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.
In commercial real estate brokerage, you will find challenges when it comes to every real estate team. The disciplines and business processes across sales, leasing, and property management will vary, and on that basis you need to know that every member of the team is implementing the necessary skills to serve the client base and improve the business.
Every brokerage principal or manager should be closely interacting with the client base to identify and determine any factors of under-performance or client concern. Invariably most clients suffering the effects of poor agency performance will tell others about their concerns before they tell the relevant agent or brokerage; over time they can do a lot of damage to the brokerage brand. It is common for a client to move on at the end of an agency term of appointment where the listing hasn’t been well serviced or communication with the client has been below par.
Whilst you may spend a lot of time encouraging the agents in the brokerage team to improve personal skills and strengthen opportunities, are they really implementing the necessary skills and habits to move to the next level? The only way you will know that is through tracking results of each agent when it comes to the core factors of the business. Most particularly they are:
- The type of prospecting activities undertaken on an agent by the agent basis
- The amount of prospecting undertaken each day by each agent
- The conversions of meetings with new people as a direct result of prospecting
- The leads and opportunities that evolve from client meetings and prospect meetings
- The number of listing presentations made each week
- The number of listings per agent on an open listing basis versus an exclusive listing basis
- The time on market for each exclusive listing
- The amount of commission generated per lease transaction and per sales transaction
- The number of new clients entered into the database by each agent on a weekly basis
- The accuracy of the database when it comes to client contact details and current information
- The number of clicks and hits that apply to listings placed on the Internet by each agent
- The way in which each agent will integrate social media to listing opportunities and marketing efforts
- The amount of vendor paid marketing funds converted on a weekly basis for current listings for each agent
- The listing refresh process and frequency that applies to current listings with each agent
- The feedback that each client may give when it comes to the services provided by each agent with the listing
So there are plenty of things to track here when it comes to identifying performance opportunities, as strengths, and weaknesses. The rules should apply across the brokerage and should delve into the activities of each agent. You will soon see and identify the agents that are under-performing, allowing you to take the necessary steps of adjustment in each case.
The commercial real estate industry can be highly rewarding in so many different ways when appropriate tasks and opportunities are seized in a timely way. Almost every element of success in the industry will be centered on the activities of individual agents. Encourage your people in the business team to do the right things in the right way and to make adjustments where necessary.
In commercial real estate brokerage, most successful sales people must play the ‘numbers game’ when it comes to new business and market share. Without an awareness of the right numbers and just where they are headed, any opportunity for growth can be overlooked or not captured by the agent.
So what are the numbers to be tracked? Here are a few of the important ones:
- The size of the real estate market – every sales person should understand just how big their market is and how they are positioned within it. That assessment will include the numbers of properties, numbers of businesses, and the historic sales and leasing records over the last couple of years. From those facts they can assess just how they can improve with more market share.
- The number of competing agents and brokers – every town or city will have competing agents in differing segments. Some of those agents will be better than others. There will also be specialisation factors that make some agents dominant in a market segment.
- Prices and rents – during the year there will be fluctuations in price and rent. That will occur across property types and in zones within the town or city. Every agent must know how the prices and rents for property deals are trending.
- Current listings – the other local properties should be watched for time on market, marketing method, success or failure, and enquiry rates. Some properties will be more ‘popular’ than others. Quality properties will always attract more enquiries. Exclusive listings will help you with market share; you should control your listing stock wherever possible.
- Internet listings – a lot of enquiry today is generated from the internet. On that basis it is necessary to track online listing numbers by agent and brokerage. It is best to do that on a Saturday when other things are less pressing in time. You can also visit those properties to see if they are of relevance to your market activities.
- Commissions and conversions – all top sales people and brokers should be tracking their personal commissions and conversions. They should understand how their market is improving or expanding. Those numbers can be compared to the local averages and the other brokers.
- Numbers of signboards – the traditional signboard is still highly effective as a marketing tool. The greater number of boards that you have placed in your sales territory, the better your enquiry rates will be. That fact being said, focus on signboards on exclusive listings at all times; control your stock and your market.
So this information will help a broker or agent with self-improvement and market development. Some would say that it takes time to track these things, and they would be right, however progress in any sales role takes understanding and tracking. That’s what this is all about.
