In commercial real estate today, the abundance of agents in the property market means that most listing opportunities are a competition to win the business. Every agent invited to the listing presentation process with the client will put on their best pitch and strategy for the listing.
This can be good and bad, but the fact of the matter is that many agents tackle the listing process very generically; they are largely complacent and quite ordinary when it comes to target marketing and direct marketing. You can adjust your pitch and presentation to be quite specific to the property type, the client, and the location. When you do this your chances of converting the listing rise greatly.
If you are known as the local real estate agent of skill and relevance, you will get invited to more listing opportunities. All or most of your leads and listing invitations will come from your local market presence and personal networking. You cannot wait for the leads to walk into your agency; it doesn’t work that way in this market.
To be known for the right reasons is an unusual equation that requires planning on your part. Consider your local property market. What would make you the top agent? What would let people know that you are the best in a particular property type and location?
Here are some ideas to help you build your local brand:
- Signboard presence will always be the number 1 factor in territory dominance and market share. You cannot claim to be a top agent unless you have the majority of the signboards on all the top quality properties. Now I know that this is difficult to achieve, however dedicated networking and prospecting will get you there.
- The internet will bring you many leads and opportunities today. All of your property adverts on the internet should be optimised for the search engines and customers that are looking to buy or lease property. So how can you do this? Do a keyword search on your property type and local area. Do this in http://Google.com with their ‘keyword search tool’ to see what people are typing into the search engines today when it comes to looking for local property. Take a selection of those words (not too many at once), and feed them into your marketing material and online advertisements.
- Write a blog about commercial investment property in your area. The blog process will cost you virtually nothing to establish using http://wordpress.com or http://blogger.com . Over time you can fill the blog with regular market updates and property tips. Do not focus on listings, but do focus on helpful information about the local area. That simple internet marketing process will help build your personal brand well above the other competitors locally.
- Create an email newsletter that is supported by an auto responder. Put all of your clients into the system and keep in contact with them through the regular email market updates.
- Make lots of telephone calls every day. The telephone remains the most powerful personal marketing tool that we have. Use it well.
In today’s property market you really must be known as the best solution for the clients that you serve. If they can see your name and face in more locations it will help you rise to the top of your market faster.
In commercial real estate today, we have to do more with less enquiry coming in. Every prospect that comes to us from a listing or a marketing campaign needs to be correctly qualified and then successfully directed to the right property. This takes skill. Every property enquiry should be optimised.
The property inspection process is therefore critical to moving the transaction ahead. We must ensure that the prospective buyer is comprehensively supported through the property inspection process so that we can get an offer that is fair and reasonable given the current market conditions.
Most property buyers today have little urgency to make a decision. They will look around the market, talk to other agents, and take some time to move to the stage of an offer on any property that they like. Our skills in this market today, are more important than previously.
So What Should You Do?
Qualifying a prospect should be undertaken as part of the initial inquiry. Find out what the prospect is looking for when it comes to property location, price or rental, and improvements. Ensure that they have the necessary financial backing to act in this property market today. Make sure that they have the ability to transact the property at the expected rental benchmark or price. Ask them about the other properties that they have seen and the other agents that they have spoken to. Hopefully they will give you a truthful answer!
Here are some tips to help the inspection process with your prospect:
- Ensure that you have all the facts about the property including income, expenditure, tenant mix, and improvements.
- If required, get the clients approval to undertake the inspection of the property at a particular time convenient to them and any tenants in the property.
- Before you take a prospect to the property (or hand over any information) have them sign a confidentiality agreement. You do not want information making its way to your competitors.
- Have a clear strategy to move people to and around the property. The features of the property should be comprehensively covered in the inspection.
- If the property involves tenants and a tenant mix, have the information at hand as well as the information relating to other competing properties, the supply and demand for space, and the market rentals in the area.
- Always be prepared to take an offer. That offer should be in writing in all cases. You have nothing to work with if the offer is verbal.
