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.
Are there dangerous clients in commercial real estate? Absolutely; yes is the answer. You will come across them all the time. You must protect yourself from these clients that are out to manipulate the deal for themselves without true transparency.
Ethics in our industry is really important. Poor quality clients can derail your listing integrity and commissions. So the message is that you should keep to the rules in the industry that protect your actions and listing activities. Clients that are less than honest can destroy your business in many different ways.
So here are some signs to look for when it comes to client selection and communication:
- Watch out for the clients that will not sign an agency appointment ‘until you find a buyer or tenant’. The request happens all the time in our industry but you cannot and should not act outside of the laws of commercial real estate agency in your location. You are bound to act legally and with integrity; if the client wants you to ‘bend the rules’, they are not a client to have and you simply cannot trust them. In those circumstances walk away from the deal or the listing. Let some other agent waste their own time and risk legal action. It is not fun when legal claims are made against you.
- Some clients work with many agents. Now this is just fine if all relationships are ethical and legal, but your listing and negotiation information should be protected by a valid appointment to act and an established client and agent relationship. If you suspect that the client is sharing your ‘market intelligence’ with other agents, you could have a problem.
- If your client avoids giving you an exclusive listing, it can be a sign that you really do not have their commitment and trust. They could also be working with many other agents at this very moment in trying to sell or lease the property. Ask the questions and get to the real facts of the matter.
- A reluctance to give you full access to the property or comprehensive property detail is a sign that something is going on. A similar problem is evident with the client not disclosing tenant and income detail for the property. If the client is not being open and honest, step back from the deal until you know all the facts. Get copy of all current property related documentation before you go to the market, negotiate, or talk to other people. Understand the facts that are before you.
- Failing to put things in writing can be a big problem in our industry. Many conversations across the telephone happen every day. Always keep your notes of client and customer conversations and instructions. Evidence the matter back to the other party in an email or similar written or electronic form.
Lastly something should be said regards confidentiality. Know who your client is and what their instructions are. Keep client agent discussions and instructions confidential. Disclosure of privileged information can get you into a lot of trouble.
The commercial real estate market of today has some challenges to deal with. In most cases it is a slow market or there is an abundance of unsold properties, and or vacant premises for lease.
The property market doesn’t disappear; it just changes. That change factor is what we as commercial real estate agents can help with. We become the ‘agents of change’ and can provide the right solutions for property investors, business owners, and tenants. People need our help in many different ways.
If you are finding that things are a bit tough at the moment for you as a Real Estate Agent, have a look at the way in which you are doing things. Today you need a ‘toolbox’ of solutions to help the clients and prospects in today’s property market.
Creativity and relevance are the two facts to aim for here. Are you creative in marketing your properties for sale or lease? Are you relevant as a top agent in this type of property market? Generic agents struggle in this type of market because they do not have the ideas and strategies active to solve property problems for clients.
So let’s give you some ideas to put into your agent toolbox for commercial real estate sales and leasing.
- Have all the market facts and information at your fingertips for the particular property type and deal that needs to be done. You cannot change the client’s perception without the right information.
- Check out all the competing properties locally before you meet with your client. Be very familiar with prices and rents that are being asked. Time on market assessments will also be of value in helping the client see what is going on today.
- Have stories of success with other local properties and listings that you can share. Most clients will listen to the experiences of other properties and clients.
- Have alternatives for the client to choose from. When alternatives are available, the decision to be made is less difficult. Most clients will choose the ‘middle ground’ alternative.
- When you list any property, set the rents and prices for today’s market. The client’s perspective on price or rent should be challenged if it is too unrealistic. You do not want to waste your time or theirs in the listing process.
- Provide the solutions that the market needs including personal marketing systems that will allow you to take the listing to the right people in your database and the right local property owners.
Help the parties make decisions. In many respects our clients and prospects are just looking for the right agent that can solve their issues quickly and effectively.
When it comes to your career in commercial real estate, nothing will fast track your results faster than a good prospecting model. This then says that a prospecting model should be established into your daily business activities.
Prospecting for new business is quite a specific task and very specialized. It should be regarded as something that requires practice and directed effort. It takes about 2 or 3 hours each and every day to develop a good solid prospecting model.
This should also say that prospecting should be undertaken before anything else is done within the commercial real estate office. If all salespeople within a commercial real estate agency did this, the volume of listings and the quality of enquiry would be far higher in just about all cases. That will make the market share for the office more significant.
Quality listings and quality properties produce good enquiry. It’s in tougher markets like this that we have today that we need a solid enquiry base coming from qualified prospects. This is where your database will become highly important as part of your business activities.
Here are some ideas to help you with your prospecting activities and system.
- Determine a specific territory of prospecting. That will contain the necessary numbers of properties and businesses that will produce the required commission that you want. Make sure that the historic activity in the area has been significant and will remain so into the known future.
- Get to know all the local property owners of significant and important properties in your territory. It does take time to identify property ownership structures and particular property owners; that being said, it still needs to be done and should be merged into your prospecting model. Tackling property owner at a time is a good strategy to adopt in growing this market share as part of your prospecting system.