In commercial real estate brokerage, it is very easy to get swamped with daily events and reactive issues. Many people will want a slice of your time. If uncontrolled, this can lead to a downturn in listings and market share. In simple terms, you need to implement a system that allows you to stay ‘ahead of your game’ in commercial real estate.
The rewards in the industry are many, providing you stay on track and implement the correct system. It is a personal process that cannot be delegated. Here are my top seven tips to help you stay ahead of your game as a top agent or broker.
- Start the day with focus. Each evening you should be preparing for the following day by planning your time and the key issues that need to be done. Identify the four or five key issues that will have maximum impact on your client base, listings, and market share. Those things should be a high priority in your daily action plan. Get all of those things done before you do anything else. When you feel in control, you get more things done. On that basis, control your diary at an obsessive level.
- Understand the high value of prospecting and growing your database. Devote approximately 2 or 3 hours to prospecting and client contact. Split that time equally between new contacts and established contacts. Track all of the conversations, the meetings, and the presentations that you make, so that you can see when your ratios and numbers are improving.
- As a general rule, focus on exclusive listings more than anything else. The exclusive listings will allow you to build market share, focus your inspections and negotiations, and service the client comprehensively. The agents that struggle in the marketplace are typically those that have difficulty with converting exclusive listings. You simply must control the listing stock.
- There is a big difference between being proactive and reactive in the industry. At least 40% of your day needs to be proactive and in that case should be directed towards prospecting, marketing, and client contact. Unfortunately you cannot remove the reactive element of the industry given that you will be working with many different people who will impose on your time. That being said, take the necessary steps to control the impact and limit the exposure that you have to other people’s priorities. Manage your time accordingly.
- Every listing can be extensively promoted, and then adjusted to the market conditions. When you have sufficient marketing feedback on a particular listing, you can make the recommendations to the client that will shift the enquiry rate and the inspection results. Don’t take too long to get to the point of repositioning.
- Review all of the listing stock locally including those listings that belong to your competitors. When they place a signboard on a property, make contact with all the other businesses and property owners in the region surrounding it. They may like to compete with the other listing in the same street.
- In your town or city, you will find that commercial property ownership is typically for a period of 5 to 10 years. At or during that time, the property owner is likely to expand their portfolio, or replace the property asset with another larger property. When you track the cycles of sales from the region, you can identify the best clients to work with for upcoming property activity.
When you look at a list like this, there are plenty of issues to action and matters to get under control. I go back to the point that you really do need to be proactive and not reactive in this industry. Spend at least 40% of your day getting involved in proactive issues and strategies. Soon the commercial real estate market will open up with opportunity in both listings and future clients. Stay on track to your plan.
When you work as a commercial real estate agent, you should be on the lookout for opportunity in the market. It can come in many forms including the following:
- Businesses moving in or out of the area
- Businesses under occupancy pressure for more or less space
- New property developments coming into the area
- Supply and demand shifts for space locally
- High vacancy factors
- Unsold properties
- Rental pressures
- Landlords that are frustrating their tenants
- Under performing properties
- Poorly maintained properties
- Shifts in business demographic
- Changes in key business activity such as mining or agriculture that will shift secondary business activity
The list is just the ‘tip of the iceberg’ when it comes to the variations of property ownership and use. It is always the case that opportunity will shift and change but you should be prospecting every day to find that new opportunity. Asking the right questions will find that opportunity.
The agents that do not prospect regularly enough ‘struggle’ when it comes to building market share. Poor property enquiry and listings are the direct result. Today you must build good networks of landlords, tenants, and business owners. This property market is challenging enough without us creating greater hurdles for ourselves. Network a lot of the right people; that’s the rule.
In today’s property market you should know several hundred local business identities and property investors. The only way you can ‘track’ this number of people is to have a great database or contact management system that is well maintained. It is a personal process for each and every salesperson and cannot be delegated.
Top agents have a focus on growth and market share when it comes to the best properties and the best clients. In many respects they will not take listings of small and insignificant properties. They want to protect their time and effort. It is a worthwhile business focus to adopt. Spend time on the best listings and the best clients.
Here are some points of focus for you to develop your commercial or retail real estate agency business:
- Review the property history of your area to see what has happened over the last few years by way of prices and rents. Make sure you are selling or leasing a property type or location that is active in the market today and will be so in the future.
