Throughout the year the commercial real estate market will change and fluctuate with prices, rents, and levels of enquiry. The clients that you act for may not understand the true pressures of the property market and the changes that are underway.
It is your job to help your clients make wise property decisions taking into account the key performance indicators relevant to their property listing. Some clients will take more convincing than others.
So What is the Property Market Doing?
Market evidence will be a key component of any property or listing presentation to a client or prospective client. The active sales and leasing transactions through the region will show trends when it comes to prices, rents, incentives, time on market, rates of inquiry and marketing. There will also be achieved and identifiable differences between high quality listings, and average or lower quality properties. Differentiate the changes in the property market so that you can show the client where their property sits in comparison to others.
Key Performance Indicators in the Commercial Property Market
Here are some essential key performance indicators and factors to consider that will help you in conditioning your clients thinking and decision processes:
- The rates of inquiry – Throughout every calendar year there will be plenty of changes occurring in the level of inquiry coming to you or into your office across sales and leasing. The buyers and the tenants that you are working with will have certain demands when it comes to property choice and location. They will also have predetermined ideas when it comes to price and rental rates. On that basis you can see the importance of tracking the levels of inquiry applying to each listing type and location. Understand what the buyers and the tenants are looking for when it comes to commercial property today.
- Higher quality listings – Some properties will be very desirable and achieve greater levels of inquiry, inspections, and negotiations or offers. Understand why one property would be more desirable than another. The same comparison applies to precincts and locations locally. When you list a high quality property, the inquiries will fly in to you from the very start of the campaign. Some local property precincts will be highly desirable from a buyer or tenant perspective, and you will need to determine the differences between those precincts in both price and rent. When you list a property that could be regarded as high quality, it is necessary that you carefully consider the marketing process and the best method of sale or lease as the case may be. In the end result the marketing of a high quality property will always provide you with plenty of qualified leads and contacts for future opportunity. That is where the use of your database will become a key factor of support in any property marketing campaign.
- The best method of sale or lease – Choose the correct method of sale or lease that will attract the best levels of inquiry. Adjust your listing pitch or presentation accordingly. The choice that you make here can also impact the marketing strategy that you structure for the campaign. Understand the differences between specific property marketing and generic marketing; match those differences to be target market relative to the listing. The generic marketing process only applies to open listings, and any result that you achieve with an open listing is a process of luck more than anything else. Help the client understand the direct strategies that you will deploy when it comes to their property listed exclusively. The marketing process for any property today is not an experiment and should not be regarded the way by the client. Help them make the right choices when it comes to the correct method of sale or lease and the associated marketing campaign. Always seek vendor paid marketing funds as part of the property promotion process on exclusive basis.
These items are perhaps the three most important factors of commercial property performance and marketing for your location. With each and every listing presentation that you make to a client or a prospective client, be prepared to explain the important facts of the location and listing today relating to the current levels of enquiry.
In commercial property management it is easy to fall into the same basic management model with all of your properties and clients. That can be the wrong thing to do, given that most properties have differences and challenges that all need to be adjusted to.
To get a reasonable management fee and keep the client and the property in your brokerage portfolio for a long period of time, it is necessary to produce a high quality service. Set new standards for your brokerage; get known as the ‘brokerage of choice’ when it comes to managing difficult and diverse properties.
Remember these facts:
- Most clients don’t do a very good job themselves in property management, so they need help. They have not got the systems and support tools that most other quality brokerages have.
- Many other property managers are a bit ordinary when it comes to skills and commitment to the task. You can usually do a better job.
- Every negotiated sale or lease is an opportunity for a property management proposal.
To attract new clients and better properties to manage here are some ideas to help you set new standards:
- Understand the client before you do anything else. They don’t just want the property managed; they want it formulated to a plan or a strategy that matches their intentions of holding the property.
- Check out the tenant mix and the leases so you can relate to the strengths and weaknesses in each. The weaknesses will need resolve or removal. Given that some leases can go for some time if not years, you will need a tenant retention plan to help you decide what tenants are going and what are staying.
- Understand the critical dates in the property with all of the leases. Act early on the dates so you are not creating a weakness in the property or income base.
- Vacancies and arrears can be challenging issues. Both require strong and sensible management or resolve. It pays in many cases initially not to remove a tenant because of arrears. Usually the arrears can be managed through hence avoiding a vacancy and loss of rent.
- Understand the income profiles and factors for the property. Match the expenditure trends to the cash flow and the requirements of the landlord. It is not so much that the bills need to be paid on time; but rather that the expenditure needs to be planned.
A good property management system will be supported by a checklist and forward planning model. Every client is different so take the time to understand the client before you do anything else. Help them with their property needs.
In commercial real estate agency, the property investors that you know well and connect with regularly will provide you with lots of opportunists in sales and leasing activity. That being said you really do need to know their focus and priorities when it comes to property ownership and overall performance.
The property market changes frequently and so will the plans of the people and clients that you serve. A lease transaction today can be a sales transaction tomorrow. The same extended business opportunity can occur from a lease deal to a property management appointment. Understanding the client will help you find the right opportunities and leads.
Here are some questions to ask your clients and prospects. Adjust the questions and concepts to suit the property type and local market that you control.
