The Essential Strategies to Follow in Commercial Real Estate Leasing

As you consolidate your career in commercial real estate brokerage, there are plenty of opportunities to be had across the segments of the leasing market. There will usually be a good selection of local businesses, landlords, and tenants struggling to resolve occupancy issues.

 

If this is the property market segment for you, then consider how you can boost leasing inquiry and provide professional services to both landlords and tenants. There are some critical steps to the process to help you build your leasing momentum.

 

Leasing Facts

 

Let me set the scene here in your local area:

  1. Some tenants are looking to relocate due to pressures of expansion and or contraction.
  2. Some landlords have vacancy issues and pressures to deal with. Look for the vacant properties and then talk to the landlords directly.
  3. Some properties are quite complex in tenancy mix and occupancy. The larger properties are likely to have an array of leasing challenges including variable market rentals, upcoming lease expiries, and a changing tenancy mix.
  4. Market rents are changing in your town or city. Track the market rentals that apply to the different property types and precincts.
  5. The factors of supply and demand in the local area will shift occupancy rates and market rentals. Look for the local developments that could influence future supply and demand. Adjust your marketing efforts based on the upcoming changes to occupancy supply and demand.
  6. Many tenants today are looking for improved conditions of occupancy and better buildings. In talking to the tenants locally, you will soon identify what they are looking for in any new occupancy.
  7. Some landlords are overly aggressive when it comes to market rental negotiation. The landlords that push the levels of occupancy and rental recovery are usually the landlords that lose tenants over time. They are likely to have higher vacancy factors in their investment buildings.
  8. Many tenants are looking for improved factors of economy and cost when it comes to lease occupancy. Understand how you can bring factors of occupancy cost improvement into the tenant lease negotiations. Market rentals, outgoings costs, and rent review processes are ways of achieving a better rental package for the tenants that you serve. If you work as a tenant advocate, this will be a big part of your professional advocacy services.
  9. New projects are coming onto the market, and those projects will require a professional occupancy and leasing strategy. Many project leasing opportunities are quite large and can take months if not years to complete. If this is the type of work that you are focusing on, then be careful when considering commission charges, marketing costs, and resources to be applied to the project. Many developers will look for lower levels of commission and minimized marketing costs. They will be looking to offload many of the project leasing costs to the marketing agent.

 

All of these things are happening in most cities at any given point in time. They are all related to leasing and property performance. You are the best person to help resolve these challenges.

 

So here are some of the rules that you must follow to improve your professional profile as a top leasing agent:

  1. Concentrate on the market segments that have the best levels of churn and opportunity. There will be certain property precincts and buildings in your town or city that are higher on the selection list for new tenancies and new tenants. Work the buildings, the landlords and the precincts that have the best opportunity for change and churn.
  2. In talking to local business owners and tenants, adopt a checklist approach to understand where their business is located now, what they may need for ongoing successful business occupancy, and when their current lease may expire. When talking with decision makers, understand the pressures of today that they may be experiencing, and how they are looking at their future in the location. Show them the economies of the area that could influence their choices to relocate. Most business owners and tenants will be attracted to factors of efficiency and economy.
  3. Track the market rentals that apply to the property types and the precincts. When any new lease transaction has been completed, seek out the facts relating the finalized lease, and the agreed rental.
  4. When focusing on new properties to lease, bias your activities towards the larger properties, the quality locations, and the good quality buildings. In that way you will achieve a higher level of rental and better levels of interest as you market the vacancies.

 

So these are all strategic issues that can easily be applied to the tenant and landlord leasing services locally. Understand the factors of attraction in the local commercial real estate leasing market. Work the factors of attraction through your prospecting and marketing processes. The better buildings, precincts, and market rentals will always attract good levels of quality inquiry. Work with your landlords and tenants on that basis.

Commercial Real Estate Leasing Brokers – The Additional Benefits of Working with More Local Tenants

If you are a commercial real estate leasing agent, you can get plenty of market traction if you work with local tenants and business owners.  They tell you things and that then leads to listings and better commissions with quality property transactions.

Always err on the side of leasing quality when it comes to any property listing or property choices.  Why is that?  Consider these things:

  • Quality properties create better levels of inquiry
  • The rents are higher per unit of area
  • The commissions are better due to the higher rents
  • The tenants are drawn to a quality listing
  • Modern buildings offer a level of improvement and services that most tenants require

What are the Leasing Positives?