- Provide a unique and high quality service to your clients that other agents fail to provide. To win the listings, you must be the ‘right choice’ of local agent.
- Verify every property before you spend time on it. The verification process will normally involve price, rent, motivation, market supply and demand, plus the quality of the improvements, services and amenities.
In saying all of this, there will always be opportunity in any commercial or retail property market; you just need to see it and adjust your efforts accordingly.
In commercial and retail property management, you do need some strategy behind the fee process. It is simply not a matter of just charging a fee based on the percentage of the income received. There will be certain activities in your property management services that require specific attention when it comes to the fee calculation.
I prefer to calculate a fee based on the amount of time to be applied to the particular property under management. This then says that you will need to know the cost factors that apply to your property management services. When you can achieve that awareness, you can understand where you are spending too much time on a particular property under management.
So let’s look at some different ways to calculate property management fees.
- There may be some local industry trends that apply to the management fee process when it comes to the different property types. Survey your competitors to ensure that you understand the fees that you are competing with. For smaller properties under management, the typical fee is approximately 5 to 7 per cent of the gross income received. As the passing income for the property gets larger, the fee tends to get lower. That being said, the fee still needs to cover the amount of work required to manage the property successfully and professionally.
- Be aware that the complexity of property management in retail property is far more significant than that which applies in industrial or office property. For this very reason, the fee to manage a retail property is much higher than the other property types.
- So the fee calculation will be based on the property type and the time input to provide management services. It is simply a matter of knowing how many hours you will spend on the management services for that particular client each week and for each particular property. You can then see where you are spending far too much time for the fee being recovered. What should you do with the property where the fee is too low? The client should be approached regards fee modification. It is best to do that across your entire property management portfolio at least once per year.
- Interview the client at the commencement of management services so you know exactly what they require from the property manager and your agency. List the services and the frequency of those services to be provided. This will remove any misunderstandings relating to ongoing services.
- There are different management duties to be provided as part of the typical property management service. Income collection, lease management, maintenance management, property inspections, and disputes are all separate services to be provided in managing a property. They may very well attract separate fee activity.
- The same can be said for leasing commercial property and minimising the vacancy factor across the tenancy mix. Specific lease strategies such as options and rent reviews will also be quite time consuming during the average property management year. Allow for these processes as part of your fee structure.
- There will be a different lease fee structure for leases negotiated with outside tenants vs. sitting tenants. There will usually be a 25% discount for leasing fees undertaken with sitting tenants.
Commercial property management services are detailed and specific. They demand a special fees strategy.
In commercial or retail property management today, there is no point in making a fee loss. Many agents look at the alternative fees that can be achieved from the property management portfolio; those extra fees being sales and leasing related. They then minimise the management fee to attract the ongoing property management business. The strategy is not good and should be avoided.
Unfortunately it is a long time before the average property will go through a sale and or a lease transaction. That means that the loss factor of the property management division will become a significant cost burden on the agency business. Get the correct management fee from the start, understanding that your property management services are of high quality in every respect. Sell your specialised services and get a good fee.
When it comes to commercial and retail property services today, the fees and commissions that we negotiate are critical to the performance of our property agency business, and its stability over the long term. Whilst discounting fees and commissions may be an option, it should not be a normal activity when it comes to working with clients or taking listings.
Far too many agents provide discounts as a factor of encouraging the listing. The fact of the matter is that discounts do nothing towards helping the client with a satisfactory sale or lease as the case may be. When it comes to a competitive situation between agencies in attempting to win the listing, it is better to provide real strategy and points of difference as part of your service offering, than any discounting for the client.
Here are some rules that can apply to the commissions and fees in your listing processes.
- Establish a significant and comprehensive marketing campaign that is funded by the vendor. Give the client a number of alternatives to consider when it comes to marketing. Invariably and in most cases, you will see the client select the middle ground when it comes to marketing costs. Show the client a number of alternatives when it comes to the marketing of commercial and retail property today. Tell them what works, and show them the results that they can achieve. Drill down on the facts so that they know exactly what the recommendations are.