- Remember who your client is in the transaction. You are working for them when it comes to the offer, the inspection process, and the negotiation.
To help your inspection strategies when it comes to commercial and retail property, you can use a checklist that combines all the strategies that have worked for you on other properties locally. Be prepared and have your information ready.
In commercial real estate you should be telephoning lots of people every day. The cold calling process is the way to do that. In a way, your success in cold calling is a numbers game. You track your numbers and in that way you will know what is working for you and what is not. So what numbers should you track?
You track the numbers that can tell you how you are progressing. One secret in the whole process is to make calls at the same time every day. Over time you will know if that is the best time to find the people that you need to talk to. If it is not the right time frame, then you shift your call time slot to make things work. Systems are really important when it comes to getting your prospecting model to work for you.
Here are some of the main numbers that are really important to getting momentum in the commercial real estate prospecting process.
- The numbers of outbound calls to new people are the base to work with and from. At least 50% of your outbound calls should be to new people that you have not spoken with before. In that way you will build some momentum of new business growth.
- After some time you will have a list of people that you must call back because in the last conversation they indicated that they had a future interest in what you wanted to talk about. So the balance of your call time each day (the other 50%) should be devoted to follow-up calls with previous contacts.
- In 2 hours of call contact you should be making 50 outbound calls. In that time you will not get through to all those people, but you should get through to at least 15 to 20.
- Call results should be recorded in a database when you find people of relevance. Do not waste time in capturing unnecessary information. Only enter the information that can be something for you.
- Of the people that you talk to some will move to meetings with you. As you gain skill and momentum in cold calling, you should be getting 2 meetings per day from your call contacts.
- From the meetings that you have every week with these people, at least one transaction or listing should occur.
- When you have established a relationship and a listing from the call contact process, it is a matter of tracking the time on market for the listings and the conversions to sales or leases as the case may be.
So I go back to my point, when you track the numbers you will know how you are improving, and that is what commercial real estate prospecting is all about. Good hunting!
When it comes to the leasing of commercial property, you as the commercial real estate agent really do need to understand the trends of the local area. It really does not matter if you sell, lease, or manage property as the main part of your job; you still need to understand how to lease a property and how that lease can improve the sale or the property performance.
The clients that you work with will expect you to bring significant local market knowledge to their needs and opportunities. That local knowledge will also need to be very apparent in your sales pitch and presentation; you want the client to listen to you.
It is a fact that many agents are far too general when it comes to the initial presentation to the client of the available services and solutions for their property. Being specific to the property helps the clients really understand the relevance that you bring to the property requirement.
Leasing is one of those disciplines that will eventually create a property sale or a property management opportunity. That being said, a commercial or retail leasing specialist should be suitably versatile to talk about sales opportunity and property management strategies as well. One commission opportunity will turn into several over time.
For a commercial real estate agent to be of any relevance to the client that they serve, they will need to have a toolbox of strategies to implement for any particular client or their particular property. Those strategies should not be generic, because the client is likely to be seeing a few agents before they make a selection on what agent should get their listing.
Here are some factors for commercial and retail property agents to optimize as part of their services and solutions for clients:
- Get to know the rentals in the local area as they apply to the different property types. There are differences between gross and net rental when it comes to different property locations and property types. In some leasing circumstances you may use a net rental strategy, whilst in others you may use a gross rental strategy. Either of these choices will have impact on the rent review process that you negotiate for the particular lease.
- In any particular property market is very common to have a variety of incentives available to new tenants. The size and type of that incentive will change from time to time based on the supply and demand of premises locally. When there is little vacant space available for new tenants to occupy, it is likely that the incentive will diminish or even disappear. That will only remain the case when demand for premises exceeds supply. Over time you will see new property come into the market through fresh new property developments; the leasing leverage that each landlord creates in those circumstances will be that of an incentive. As the local property expert, you need to know the incentives that are both available and sensible for any particular property that you could be leasing. Compare those incentives to other properties nearby and in the general property market. Offer the landlord some alternatives when it comes to those incentives and how they match the needs of that tenant enquiry that you know exists currently.