There are some good things evolving from working in property leasing and resolving tenant needs.  Think about these:

  1. Leasing leads to Property Management – Many landlords are open to property management services when you have just solved a complex leasing issue for them.
  2. Leasing leads to Sales – A lease today is likely to be a property sale in the future, particularly if you do a great job for the landlord property investor.
  3. Tenants share local property information – Local tenants will tell you many things about their location and other nearby businesses.
  4. Landlords want help with tenant placement and tenant mix – Whilst a landlord may have a fully occupied property right now, many leases may be in need of upgrade and renegotiation at the right time in the future. As a general rule, weaknesses in leases can be negotiated away over time with better leases and rents.
  5. Rental and lease strategies are highly specialized – There are many different types of rents and leases; they can be mixed and matched to the investment requirements of the landlord and or the occupancy needs of the tenant (it just depends on who you are engaged by as a client). You can drill down into market rent strategies and leasing alternatives.  That will then make every lease negotiation more valuable for the clients that you serve.

So you can do a long way in the property market as a specialized agent or broker by starting from a ‘leasing base’.  Understand the linkages between the 5 points mentioned and build your skills and property market around them.

In closing on these points, recognize the differences between office, retail, and industrial property.  Understand the leasing opportunity in each property type, and then choose the segment that offers you the most market activity over time.

You can get more commercial real estate broker leasing tips in our ‘Snapshot’ eCourse right here.

Commercial Real Estate Brokers – Why You Should Target Tenants in Your Prospecting

In commercial real estate brokerage leasing and sales you can find plenty of leads and opportunities when you target building occupants in a regular and ongoing way.  Research your listing territory by building and then split those buildings up into tenants and businesses.  Make direct contact.

Some business segments and industry types will be under pressures of change at different times during the year.  Local economic circumstances and business sentiment will drive property change for some businesses and industry types.

The Canvassing Process

Assuming you can get this process underway, here are some concepts to feed into the commercial real estate canvassing process:

  1. Their business intentions – When you take and review all the tenants in a location, many will have future intentions to feed into their movement and growth plans. Customers and staff all place pressure on a business and with how things are done.  In a manufacturing segment where industrial property is involved, property configuration and use also rises to the top of the ‘planning’ list.  Most property decisions are made just before or after a change of financial year.  If you stay in regular contact with business owners and leaders, they are likely to remember you when a property challenge or change arises.
  2. Factors of expansion and contraction – Some businesses need more or less space. Canvass your territory every day and look at how some businesses seem to be trading.  If the property is of an industrial nature you can usually see pressures of change and occupation in and around the property.  Observe what you can.  Ask plenty of questions.  Meet more local people.
  3. Relocation requirements – Some businesses need to be located close to transport, highways, raw materials, and customer markets. Find out how those factors integrate into your location and property types.
  4. Difficult landlords – Some landlords are notoriously challenging and unsupportive of tenant occupancy and comfort; those landlords can focus too much on rental returns and less on property performance. Over time that can lead to a general exodus of tenants from a property.  Look for tenants that are disgruntled with the landlords in property ownership.  Check out locations for distressed tenant mixes and properties with higher vacancy factors.  There will be reasons for issues like that happening.
  5. Occupancy costs – Every tenant is concerned about paying rent and other occupancy costs. You should know what the rental averages are for a property and a lease by property type and location.  If a property is aggressively rented, the vacancy factor is likely to climb over time.  Distressed tenants are likely to move.  That then is a leasing prospect and opportunity.

Look further into buildings, tenant lists, property occupancy, and business activity.  You will always find leasing opportunities with tenants wanting to change location.

Commercial Real Estate Brokers – The Top 7 Motivators in Office Leasing Today

In commercial real estate leasing there are many different factors that come into consideration with any lease negotiation.  That being said, some stand out as the most common issues to be worked through by landlords and leasing brokers.

