In commercial and retail real estate, it is common to be asked to do a property management proposal to manage a property that has just been sold or leased. That is usually the best time to secure a new management. The owner of the property at that time is normally quite receptive to discussing property management strategies and services. Most property landlords do not have either the experience or the expertise to manage their property comprehensively. They have not got the latest tools and the systems to correctly manage the cash flow in keeping with the tenant mix and the lease profiles. When you have a number of tenants in the building, the entire management process becomes more complex and time consuming.
Managing a property is not simply just a matter of collecting rent and negotiating leases. There are many strategies and systems to be applied across the property for the long term. In this way the rental and the tenancy mix can be structured or improved. A property management proposal should be prepared with due relevance to the property function and requirements. That says that every proposal should be based on the needs of the client and the challenges of the property. Here are some factors to build into your proposal structure:
The time involved in managing a property will vary substantially based on the needs of the client and the challenges of the property. When setting a new fee for a new client, it is wise to consider the number of hours required each week to perform the expected tasks of management. When you relate this time factor to your operational costs of the division, you will soon see the breakeven point in the fee structure. Far too many agents simply set a fee based on known cash flow without the regard for expected time input.
The tenant mix for the property will have both challenges and opportunities. The challenges will be in upcoming vacancies and the repositioning of sitting tenants. That is where lease management becomes really important to the property process. Opportunities will always exist in renegotiating leases with the sitting tenants to improve occupancy and potentially the market rental. Fees should be established in your proposal to cover the renegotiation activities with existing tenants.
Be quite clear when it comes to the reporting processes to be provided to the landlord. Some landlords can be overly demanding when it comes to the weekly and monthly property reports. If a higher reporting requirement exists, then the fee structure for the property management service should be appropriately set.
It is interesting to note that a quality property management service will only occur if you have good people within your division. That is managers with the experience and the maturity to negotiate leases, optimise income, and manage expenditure activity. Property managers of this type can be hard to find and usually demand a reasonable salary base. That being said, they will always produce better quality work across the portfolio for the clients and the agency principal. To establish and run a professional commercial property management division, you need good people; there are no short cuts.
When you work in commercial real estate agency, the prospecting process should be part of every working day. Cold calling is a central component of that prospecting activity. When you make the calls professionally and directly each and every day, you will produce more opportunity faster for yourself. That being said, the calling process requires diligence and personal persistence.
To get the cold call process underway within your daily agency business activities, it is wise to consider and control the following issues.
Define your property market geographically so you know exactly where you need to be directing your calls. The best way to do this is on a simple map of the local region. Choose the roads and the boundaries that capture the best segments of the business and property community.
Within your defined territory, determine the types of properties that you will be acting on. Typically they will be Office Property, Industrial Property, or Retail Property. Each classification of property has specific attributes that need to be understood. This is where your personal market knowledge becomes very important as you consolidate and grow your market share. You cannot be an expert across the entire property market and every property type. For this reason you need to specialise.
Once you have defined your property market and property type, it is essential to study the properties that are currently available for sale or lease within that area. When you start cold calling, you will find that information of value. Some business owners and property owners will test you out regards existing listings near to them and the existing property market activity.
When you decide to start making calls into your property market, you will need lists of businesses and property owners to direct those calls to. The research side of the prospecting process continues each and every day and should be merged into your diary process. Finding property owners can be a slow process however it needs to be done. Finding business owners is a lot easier and can occur from use of the business telephone book. Either way you will find the right people to talk to through consistent research.
You should be prepared for two or three weeks of hard work in your call prospecting before you see significant opportunity evolving. However, the process does work and simply needs to occur each and every day. When you stop the calls cycle, you fall backwards in your momentum and consistency.
To help your momentum and your call process, develop a very simple script to support your initial dialogue when you make the calls. The cold call should be a conversation and not a sales pitch. Your target from the calling process should be to create meetings with people who have an interest in local property matters.
Build your database from the results of your calls. This is a personal process and should occur at the end of the day when time is less critical.
You can generate a lot of new business from the contact calling process. It is a personal discipline that requires practice and focus. Should you choose to develop this skill, new listings and commissions will be far easier to achieve.
Commercial real estate sales and leasing is a very competitive industry and the large amounts of money both in commission and in property prices make the ‘players’ of the industry compete in ways that can seem aggressive and pushy. This aggressive and pushy focus does not win you market share or better deals in the long term as the real focus should be your absolute professionalism. You must be the best in your market and people need to know that you are. Being the best in your industry does not mean ‘aggression’, but rather ‘relevance’. The more ‘relevant’ that you are, the more business you will attract. Its a simple rule but it brings major results.
Now is a good time to ask yourself how professional you think that you are now or you can be this year in commercial real estate. So what does professional mean for the commercial real estate market in your area? Would you use yourself to market and sell property locally based on your skills and knowledge? If the answer in ‘no’, then ‘We have a problem Houston’.
Getting Professional with the Right People
Let’s create some rules for you on this. Getting up close and professional with the sellers, their ideas and their motivation is critical in the prospecting, listing and closing process of commercial property.
Information must be a daily process for you in your commercial real estate business. All the information gained every day about and in the market should be captured and included on an appropriate series of detailed forms that are relevant to the property types and your market.
When you capture data for a property, make sure that the client sees your diligence in the information gathering and analysis process. Use your professional processes obviously and in full view of the people that matter.
Record your property information and market intelligence as both hard copy and later as part of a computerised listing data bank. The more you know about your market and can easily draw on later, the more business you will find and attract in the long term.
If you do not have the advantage of a specialised commercial property software solution for collating your data then use a simple spreadsheet. The process is easy and effective and you can use it anywhere and at anytime.
