retail property will change throughout the year.  They will also change by location and property type.  Assessing the changes will allow you to be accurate and relevant when it comes to each and every particular property listing or presentation.

It is interesting to observe the inflated motivations and intentions of clients when it comes to setting prices and setting rentals in the sale or lease of any property.  Most clients have a very good understanding of the price or rent that they require, with very little understanding of the actual results in the market today.  This then says that every property listing should be well considered and negotiated between the agency and the client so that the property can be successfully marketed.  You do not wish to waste your time now do you?

Top agents will avoid unrealistically priced properties and those clients that seem reluctant to accept the prevailing the factors of the local property market.  Let’s face it; there are plenty of other listings out there to focus on.

Some agents will still however take on a property listing that is overpriced, expecting that they can condition the client over time to the true market conditions.  They may also use a time based method of sale such as auction or tender to achieve that outcome.  The strategy does work, providing you are well skilled in the client conditioning process.

Here are some factors to help you with local property market conditions and prepare yourself for future listing situations with clients.

  1. Look for similar property types in the local area.  Gather information regards those properties when it comes to marketing strategies, prices or rentals, and time on market.  It can also be that the agents involved with those other listings are not servicing or marketing the properties well.  You will need to form an opinion that is relevant and accurate.  Look at all the competing properties locally and inspect them in some basic form prior to using them as evidence with your client.
  2. Understand the differences between properties when it comes to improvements.  Also consider the locational factors, and the size of the properties in question.  Can one property be considered more attractive than another, and for what reason?  Will that have an impact on property marketing, potential enquiry, price, or rental?
  3. Assess the time on market for each property type in your territory.  The time on market will be impacted by current property enquiry and the supply and demand for premises.  Future developments will have impact on existing properties locally.  The local business sentiment will also have relevance to the time on market.

A successful property listing will generally be created providing you understand the prevailing market conditions, and can convince the client of those factors.  It takes practice, however the client conditioning process will help you in establishing well priced listings that will attract enquiry.  That’s what commercial and retail real estate is all about