Initially the tenants ‘call the shots’ when it comes to starting a negotiation and making an offer on leasing office space.  The essential ‘factors of attraction’ have to be there at the very start to get things moving.  Typically those issues are:

  1. Occupancy costs – the rental spend has to be there at the beginning of any lease negotiation. Can the tenant afford the property given all the factors of occupancy?  Remember that occupancy costs add up and include base rent, outgoings, electricity, water, communications costs, and maintenance.  These are base building charges that exist in most leasing deals; look at the building budget for this year and understand how that budget will impact the property and the occupants.  What are these costs with your quality lease listings?  Can you provide a tenant with all of these facts?
  2. Technology support and integration – Most tenants in office space today want to integrate their business into the World Wide Web and global market place. That requirement could include high speed online portals, reliable telephone systems for both wired and mobile communication, data cabling, dedicated antennas for special tenant use, and secure risers for highly sensitive cabling and portal communication.
  3. Environmentally friendly occupancy – Most office tenants today will ask questions about natural light availability, energy costs for tenants, air conditioning quality and service, and the building compliance to environmental standards and safety support systems (fire, evacuation, bomb, and other modern day threats). You will need specialised consultant or engineering reports to provide these answers.
  4. Business location and proximity to other tenants – Some businesses like to know who and what other businesses occupy premises in the same location. There are sensitivities that can exist between tenant types and across tenant proximities.
  5. Branding – What image and branding can the tenant bring to the property? There will need to be strategies in place for directory boards, advertising, signage, and logos.   In a building with multiple occupants, the strategies should be set.  Each tenant will have certain branding demands; in some cases you can ask for extra rent to be paid for special considerations such as ‘naming rights’ and the directory signage.
  6. Landlord – Many tenants know all too well that a landlord can make or break comfortable lease occupancy. Some landlords are just too tough on tenant occupancy, fitout use or flexibility, and mid-term rental review negotiations.  Over time that can make things really frustrating for tenants that just want to get on with business.
  7. Fitout – What will be the fitout requirements and specifications for any tenants? The landlord should determine what ‘standards should be set’ when it comes to tenant fitout and construction; in that way the quality of the building is maintained.  The landlord should also determine what they will regard as ‘base building’ as any landlord cost in a fitout.

When you have these 7 factors under control for your lease listings, you have most of the lease momentum under control.

Commercial Real Estate Leasing Brokers – A Vacant Property is a Great Opportunity for the Long Term

Some of your commercial real estate clients will have vacancies in their investment properties to work through and resolve.  Those vacancies are a real opportunity for you the local leasing broker.  If you have a large database of tenants in the local area then you will have plenty of attraction and leverage to offer to local landlords.  Sell your professional leasing services from the strength of your database.

Ultimately the clients that you serve just want to get a tenant.  You can offer the best solution as part of that process.  Talk about the best tenant types that you see for the vacant premises and then offer the client a specific way to attract those tenants.   Here are some factors that you can drill down on as part of your client offering:

  • Presentation of the premises
  • Property improvements to strengthen promotion
  • Time of marketing to lift enquiry rates
  • Best promotional channels
  • Leasing alternatives
  • Rental structures
  • Incentives to offer tenants
  • Special advertising methods
  • Tenant mix strategies for the overall property
  • Rental improvement strategies

So the message here is that any vacant property or premises is a major opportunity for working with an investor for the longer term.  Don’t just let the single leasing requirement be the start and the end of the matter.  Look at how you can extend your services for the client.

Develop a leasing team in your office that can handle the leasing requirements in specific locations and across property types.  Ensure that the team can speak and present comprehensively into the rental and leasing market locally; that will mean across specific rents, marketing situations, leasing documentation, inspection processes, and negotiation approaches.

When you open the client up to the many extra leasing services that you can offer for the longer term, benefits arise for both you and your brokerage.  Try some of these for starters:

  1. Taking a property through a growth phase for a new renovation or project opportunity.
  2. Upgrading leasing services to a full property management appointment.
  3. Expanding the client’s investment requirements to other local properties and opportunities.
  4. You can be seen as the leasing specialist that is helping results happen over the lease duration and across the tenant mix.
  5. A good leasing outcome today can be a sales requirement in the future with the same client.

All of these things can lead to fee growth and diversity for the brokerage.  Comprehensive fees are driven from diverse leasing services.  Are you ready to lift your service offerings?

Commercial Real Estate Leasing Agents – Why You Should Understand Lease Covenants

As you service and help commercial real estate investment clients, lease covenants and terms can be a critical part of property performance and the established tenancy mix strategy. Every lease can be potentially different, and in a property with a number of tenants in occupancy, lease interpretation and management becomes really important.

