In commercial real estate agency you will get enquiries for properties coming to you each and every day. Some of those enquiries will be genuine whilst others will be phoney. With practice you can pick the phoney ones quite easily.
The golden rule in taking telephone enquiries for your listings is that you do not give out information without the full details of the person who has contacted you. You should also limit the information that you give over the telephone, so that you can encourage a meeting and fuller property detail later.
Some of the people in our industry are not particularly ethical or honest. Anything you say can be used later to some advantage; limit what you say on the telephone. Meet the people first.
So why would someone make a phoney property enquiry? Here are some of the common reasons:
- The most common problem is with other agents checking out the listing and the property details.
- Adjoining owners wanting to know more about the property just to compare it to their property.
- Other property owners wanting to get details so they can put their property on the market at more favourable terms and conditions.
- Business owners or tenants wanting property details so they can negotiate with the property owner direct at a better deal.
From this short list it is easy to see why exclusive listings in our industry are so important. With exclusive listings you can control the enquiry, the client, the property, and the negotiation. If by contrast you have an open listing, most control is gone. With an open listing you are relying on the ethics and honesty of the client; you are also relying on the strength of you agency agreement. If your agency agreement has ‘holes in it’, expect the client to find them and perhaps avoid paying commission.
So what do you do when someone makes a telephone enquiry about a listing? In simple terms you ask questions and note the answers. You never know when those answers will be required to take matters further. Here are some ideas to use in taking enquiries:
- If the person has a number displayed on your telephone as they speak to you, write the number down.
- Get a name and a telephone number from the person at the start of the conversation.
- Ask them how they found out about you and the property.
- Find out what they are looking for and if they are coming to you from another local property.
- Within reason, limit what you tell them about the property, so you can encourage a meeting on site or in your office.
- If the property and its detail are sensitive, tell the person that you will require a confidentiality agreement to be signed before much more detail is given.
- Get an email address so you can send them a brochure.
- Ask the person if they will allow you to keep their details in the database for ongoing contact.
- Get a meeting established.
Keep control of the conversation and your listing. If the other person is not free and open with you, limit what you say and provide across the telephone. Keep records of all telephone enquiries and use them in conversation with the client as a market update and part of marketing feedback.
Many property investors are attracted to investing in industrial property because it is easy to understand. The tenant, the lease, and the property are quite straight forward from an investment perspective.
It is also worth noting that many commercial real estate agents ‘cut their teeth’ in the industry by working firstly on industrial property sales and leasing. The basic nature of the property is easy for them to grasp and negotiate on.
Some commercial agents will like the industrial property type so much that they may stay with the segment of the market and become true ‘specialists’ in an area. If that is the case they will usually rise to the higher end of industrial property sales and leasing in both size and value. There are plenty of large companies and industries looking for specialised assets for the business growth of their company.
So here are a few more observations about industrial property today:
- Take care when it comes to industrial properties that are created for a specific industrial use and tenant. They will generally have a high liquidity factor and be hard to move when the property is to be sold.
- Special purpose or single purpose industrial properties will be difficult to lease (or sell). As a case or example in point, large cold storage industrial properties are so specialised that an investor would (or should) want a high yield and long lease with a ‘blue chip’ tenant before the property was considered a wise purchase.
- This property type is usually the first to be impacted when the national economy and business sentiment is under pressure. That being said, industrial property is usually the first to respond when the economy is improving.
- The premises and buildings are easy to manage. The leases are basic and straight forward in most circumstances.
- The rental structures in industrial premises are usually a type of net rent. The tenant will usually pay most if not all outgoings.
- Capital expenditure in an industrial property will be impacted by property use. The property owner should get a depreciation schedule of all capital items so they can plan the larger expenditure of capital items that may arise in the future.
- The zoning of the property and premises will have direct impact on use and therefore tenant occupation. Ensure that the zoning offers sufficient flexibility for property occupancy and returns.
- Industrial premises are frequently a single tenant and single occupancy issue. The facts are easy to understand and tenant mix is not a problem as it would be by comparison in a retail property.
When you look at overall property performance, consider the growth potential in rental as well as the growth in capital appreciation. The two factors are not always linked and may be impacted by locational factors.
When a commercial property manager takes on a new lease and property to manage, I usually tell them to spend a good deal of time reading the leases before they form an opinion about the property and the tenant mix.
The fact of the matter is that any and all leases in the one property will be different from each other. Critical dates, definitions, and terms and conditions will all have an impact on the way things are done. If there is to be a lease default by the tenant, the first place to go for information is the lease.
Here are some of the main factors to look for when it comes to handling a dispute and default with a tenant.
- The definition of lease default will be in the lease and it will go on to say exactly when and how you (as the landlord’s property manager) can take action to remedy the breach or default.
- As to when you can take action will be important, as it will have bearing on legal relationships between the parties.
- Look out for the relative legislation or laws that can also impact the lease, the tenant, or the landlord. Sometimes laws will interact with the lease documentation and the default event.
- Who can take action and how will vary depending on the lease. Read it to know what can occur.
