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:
- Leasing leads to Property Management – Many landlords are open to property management services when you have just solved a complex leasing issue for them.
- 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.
- Tenants share local property information – Local tenants will tell you many things about their location and other nearby businesses.
- 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.
- 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.
When it comes to vacancy leasing within an investment property, the fit out standards that you set and work to are very important. Those standards will help you when it comes to ongoing occupancy and property presentation. Over time a property controlled in that way will maintain its appearance and its leasing standards. That then helps with establishing and strengthening market rentals, and minimizing vacancies.
Poor Property Presentation
Most people can relate to and would have seen a property that is poorly presented and maintained. In any office building or retail shopping centre you can soon see where the maintenance is inadequate and where things are not being done. In many ‘owner managed’ properties that inadequacy can be a common problem. Many investment property owners are ‘too close’ to the decisions required of expenditure and maintenance. They can sometimes have differing priorities when it comes to property presentation compared to income paid and banked.
A well maintained property will attract tenants and achieve better levels of tenant retention. A property of that type will also see lower vacancy levels and stable market rentals. It directly follows that the appearance of the property and the maintenance program within is very important to help the investment improve over time.
Set Fitout Standards
Setting the correct fit out standards and policing those standards as part of the leasing process will help with overall property presentation and tenant retention. Here are some specific topics to focus on as part of that overall standards strategy:
- Shop fronts – When you are leasing a property with multiple tenants in occupancy, the shop fronts and the entrance ways to each and every tenancy should be carefully considered and controlled from a visual aspect. The shop fronts should be standardised to a particular design, size, and lay out. What you are trying to do here is maintain the appearance of the property.
- Marketing material and signage – Some tenants will try to ‘bend the rules’ when it comes to signage and marketing material. As part of the leasing process, the landlord and or the property manager should reserve the right to approve and control any signage within the property and on the premises for the duration of the lease.
- Air conditioning – Whilst the property may have central plant and machinery to supply air conditioning conditions, the tenant will need to tap into the plant capability and design. The tenants fit out should be adjusted to the air conditioning capability of the building. There are unfortunately plenty of cases where that strategy has been overlooked or not properly controlled, and the performance of the air conditioning within the building is thereby compromised.
- Lighting – You can specify the types of lighting and layout for a tenancy fitout. That then has benefits from the aspects of energy consumption, illumination, and presentation. You want a tenancy to look good, and lighting will have a lot to do with that.
- Electrical connections – There will be certain capabilities of energy supply to a property and a tenancy. Consumption monitoring is one factor to watch, but energy efficiency today is now a concern in property operational costs and outgoings.
- Standards and finishes – In any modern newly constructed investment property, the finishes and standards of fitout will be critical to overall wear and tear as well as appearance. Set the standards in consultation with the building architects.
- Entrance ways – The entrance to a tenant area and the entrance to a property are unique spaces requiring control. Entrance design and functionality should be balanced against safety and appearance. Locks, finishes, and size of entrances will all impact those decisions as well as existing building construction codes.
- Fire and safety – Fitout designs require the integration of special factors of fire and personal safety. Building codes apply. All tenant plans and approvals should be considered given the existing fire and safety codes for the property and the location.
- Floor coverings and wall treatments – Good quality floor coverings give longer serviceable life. The walls should also be painted with quality paints that give longer term protection and presentation to the property.
- Maintenance – How will the property and the premises be maintained? Who will pay for upkeep? The terms of the lease will need to set out who pays for regular property maintenance and how that is to be done.
These are some of the bigger issues to work through as part of fitout design, approval, and construction. Use a checklist to keep things under control.
When you are to lease a commercial property, the facts about the property and the leasing process should be at your fingertips. Tenants will ask you plenty of questions as part of the property inspection and enquiry process. Lack of information can slow down or derail a property lease negotiation.
You may only have one opportunity to convert your tenant to an inspection or a negotiation. So it is important to remember that preparation is the key to converting more leasing activity in a positive way. I like to do a lease orientation in preparation for that tenant attraction process.
Let’s face a few facts about property leasing:
- Every tenant will have different demands
- Every landlord will have specific ideas about rental, lease terms and conditions, and occupancy
- Some modern and new office or retail properties are very complex when it comes to lay out, fit out specifications, and the as built factors of design
- Property improvements, services, and amenities differ significantly from location to location
So there is plenty to think about here if you are the leasing agent. There are a lot of things to understand, look into, and review. Without capturing the interest of the tenant, they will quickly move on to another property inspection with another agent. You will only have one short opportunity to interest the tenant in the property and the vacancy.
Lease and Tenant Orientation
Here are some elements of lease orientation that I recommend you undertaken as part of every vacancy assessment and marketing process:
- Size – Understand the layout of the premises and the vacancy. The size and the configuration of the floor plate will be critical to tenancy design and business function. Some businesses require floor plates that offer flexibility in office configuration and departmental interaction.
- Tenancy use – Every vacancy should be assessed so that the ideal tenant profile and permitted use can be decided. The existing tenancy mix within the property may also have some relevance to the vacancy and the new tenant selection. Understand the pressures and the priorities that apply in choosing the right tenant with the correct business orientation.
- Access and security – Understand exactly how tenants will move to and through the property as part of their business operations. Security today is also a factor of concern for many businesses as they strive to service customers and protect staff. The tenancy itself may have proximity card access within a certain zones and certain floors. Advanced levels of security help when it comes to attracting corporate tenants today.
- Fit out standards – Within certain buildings there will be a need to establish and manage the standards of fit out construction. In that way you can preserve the quality of the property and the presentation to both tenants and customers.
- Rents and outgoings – Set some targets when it comes to market rental negotiation. As part of that, you will need to consider the incentives that apply in the leasing process for the location and the property type. Do a full market assessment of rental trends and opportunities as they exist within the property type. Advise the landlord accordingly, and set some flexible rental ranges that apply to any potential lease, the associated incentives, and the terms of lease occupancy.
- Strengths and weaknesses – Every property will have certain strengths and weaknesses to be understood and worked through. The strengths can give you significant points of difference when it comes to marketing, inspecting, and negotiating. The weaknesses on the other hand will need to be addressed prior to any lease inspection or lease enquiry.
So there are some good things to be understood and optimized as part of the lease orientation process. As the professional leasing expert, you can get these things under control at the earliest stages of lease marketing and thereby improve the levels of enquiry, and the negotiation outcomes.