In commercial real estate today, every service that you offer should have specific value related strategies. It doesn’t really matter whether you sell, lease, or manage commercial real estate, but it does matter that you understand the valuable outcomes that you provide to the clients that you serve.
Every person in your agency should understand the values that are provided by your agency and business. In this way every sales pitch and presentation can be improved and optimized. Consistency in your message is really important.
To win a listing in today’s property market, your services are to be of the highest value and of great relevance to the client. The generic approach in commercial real estate will give you poor results. There is no point in being like every other agent.
Why are you the best agent in the local area? It’s an interesting question. When you know the answer, it will be very easy for you to pitch and sell your services in sales, leasing, or property management. Top agents know how to do this and you should also understand the process.
When you look at the differences in service that can be provided, you can see specific values that are real and relevant to the clients that you act for today. Here are some cases in point.
Commercial Real Estate Sales
- The ability to tap into some comprehensive database that is real and up to date. That database will help you minimise time on market and create property inspections conveniently and effectively.
- The right methods of sale to attract the appropriate enquiry in today’s market. The method of sale should be relevant to the property type and the levels of current property enquiry. The ways in which you take a property to the market will send a message to the local property investors and business owners.
- The marketing systems that can help spread the message into the target audience for the particular property. Those marketing systems should be specific and not generic. They should reach the target audience effectively and comprehensively over a well-directed marketing campaign.
Commercial Real Estate Leasing
- A comprehensive list of all the business owners and business proprietors through the local area. That list could be updated continually to ensure that you know when those businesses need to expand, contract, or relocate into other premises.
- Tenant advocacy services that can help tenants to find the right properties in the right location. Tenant advocacy is quite a specialised service and it requires the services of a highly experienced leasing professional. They understand the lease strategies, rental types, and occupancy costs. They know how to put good leases together and can serve their tenants well. That being said, the tenant in such situation is the client.
Commercial Real Estate Property Management
- Commercial property management is quite a specific service and should not be undertaken in your agency unless you have the right people. A good property management service will include income control, expenditure management, risk management, property compliance, maintenance strategies, lease documentation, and tenancy mix management. Make sure that you have at least one highly experienced commercial property manager on your team that knows what to do and how to do it. They can then train other more junior people that come through the ranks.
- Retail property management is distinctly different than commercial property management and to a large degree is more intense. In retail property and with shopping centres, you will find that the intensity of management service is higher and therefore the fees are higher. You need the right people that have experience in managing shopping centres with large numbers of tenants. The fact of the matter is that a good retail property manager will help build your business due to the experience and relevance they apply to the properties that they manage.
So these are some points of difference that can be built on. Specialisation in the industry will always give you leverage. Make sure that your people provide the specialisation that your clients need and then send that message out into the market at every opportunity.
In commercial and retail property management, you do need some strategy behind the fee process. It is simply not a matter of just charging a fee based on the percentage of the income received. There will be certain activities in your property management services that require specific attention when it comes to the fee calculation.
I prefer to calculate a fee based on the amount of time to be applied to the particular property under management. This then says that you will need to know the cost factors that apply to your property management services. When you can achieve that awareness, you can understand where you are spending too much time on a particular property under management.
So let’s look at some different ways to calculate property management fees.
- There may be some local industry trends that apply to the management fee process when it comes to the different property types. Survey your competitors to ensure that you understand the fees that you are competing with. For smaller properties under management, the typical fee is approximately 5 to 7 per cent of the gross income received. As the passing income for the property gets larger, the fee tends to get lower. That being said, the fee still needs to cover the amount of work required to manage the property successfully and professionally.
- Be aware that the complexity of property management in retail property is far more significant than that which applies in industrial or office property. For this very reason, the fee to manage a retail property is much higher than the other property types.
- So the fee calculation will be based on the property type and the time input to provide management services. It is simply a matter of knowing how many hours you will spend on the management services for that particular client each week and for each particular property. You can then see where you are spending far too much time for the fee being recovered. What should you do with the property where the fee is too low? The client should be approached regards fee modification. It is best to do that across your entire property management portfolio at least once per year.