- Do not discount your commission to attract a listing. The fact of the matter is that property commission is a reward based fee. If the client wants a successful outcome, they will understand the value of a fair fee for service. If they still want you to provide a discount, and you still want to take the listing, then discount your available services as part of the process. Lower commissions deserve less focus and marketing activity on the part of the agent. Does the client really want a sell or lease their property? If they do, discounting the commission is not part of that process. Show them the real savings and service that they will achieve when they have your total focus as a specialized local property agent. If they still want a discount, then you have not successfully and comprehensively sold your experience and relevance to the client when it comes to the particular property.
- Consider the other fees that will be incurred as part of the transaction preparation. It may be that certain fees will need to be recovered prior to any marketing effort and promotional activity. This is certainly the case when it comes to preparing an information memorandum for the particular property. Many agents recover the cost of the information memorandum up front, given that it will take them a few days to put the document together. It is not unusual to see a fee between $1000 and $2000 for this document preparation.
Do not be too eager to provide discounts. Be focused on your specialised value as a local commercial or retail property agent. Top agents do this all the time. It is hard for a client to ignore or walk away from a top agent. In the end result, the client wants a satisfactory property outcome within the earliest possible time frame. That should be the focus of your listings sales pitch or presentation.
In commercial real estate today, there are some significant opportunities for lease renegotiation. Some tenants would seize the opportunity for a rental reduction or lease adjustment in exchange for some benefits back to the landlord. This then says that you can through this process stabilise the tenancy mix, and rebalance the property for the longer lease term.
When the business community is under some pressure in regards to trade or occupancy, the lowering of the rental over the short term is a satisfactory exchange for other lease terms and conditions that will have benefit for the landlord. The pressures on tenants and businesses today will not remain so forever. A lower rental for 12 months can give you tenant stability through difficult times, whilst preparing the property for greater capital gain or future sale. This is what lease strategy is all about and these are the ideas that we can give our clients to help them with tenant and lease optimisation.
Lease renegotiation opportunities are normally structured into a tenant retention plan. That tenant retention plan would identify the tenants that are critical to the future of the property, and then seek to retain these tenants for the long term. Things should be done to assist them to remain in occupancy conveniently and economically. The landlord therefore benefits by tenant and rental stability. There is however the need to achieve a tradeoff and benefit for the landlord if you are to give the tenant a benefit today.
Here are some ideas that can apply to the landlord benefit process. This is assuming that you achieve or provide an adjusted lower rental for the tenants in occupancy.
- Get the tenant to exercise their option in the property early. By exercising the option, the landlord knows that the tenant will remain in occupancy for the longer term. That is the base benefit.
- You can adjust the terms of the existing lease so that the prevailing make good conditions are more beneficial to the landlord at the end of the lease term. You can obligate the tenant to undertake further renovation works if they choose to leave the premises at the end of lease. This then prepares the premises for alternative occupancy with a new tenant, at a lower cost to the landlord.
- Any lower rental today, can prepare the tenant for a higher rental at some stage in the future. This assumes that the business can be seen to be successful in coming years and months. The lower rental today provides the tenant with breathing space for generating income and repositioning their business. Over time they can likely achieve a better ability to pay the rent.
- Any longer lease term provided to the tenant today should include a renovation requirement. They can be obligated to renovate the premises in a particular way at a certain time. Normally leased premises require renovation every five years. That renovation can include painting, carpeting, and cosmetic upgrades. A suitable agreement can be struck with the tenant and appropriately documented as part of an agreement for a lower rental today.
It is in property markets like this where we can be assisting the landlords to reposition their property and stabilize the tenancy mix. That is the high value of experience and knowledge in commercial and retail real estate that we can apply to help our clients at this time.
When you work in commercial real estate, your personal skills should be optimised for better new business conversion and growth of market share. On that basis, it pays to improve your personal skills through regular practice.
It is notable that many salespeople and specialists in the industry do not consistently practice elements their craft to improve on skills. If they did ‘practice’, they would reach the ‘top of the market’ faster. Self-improvement is the ‘fast track’ to the top.
So why do I say this and on what basis? I am an agent and have been fortunate enough to work on some big and complex commercial and retail properties; I have also worked with some good and not so good people.
Most of us will specialise in one or more of the following:
- Commercial property sales
- Commercial property leasing
- Commercial property management
- Retail property leasing
- Shopping Centre management
All of these things are quite specific and specialised. They all require unique levels of market knowledge updated regularly. In saying that, market knowledge will only get us through to some degree when it comes to working with clients and finding the business; your personal skills in property inspections, negotiating, leasing, and sales will help you significantly with your clients and market share.