Spreadsheets can be sorted and manipulated to give you the sales and leasing information that you need conveniently and concisely. You can even do this in front of the client as a point of difference in your discussions.
Computer and software literacy in the industry is now the ‘norm’ and not the ‘exception’. At the basic minimum today, you should be very conversant in using commonly available software such as ‘MS Word, Excel, Publisher, Outlook, Adobe Acrobat PDF, and Access’. We put ‘Access’ on this list as it is a very powerful and flexible database tool that is so versatile and talks to all other major Microsoft programs.
If you have some spare money in setting up or growing your commercial real estate business and want to get a database program to collate and control your customer relationships, then try the commonly available ‘Goldmine’ or ‘ACT’. They are well proven globally and cost effective for the individual. You can trial these programs from the web for 30 days to see that they suit your needs.
So let’s now move on to the keys to effective relationships in commercial real estate.
Here are six simple ways that you can start to build your relationships consistently and professionally in commercial property sales and leasing.
Property is very much a person-to-person business. Whilst your clients or prospects may be attracted in the first instance by your firm’s name, advertising etc., eventually people trust and deal with people (not firms, or organisations). Consequently, your personality, approach and attitude are very important to your success. You are ‘in-charge’ of these factors and only you can do something with them.
You should not attempt to adopt artificial characteristics or mannerisms that do not come to you naturally. If you are in any way ‘artificial’, the client will see that you are not being yourself and will see weakness in your processes. Nevertheless, you must be able to provide your client with the QUALITY SERVICE that he or she demands, hence adjustment of your skills and actions may be necessary. Clients in commercial real estate will typically be astute business people who are used to dealing with specialist professionals and will accept nothing less. To help with this aspect you can and should adopt a daily practice process of the critical skills of communication and market knowledge that you need to draw on frequently with the properties in your market. This will help fast track your success in listings and deal conversions.
What, then, does your Commercial and Industrial client demand? Clearly, he or she wants someone with expert knowledge. Firstly the whole basis of the client retaining you is that you possess a level of expertise and skill that the client has not got himself, and that these aspects are significantly better than your competitors. Secondly, the client will seek a friendly, confident, businesslike approach from an agent who appears well organised, successful, and well presented. They want someone who is creative and enthusiastic, willing to LISTEN to the client’s requirements and, most important of all, to instigate timely ACTION to fulfil them. Sometimes in this process it helps to think of the things that you would expect of an agent if you were a client. The client has to have confidence in you to help them. It is not all about price and commission; it is about your ability and relevance to achieve the result that the client wants. If you lack in ability and relevance in your market segment then start to practice and improve your weakest points as they alone will hold you back and hinder your conversions.
In Commercial and Industrial Property Marketing, never be pressured into making rash statements or opinions. The sector is complex and the vendor will respect you taking a little more time to research the particular property and to prepare a comprehensive marketing submission prior to securing a listing. If in doubt on any property proposal or related question, do not answer or respond immediately, but rather seek the extra time to get the right detail that you need.
Proposals and submissions should include fully detailed relevant matters and recommendations. That will include things such as marketing proposals and strategies, timing, market conditions and opportunities, advertising budget, commission, anticipated market value, and target market. The submission should, without padding, reinforce your ability to carry out the work and facilitate action that will secure the listing for you. A key component of the proposal process is identifying and then handling the worries and concerns of the client. If you do this in the proposal or submission to the client then you will be all that much closer to closing the listing.
Submissions and Proposals to the client must be completed in a timely fashion and then followed up regularly and professionally until a decision is made. Once the listing is secured, it is then essential for all later contact, negotiations, and final agreements to be supported and documented clearly and correctly. This extends throughout the marketing period, the inspection process, the negotiation, and the contact or lease. When you do this correctly you build a high level of trust with the client and this is invaluable when it comes to the actual deal, the future and other transactions with the same people.
All of the above matters are not difficult but they do demand attention and diligence. The rest is up to you.
Advertising and marketing is the only way of getting many people interested in a commercial property in a short period of time. The more that people know about the property, the greater the chances of someone liking it, and wanting to buy. When you can get people to like a property, the higher the asking price can be, and the greater the potential for genuine enquiry.
Although some Commercial Real Estate companies pay for the advertising themselves (and the vendor gets what he or she pays for; little or no advertising and poor results).
Anyone could put their property to auction for a free market valuation, with an impossible reserve price and no intention of selling.
Getting the Marketing Message Right
Selling a commercial property is a business transaction and a joint effort. A vendor who spends money to make money is a genuine seller. The newspapers get the advertising money, in return for which the vendor receives AGENT SERVICE, EXPERTISE, LOYALTY AND BEST EFFORTS.
If a commercial real estate auction company paid for the cost of advertising for each property on their books, (say 200 properties) their classified and display advertising costs would be over $50,000 per month! They would quickly go out of business.
Know Your Marketing Requirements
In choosing an advertising budget, the vendor should carefully consider what the advertising is required to achieve. The more advertising that can be done the better for the client; more people will know of the property and its availability. Give the client some marketing campaign choices as you pitch for the listing and ask for vendor paid marketing funds. When you take the comprehensive approach, it is hard for a client to ignore the marketing story and the need for them to commit to the promotional campaign.
THE CHIEF CONCERN OF A VENDOR SHOULD BE TO FIND A SOLUTION TO THE PROBLEM OF HOW TO GET FULL EXPOSURE IN ORDER TO ACHIEVE THE MAXIMUM PRICE FOR THE PROPERTY.
Individual advertising budgets in Commercial Real Estate are tailored for each property. Agent’s commission, legal fees and advertising costs are often paid for in just one higher bid at auction. (As a guideline, adequate advertising costs should be approximately 1% of the value of the commercial property being offered for sale).