- Interview the client at the commencement of management services so you know exactly what they require from the property manager and your agency. List the services and the frequency of those services to be provided. This will remove any misunderstandings relating to ongoing services.
- There are different management duties to be provided as part of the typical property management service. Income collection, lease management, maintenance management, property inspections, and disputes are all separate services to be provided in managing a property. They may very well attract separate fee activity.
- The same can be said for leasing commercial property and minimising the vacancy factor across the tenancy mix. Specific lease strategies such as options and rent reviews will also be quite time consuming during the average property management year. Allow for these processes as part of your fee structure.
- There will be a different lease fee structure for leases negotiated with outside tenants vs. sitting tenants. There will usually be a 25% discount for leasing fees undertaken with sitting tenants.
Commercial property management services are detailed and specific. They demand a special fees strategy.
In commercial or retail property management today, there is no point in making a fee loss. Many agents look at the alternative fees that can be achieved from the property management portfolio; those extra fees being sales and leasing related. They then minimise the management fee to attract the ongoing property management business. The strategy is not good and should be avoided.
Unfortunately it is a long time before the average property will go through a sale and or a lease transaction. That means that the loss factor of the property management division will become a significant cost burden on the agency business. Get the correct management fee from the start, understanding that your property management services are of high quality in every respect. Sell your specialised services and get a good fee.
In commercial real estate agency today, we tend to overlook the value of the lists that we have in our office or in out possession. Lists can help focus our efforts when it comes to new business and commission.
When talking about lists, it is interesting to note that many commercial real estate agencies have a database that is well out of date. The results of any marketing into the database are therefore quite sporadic at best.
If you want results in our industry, take a look at the lists that you are working with and the accuracy of the information contained therein. Develop a good list process yourself, and work it on a daily basis. It is essential that you develop a habit when it comes to maintaining your lists and your client relationships.
The problem with databases and lists is that they need to be maintained. Many salespeople prefer not to do this work themselves. The result is that no one person then takes ownership of the database and the value of the process falls away.
Whilst I may be generalising, I would say that at least 75% of the commercial real estate salespeople that I have made contact with over time have databases that are sporadic at best, and in most cases quite random. You cannot build your commercial real estate business around a sporadic database.
Top agents tend to have lists that are completely up to date and worked on a daily basis. They know the people in the list and make sure that regular contact is maintained. After each contact process, the list is updated with accurate information.
Here are some ideas to help you build momentum and accuracy in your list process:
- In most cases, your personal list of contacts should be no more than 1000 people. Beyond that point it is very hard to keep contact with the right people at the right time. It is the quality of the 1000 people that makes all the difference in your career and industry. When you focus your connections into a group of this size, you will generate commercial real estate business. The key point is to focus your efforts of connection and communication on a regular basis to the right people. They need to know you as the expert that you want to be. In this way you can build your top agent profile over time. Regular contact sends the right message.
- You do not need to have a complex software program to support your cold call prospecting or client networking. You simply need something that works for you. Certainly there are some great software programs out there that can help you build very productive customer relationship models. When it comes to choosing the right program, I would prefer something that is simple to use and convenient. Access to the database anywhere by the mobile telephone and or a laptop computer would be an essential part of the list building process.
- It has been proven that a regular contact process to the right people will produce significant new business opportunity. That contact cycle should be at least once every 90 days. After that time people tend to forget you. When you make contact with clients and prospects, have some simple connection process and information that you can send on to them as part of the connection follow-up. You are the property expert, and they need to see that.
Leverage is one of the most important things to work with in commercial property and investment real estate. It is a people based industry and your success will be based on the size of your network, and the relevance of your skills. That is why your list is so important. If you are struggling in the property market now, take a serious look at your database and its relevance to today’s market. Start working on your database and the industry will open up for you.