Having worked with many agents and salespeople over the years, I know that most salespeople are very ‘ordinary’ when it comes to any of the six elements of required specialisation in our industry. That’s what I want to talk to you about now.
Those six elements are quite specific and all require strategy and skill development. When you do this, you win more listings and convert more deals. Here is a list of those 6 factors:
- Researching and prospecting the right people to approach in the local area should occur every day. Those people should be the decision makers and the active players in the current property market. Face to face meetings are really important in commercial and retail property. Over time those relationships will be strengthened and that’s where the listings will come from.
- Presentation skills in the first contact with decision makers will make or break the future relations that you need. In the first few minutes of your meeting, the prospect will determine whether you are relevant to them and their property needs. That relevancy and need may be today or in the future. Top agents start the connection and stay in the relationship for the long haul. It may take months if not years to get a result from the relationship.
- Questioning and listing skills relating to your property specialty and service are very specific. In every respect, you must appear to be the expert in what you do and what you know. Relevancy and competency must be there when you talk to clients. If you are not the ‘expert’ they will see it.
- Inspection skills at the time of listing and at the time of buyer or tenant ‘walk through’ can be refined and optimised by property type and location. In this way the property inspection process reaches a new level of accuracy and relevancy. Top agents know how to walk through a property, picking out the best things to talk about that will help the sale or lease (as the case may be). Property information and facts will help you here.
- Negotiation skills are an obvious need in our industry. It is very much the case that negotiation skills with most salespeople are ordinary and underdeveloped. Developing negotiation skills takes effort and practice, and it does not happen overnight. You can ‘fast track’ this with your business team as part of your weekly meetings and personal development processes. Top negotiators are good for one single reason; they practice.
- After all of the above issues, you will still need to document the property transaction accurately during the offer stages, and when the negotiation is successful. This then says that you must have a good command of the legal paperwork and documentation behind any property transaction. Many salespeople fail to address this issue and create documents that are weak or not specific to the transaction intended. Naturally, that will expose the agent and the client to the threat of litigation when something goes wrong.
It is remarkable how so many salespeople fail to improve their personal sales skills and business practices in our industry. Strive to be the best agent in your area by specialising on a particular property type and property client. In that way you can improve your relevance skills and drive far better market share faster.
In commercial real estate agency, you really do need to understand the property market and the segments that you work with. In this way you can track the trends and opportunities for more commissions and listings.
Top agents tend to systemise there approach to the market, the properties, the clients, and the listings. Here are some tips to help you with that:
- Choose a part of the market that you are interested in and around which you can show knowledge and expertise. Top agents tend to be experts in a particular segment of the market. In this way they can comprehensively quote prices, rentals, marketing strategies, and time on market. Knowledge will always help you convert listings from presentations.
- When you have defined your property type, you can determine the region geographically that you will work within. There is no point spreading yourself too thin across many suburbs or townships. Market share only comes from the market dominance of intense marketing and signboard presence.
- Research the key properties and the key property investors within your defined region. Ensure that there is sufficient stock available for you to focus on throughout the year.
- Look at the history of property transactions inside your defined region or focus territory. That history over the last three or four years will have relevance to the future opportunities and sales that are available. Typically a commercial or retail property will transact in one form or another every 5 to 7 years. If you focus on properties that were purchased, sold, or leased about four years ago, they are likely to be the next properties that come on the market in your region.
- Understand the current trends that apply to pricing and rentals. Add to that the factors of time on market that currently apply to existing listings. Inspect any comparable properties in the area within your property speciality. All of this information will help you with client connections and presentations.
- Within your region there will be groups of property investors and business owners that are frequent and high value prospects when it comes to commercial and retail property. Put together a hit list of contacts that you will focus on for regular prospecting and meetings.
The commercial and retail property market is largely based on quality and long term personal relationships. Top agents and salespeople build relationships with the right people, understanding that listings and transactions will be possible at some stage in the future. These top agents maintain the contact with the right people, and provide valuable market information as they proceed through their pipeline of opportunity. How big is your pipeline?
Get to know your market intimately, so that you can build the right knowledge in preparation for meetings with clients and prospects. Selling and leasing commercial and retail real estate is not an experiment; it is a deliberate and focused process using the best information and market intelligence available.
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