- The local businesses and business community will provide a significant volume of enquiry for you. They will tell you so much about the local area and also of their property requirements. In many cases they may own the property in which they are located. They could also be tenants and on that basis they will require further leasing assistance at a later time. Currently they may provide you with details of the landlord for any direct enquiry and networking.
- Go through the old sales records in your local region. On average, most commercial and retail property will change hands in every 5 to 7 years. That being said, the cycle can be a good source of future listing opportunity. You simply need to identify the right people who have purchased or sold commercial real estate about four or five years ago. They will again be entering the property industry in some way or form quite soon.
- Older lease transactions may still be current with business tenants. They will however soon be reaching the end of the lease and require assistance in locating another property. Every business in your local area should be entered into your database for the opportunity that it provides. That being said, the tenants of today are also requiring local property market information. You can be the expert to provide that.
To make your prospecting model work, a process of constant contact should occur. The commercial real estate industry is built around trust and personal connection.
The first approach to a prospect, property investor, or business proprietor should be the simple beginning of a long-term relationship. Over time you should be establishing meetings with those people and opening the door with property assistance at the right time. Those being said do not forget about property referrals and referral relationships that exist with people that you already know. Top agents do this all the time.
When you work in commercial real estate, you really do need a top prospecting model to help you grab market share. The faster that you do this the better it will be for your career.
The most successful top agents, still prospect every day to keep the pipeline of opportunity pointed in their direction. If you are struggling with listings, now is the time to look at your prospecting system and refine it to something that is strong, and results driven.
I like to think of prospecting and cold calling as a ‘jet powered’ process. It is a bit like preparing for an overseas trip on a large airliner. You do all of the preparation work, you then turn up at the airport; you take your seat on the plane and then prepare for the ‘push in your back’. The engines build to maximum thrust and then you power down the runway.
The analogy really works when you look at commercial real estate sales and leasing. The preparation work has to be done; without that preparation you will not take off, it’s that simple.
Some agents are still sitting on the ‘runway’ when it comes time to turn on the ‘engines’, and some have returned to the terminal. Perhaps they have thought that a more local destination may be more realistic in a taxi! Perhaps they decide to walk home!
In this industry you get back that which you put in. The results and the market share are out there to be grabbed by those salespeople that ‘push’ themselves. Develop that ‘thrust’ when it comes to moving forward.
Experience says that prospecting will take you forward in a major way in commercial real estate. Every salesperson in any location should have a prospecting model that works for them. It will be a combination of a few different things that they do quite successfully every day.
Here are some tips to help your prospecting model:
- Devote 2 hours each day to prospecting. In the first instance this can be done on the telephone as part of a systemised cold calling process. The calls produce the meetings and that’s the way to make it all happen.
- Make your prospecting a daily event that you track in numbers of calls out, meetings, listings, and inspections. Every number that you track will help you move ahead.
- Expect that some of the things that you do will be ‘dead ends’, and that is just fine. Learn from the things that did not work for you and find those things that do work for you. Importantly you should be taking forward steps every day.
If you need more listings or you want some more commissions, now is the time to look at your business and prospecting model. If you are not getting your ‘fair share’, then the answer lies ‘within. When you adjust your systems and processes you will find better outcomes are possible.
In commercial real estate you need a top sales pitch to help you convert more business than the competing agents that you are up against. In many respects you will only have 30 minutes with the client to convince them that you are the best agent solution to take their property to the market.
So many agents just ‘wing it’ when it comes to the sales presentation. If you want to win more business the best thing you can do is create a great presentational model that is built on a ‘checklist’ approach. Over time this will help you stay on focus and allow you to refine your approach when you find extra things that will work for you. Soon the whole process of pitching and presenting will be so efficient and focused you will be winning more business of the quality that you require.
Your property market is something that you should know very well. This knowledge and relevance has to get to the client in the presentation. It can help you convert the business in a powerful way. They need a local agent and that can be you.
Here are some ideas to help you build a presentational process and checklist that can really work well.
- Engage the client with relevant questions at the start. To do this you should have comprehensively inspected the property and the general area. In this way you can talk to the things that are important in the marketing campaign.
- Competing properties will impact your marketing campaign. Show the client where those properties are and tell them of the pressures those properties present to the subject property.
- Every client will have issues and concerns. You have to find them and the only way to do that is through questions. Each question you ask should be taken to the next level when you sense that the client has some facts of relevance.
- Give facts about the market based on real evidence. Those facts are likely to influence price, rent, marketing, methods of sale, and methods of lease.
- Tell the client where you see the campaign heading and why. Clients like to see that we have a solid set of solutions and not just a generic approach to helping them. Be very specific to the property.
- As a general rule, always seek vendor paid marketing and exclusive listings at all times. These two facts will help you build market share and that is what you need to make your career strong and successful.
- Do not be afraid to walk away from a listing. If the client is unrealistic or centred on facts that cannot work, do not waste your time in helping them. Let some other agent struggle with the difficult client.
Simple facts like these can help your presentational model and sales pitch greatly. As the base of your presentation improves, you can modify the checklist approach so that you are moving to the next level of listing conversions. Top agents do this all the time.