- Time for the default notices to be served will be set out in the lease clauses. There may also be factors of ‘time is of the essence’ when it comes to notices between the parties. When in doubt get a good solicitor to advise you based on the existing lease between the parties.
- In most cases the tenant should be given a reasonable chance to remedy the breach. Legal precedents may have an impact on what time frame is acceptable for the remedy to occur.
So all of these are very good reasons to read the lease comprehensively when you first take on a new commercial property or property management client.
When something goes wrong in a property, the first place to go is the lease. Read what it has to say; invariably the answer needed will likely be in the lease.
You can get more tips for commercial real estate managers and agents in our Newsletter right here.
A retail shopping center is a business within itself. It is a cash flow produced from the tenancy mix and the customers to the property. The shopping center manager and or shopping center leasing manager should be well versed when it comes to optimizing the performance of the property.
A successful shopping center is a fine balance or equation when it comes to the following issues:
- The rental for the property produced from the existing leases
- The minimization of vacancies across the property given the existing tenancy mix
- Market rent reviews that are negotiated as part of ongoing occupancy
- Lease renewals with the high value tenants that you have chosen within the mix
- Stabilization of anchor tenants and their interaction with other tenants across the property
- The renovation and refurbishment strategies that apply to the common areas, tenancies, and exterior building.
With a focus on the last point in this list, you can easily be seen that renovation and refurbishment is a critical component of retail property performance. The wear and tear factor that applies to a retail shopping center is much higher than a commercial or office building. This then says that the shopping center needs to be carefully managed when it comes to appearance, renovation, and the overall shopping experience.
People shop for just two or three reasons. Those reasons are:
- Requirements for their necessities of food, convenience, and clothing
- A feel good experience when it comes to buying the discretionary items of life
- Goods and services required to replace worn out items
A shopping center therefore has to have a mixture of tenants that satisfy all three needs. The tenancy mix within a retail property is therefore critical to ongoing customer interest. A retail property without customers will die very quickly.
Taking all of these things into account, the renovation strategy that you adopt for the Retail Property should be woven into the intentions of the tenancy mix, lease renewals, new tenants, and customer spending patterns. Here are some rules to the process:
- There will be better times of the year to renovate the property. Understand the patterns of the shopper as they apply to shopping throughout the year. These patterns will help you understand the best times to undertake renovation. It may be that renovation is only partially undertaken in different zones of the property as the year progresses.
- Prior to any renovation commencing, communicate the fact to the broader customer community and tenants. Let them know what is going on. Send flyers through the tenant customer sales activity, as well as the local mailing distribution lists.
- The renovation of the tenancy should be well publicized and well marketed. If you know the replacement tenant to move into the renovated area, put that information on to the surrounding billboards and protective hoardings.
- As part of refurbishment, you may wish to change the size of tenancies and or the type of tenancies. This therefore becomes part of the overall business plan for the property. Plan the clustering is of tenants around particular zones and traffic areas. Take special care when it comes to the entrance ways to the property given the image that renovation and refurbishment can have at the entrance way.
- It is normal for a landlord to justify the renovation of a property based on increased return. That return will normally come from an improvement in market rental. Market rental will only increase if you create more tenancies, renovate on a rising market, or bring new tenancies into the property that are of high quality and cash flow. Be very careful when it comes to the expectations of tenant and income profiles over the coming financial period after innovation. Many a landlord has made a mistake when it comes to income expectations.
All of this then says that the renovation or refurbishment can occur providing you balance the tenants, customers, leases, and seasonal sale patterns to the renovation requirement. Plan the process, and everything should do quite well.
You can get more tips like this in our Newsletter.
It is a common event that some agents will be hard pressed for commercial real estate listings during a working year. The problem develops when you are not prospecting correctly or enough.
The knee-jerk reaction is to go and get more listings and most particularly anything that you can find. That is a big error; quality is the key to the process. If you want to be a top agent, you must have quality stock. Don’t waste your time on low quality listings.
Here are some tips to help you with your listings and the prospecting process for them:
- It doesn’t really matter that you have only a few listings. What matters is the quality of those listings. Quality can be many things but it usually relates to price, rent, location, availability, and improvements.
- I have seen many if not most top agents earn more money from fewer transactions each year. This means that they are very selective to what they work on and when.
- Look at the cycle of the property market in your area. Most markets will have a pattern to them. Commercial and retail real estate will usually cycle in and out of the market every 5 to 7 years. This is because the property investor or property owner needs to change. This then says that you should identify those properties that were bought about 4 years ago. They will be the next properties to come back into the market.
- Every time a competing agent puts a signboard on a listed property, use that listing as the chance to talk to nearby businesses and property owners. Those nearby people may be seeking to compete with the other agents listing. You are best placed to help them.
- The property market today will have trends when it comes to property choice. As you advertise and promote more local property you will soon see what properties are desirable. Selective prospecting will then be a priority.
Many times I have had agents ask me about best ways to get the details of property owners and make contact with them. There are no easy short cuts to the process. The best way to prospect is to consistently make it a part of your daily diary. Two or three hours are what is required. When you devote the time you will get momentum and that will eventually bring results your way.
You can get more tips for listing commercial real estate in our commercial real estate agent newsletter right here.