- What type of property do they prefer to own and in what location? They may relate more to industrial, office or retail property. Their preference will have an impact on your prospecting activity.
- What do they own now and how long do they intend to hold that investment property? There are strategic differences between holding a property for the short term (5 years) versus longer. Any leases that are negotiated in a property will be established with due regard for the investment holding period, the cash flow required from the investment, and any renovation or relocation needs.
- The income that you set for a property will be relative to the market rental in the property type. What do they know about gross and net rent today? What impact will incentives and vacancy factors have in the leasing process and returns over coming months and years?
- Will the property need renovation soon? Some older properties will reach the end of their useful life as tenants look for better property improvements and locations. A repositioning or renovation process will need to occur with older properties. Many property investors do not know how to position current lease negotiations for that. Renovation and relocation clauses can be inserted into current lease negotiations with due regard for the upcoming property changes. In such cases, the strategy of leasing really becomes very important.
- How are outgoings and expenses running for the property? Are they comparable to the other properties locally of similar type? Keep your clients property suitably positioned in a competitive way so that any lease can be attractive and viable for new tenants considering occupation.
Simple concepts like these will help you serve your clients professionally when it comes to tenant mix and leasing. When you get the balance right, the income for the property can grow and the vacancy rates can fall.
In commercial property management it is easy for a manager to get tied up in the daily events of the property and the client. Quite soon they are just doing a job rather than providing a professional service. The pressures of the job soon take over and the ‘bigger’ picture of property performance gets lost in the events of the property.
Quality property performance and control involves a forward looking approach to the asset given the market conditions, tenant mix, and property improvements. Strategy and timing are everything in the services to be provided. The property manager must have the discipline and the skills to do the job well; that involves a good fee and the right person for the job.
So many local property brokerages and agencies claim to be the ‘best’ at what they do in managing a client’s commercial or retail property. If that is the case then they should be able to prove that they are indeed the ‘real deal’ when it comes to quality property management services. Quality and accuracy are key components of the services to be provided. There are real differences between the services provided in office, retail, and industrial properties. The property manager should understand each and be proficient in one or more based on experience.
Why do I say this? It is a fact that many commercial and retail property managers are overwhelmed with daily work due to the demands of the client, the size of their portfolio, and an imbalance in fees for service. Many agencies set lower management fees just to get the appointment to the property. Those fees then have little relationship to the requirements of the client and the increasing demands of the property and tenant mix.
So the ‘golden rule’ in pitching for a property management is to understand the package of services that will best suit the client and the property. If you apply your fee assessment on an ‘industry standard fee’ as a percentage of passing income, then track that back to the work required and the size of the property and tenant mix.
Here are some other facts to add to the assessment:
- Client focus in the future of the property
- Property performance challenges from the leases and the tenants
- Vacancy profiles and upcoming leasing challenges
- Long term plans for the property including renovation and refurbishments
- Tenant mix changes and lease critical dates
- Cash flow requirements from the rental and the outgoings
- Property improvements and maintenance
- Targets in rent, operational challenges, leases, maintenance, and reporting
- Business plans and tenant retention
- Tenant lease negotiations
There are some real facts and issues to be managed here. A good property manager chosen for the property type will understand how to do that. Balance your client’s fee for service against the time required in management and the challenges of the property.
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A good client in commercial real estate can be a massive opportunity in commissions and repeat business over time. Finding the good clients to work with can take time, but the process is necessary and should be done on an individual basis by all agents.
The agents that struggle in any commercial property market are invariably those that do not do enough prospecting on a daily basis and therefore do not have a good source of clients and contacts. It is a simple equation but it does require personal effort.
When you know what a client can do for you, the process of ongoing contact becomes a logical process. Here are some ideas to help you:
- A prospect may not be a client today, but they may certainly have all the attributes of a good client in the future. Comprehensively cover all the possibilities in sales, leasing, and property management. Be prepared to talk across all disciplines. A leasing opportunity today can be a sale or a property management appointment tomorrow or in the future.
- Some property developers and property owners have a number of properties across their portfolio so investment needs can be quite diverse. When they own more than one property, the challenge of keeping up with rents, vacancies, rent reviews, new tenants, and options can be daunting. Market your services to their broader property requirements and challenges.
- When you consider a property with multiple tenants or available premises, the tenant mix analysis and strategy can be quite special. The facts are very apparent with retail property and shopping centre performance. If you provide property leasing services, take the time to understand the strategies behind tenant placement, leasing and clustering. Any tenant that you choose for a property should be well selected given the requirements of income, profile, permitted use, compatibility to the property and the other tenants; consider the long term occupancy potential. Your leasing services should be quite special taking into account these unique factors. Show the client some real reasons as to why you are a top leasing agent.
- A good client will have certain future property needs and targets. On that basis you can seek to satisfy those requirements with some planned ‘off market’ transactions and targeted solutions. Help the client with where they want to head with the right property types and income growth. Remove the pressure from the client’s investment strategy. Show the client what they need to do to stay ahead of the market today and in the future.
Seek to understand your property clients in all respects. A good client relationship may take months to nurture. Trust and respect has to be there before the larger clients will work with you.