 

To take matters a bit further, it is worthwhile establishing a checklist of lease topics and ideas to review with every property investor client. Understand what the client is looking for and how the terms and conditions of any lease will impact the clients overall investment result.

 

Ways to Review Leases

Here are some basic ideas and questions to raise and investigate as part of the lease structure and review process:

  1. Property Usage – understand the legal use of the property and the current zoning that applies to existing planning regulations. The tenant and the lease should be matched to the legal use of the property. The lease itself should clearly determine and control how the property will be used by the tenant. The permitted use clause within the lease should be quite specific and detailed. In a property with many tenants this strategy becomes even more important and critical to the tenant mix.
  2. Rental Structure and Strategy – the lease will reflect the strategy behind rental charges and collections. The lease may reflect gross or net rentals depending on the occupancy situation. Outgoings will also be recovered as part of the rental strategy across the year. Always review a lease in detail to understand how the rental structure works and the outgoings are recovered. When you understand the figures, you can compare them to the levels of market rental in the local area for the property type.
  3. Lease Terms and Conditions – comprehensively review all the terms and conditions of every lease within a property. Look for the variations that could have an impact on the landlord and their investment requirements. Look at the expiry dates and the options situations that will occur during the lease term. Some leases will impact the property cash flow and hence the investment. Learn to read lease documentation and interpret the longer term property cash flow. Compare the net rental results regularly to the potential property value, and in doing so achieve the capitalization rate or yield result for the client. Compare those figures to the current market conditions and the property type.
  4. Property Budget and Rental Budget – when working with an entire property and the lease strategies behind the investment, ask to see the overall property budget and particularly both income and expenditure in an itemized form. From the budget you can assess expenditure rates per unit of area and compare those expenditures to other properties locally; you can also see how outgoings expenditure is recovered from the tenants given the existing lease documentation. From an investment perspective, your leased property should be within the expenditure averages for the property type.

In reviewing these four topics, you can move further into issues of property performance. Start with the basic information and move into levels of greater detail with every lease document, each tenant in the mix, and cash flow opportunity.

How to Negotiate Lease Commissions in Commercial Real Estate Brokerage

If you provide specialist leasing services to property investors and landlords, you will need to be well versed in commission negotiations and commission standards. Many of the clients that we work with in commercial property today are quite experienced when it comes to commission and listing negotiations with agents. On that basis you should have some points of difference in your professional services to convince clients that you are the best choice of agent when it comes to solving a vacancy problem.

The message here is that your specialist services should be of substantial quality and complexity to support a fair and reasonable commission payment. Landlords will find easier to use your services and pay the required commission if you can prove that you comprehensively understand and control all of the following:

  • current levels of enquiry with local tenants
  • an understanding of what tenants are looking for in the property market today
  • have a major market share when it comes to leasing local properties
  • successfully transacted a good selection of quality leases in the local area
  • have a database that is up to date when it comes to tenant movement and tenant requirements

Far too many agents think that they need to discount their commission as part of winning the listing. Nothing could be further from the truth; most investors and landlords today understand that the vacancy is costing them a lot more in loss of rents and loss of outgoings, than in any minor saving to be achieved through a discounted commission.  If the landlord pushes for a low commission, they really don’t appreciate the commitment and drive that you can bring to the listing on an exclusive basis; perhaps you haven’t sold your skills sufficiently when compared to other agents.

The landlords that we serve are simply looking for the vacancies be filled professionally, that is with a good tenant at a reasonable market level rent. If you can prove that you are the best agent to satisfy the leasing requirement, then the listing will be easier to convert.

As a general rule, the leasing commissions that we negotiate should be supported by all of the following professional services:

  • Comprehensive market coverage to the targeted tenant market
  • One-on-one contact direct into the business community
  • Online and off-line unique and special marketing initiatives to attract enquiry
  • A good knowledge of exactly what tenants are looking for when it comes to the location and the property type
  • A timely approach to encourage inspections and lease negotiations
  • A good knowledge of lease documentation when it comes to improving the property for the landlord over time
  • A detailed consideration of the special strategies that apply when it comes to incentives, market rents, renovations, and lease documentation

 

So there are plenty of things can be done here when it comes to providing a specialised and professional commercial leasing service. If you can prove that you actually provide all of the points mentioned here, it will not be difficult you to convert more clients and listings as part of the lease marketing process.