- When it comes to establishing a new lease, it is best to have some regard for the existing tenants in the current property and their proximity to the current vacancy. What you want to do here is spread the risk of any vacancies occurring in adjacent premises. In other words, you want to minimize the chance of multiple vacancies occurring at the end of lease terms at about the same time. The only reason you would have any adjacent vacancies occurring would be in the circumstances where a renovation or relocation strategy was required for property improvement.
- The operating costs for the property (the outgoings) that appear in any lease negotiation should be acceptably similar to those which apply in competing properties. If your property outgoings levels are too high, then it is likely that the vacancy will remain difficult to lease. On this basis it pays to understand the levels and types of outgoings that are available and charged in competing properties in your area. There is a large difference between the outgoings or operating costs charged for a retail property, and industrial property, and an office property. Generally speaking the outgoings for a retail property are far higher than those that would apply to office property. Similarly, an industrial property is at the bottom end of the outgoings scale in occupancy cost structure.
Get to know your local property market comprehensively and thoroughly. Properties will come and go in the area from time to time, and some rental or lease transactions will occur.
Get to know the actual rents that are achieved from the particular lease deals as they are the rents that are acceptable to the enquiring parties in today’s market. As part of this process, stay abreast of the future new property developments that are coming into your region and that could have an impact on the supply and demand process.
When it comes to leasing commercial or retail property, the landlords that we work for can be too fixated on the start rent as part of the lease agreement and lease negotiation. If they are holding the property for a number of years, there are some other factors in the lease that are perhaps much more important to the lease cash flow.
The start rent of a lease is only of great concern if the property is soon to be re-valued for finance or to be taken to sale in the near future. In that case the passing rent will be capitalised and a value for the property will be set.
The fact of the matter is that the landlord wants a tenant first and foremost. In this tougher property market the landlord cannot be too focused on the start rent (within reason). As long as they get a rent that is relative to market and not aggressively high, they can pick up the growth in rental through other means over the lease term. That’s where you being a lease specialist will be of great relevance to the client. You should be the strategist to make this happen.
Here are some ideas to help with helping the landlords that you act for, get more rent.
- The start rent should be set with reference to the local market and the comparable properties that are available for occupancy. You have to attract a tenant, so the rent has to be ‘attractive’ to encourage property inspections and lease offers.
- Rent review profiles can improve the rent. Importantly you should select the rent reviews that give the landlord a realistic and sustainable rental increase. There is no point in pushing a tenant to business volatility with a high rent. When the property market is soft, tenant stability is more important than rental increase.
- Face rent and effective rent are two different things. The difference between them will be created by the use of an incentive in the lease deal. The face rent will allow the landlord to get back the cost of the incentive. The recovery should be structured into the lease rental and the rent review process. You can calculate the difference between the rentals by a calculation and an assumption of Net Present Value over the lease term.
- Car parking can be considered a separate rental. I know that some lease deals include the car parking in the base lease rent; whilst that is fine for some landlords, do not overlook the advantage of setting a rent on the car parks that are provided to the tenant. Any car parking rental could be documented on a licence or similar separate document to the lease.
- Naming rights and signage in or on a property should not be provided ‘free’. If the business wants to put their business name on a property, consider the issue of rental for that signage being positioned.
- Storage rental should be charged when possible. On-site storage for a tenant is a business advantage. If you give the tenant a special area where they can store things, determine a rental for that and set up a separate licence agreement.
- The provision of roof top space for an antenna will be another opportunity for a rental. You can add to that rental a cabling space rental for the distance that the tenant takes in dropping a cable down the building riser to their tenancy.
I know that some of you may find some of these things difficult to negotiate in all leases; I also know that some lease deals are special and a base rental ‘covers everything’. That being said, please understand that it is the job of the leasing agent to get the best ‘realistic rent’ for the landlord that helps them improve rent and also stabilise occupancy for the long term. You are the lease strategist.