Key Performance Indicators in Commercial Real Estate Leasing

The commercial real estate leasing market will change throughout the year based on business activity and sentiment.  For this reason you do need to set some performance indicators that will help you understand where the market is changing and what tenants are looking for.

A successful commercial real estate leasing executive will support the property management division and the sales division within the same business.  There should be a strong integration between the leasing activities of your top leasing people and the other divisions of your business.

Every property type is unique and special when it comes to leasing.  Special skills are required when it comes to the differences of property types including industrial, office, and retail property.  Specialization on the part of each individual leasing executive will help attract the clients to use your agency services.

Top leasing agents provide specialist leasing services and are known for that skill.  They help clients with strategies including the following:

  • Vacancy management
  • Tenant sourcing and selection
  • Lease terms and conditions
  • Tenant retention
  • Outgoings recoveries
  • Vacancy minimization
  • Project leasing
  • Renovation and relocation strategies
  • Tenant mix and tenant clustering
  • Rental strategies and rental types

So an expert leasing operative should understand all of these factors and provide specific solutions to the clients that they serve.  There is no point wasting this knowledge on a small and below average property; aim for the top of the market and the quality properties that need top servicing.

Some top agents choose to work with leasing understanding the opportunities that they will get in sales at a later time.  The strategy is wise and does have rewards over the long term.  The landlords of today with a leasing requirement will be the property owners of tomorrow seeking to sell their asset at a reasonable price.  That being said, the strategy behind every lease should be an enhancement to the physical function and sales opportunity for each property.

An average and generic lease will do nothing for the future sale of the property.  True commercial and retail leasing specialists really do understand how to structure a lease and make it attractive to the future of the property and of benefit to the property owner.

Leasing specialists should look to the market regularly to understand the opportunities coming from the business community and the property investment community.  These are the indicators to monitor:

  1. The supply and demand as it impacts particular property types
  2. The levels of market rental that are being achieved across the various categories of properties
  3. The time on market applying to vacancies locally
  4. The lease standards that are expected on the part of landlords when it comes to a new lease structure
  5. The incentives that are in the market today to attract new tenants
  6. New property developments that could have an impact on existing occupancy rates and tenant movement
  7. Vacancy rates that exist now in the market and the trend upward or downward
  8. Business sentiment as it relates to property occupancy costs and relocations
  9. The improvements, services, and amenities that tenants are looking for in a new lease

These indicators will help you with identifying and tracking future leasing opportunities.  Get to know all the businesses in your local area and you will soon see the relocation opportunities and leasing fees that exist.

Commercial Real Estate Agents – Turn Market Problems into Opportunities

In commercial real estate today many agents will say that the property market has changed, and indeed it has.  The fact of the matter is that it is always changing and we as agents must live with that change.  If we want to earn good commissions and find more listings, we have to use that property market change change and do something productive with it.

In any working year and selling season you will find common fluctuations in all of the following:

  1. Lack of tenants to fill the existing vacancies
  2. Slow deals and decisions when it comes to property sales or leases
  3. Lack of buyers coming to you from the marketing efforts and advertising
  4. No developments coming up to put more space into the market
  5. High vacancy factors in existing properties
  6. Low grade stock and nothing of quality available to rent or buy
  7. Too many properties on the market in either sales or leasing

The real issue here is that these things happen all the time.  If any of these things are frustrating you now in your commercial real estate agency, then have a good look at your prospecting efforts and just how many people you talk to every day.  It is quite likely that you have a poor or non-existent prospecting model.

Most agents that struggle with the changes in the property market are those that do not have a solid database of qualified prospects and contacts.  Those agents live from day to day on the results that they get from ever new listing and the advertising that follows.  They lack new people and established contacts to talk to.  They generally have not created the pipeline of contact that is so important in our industry.

It is a fact that the cycle of property activity in commercial real estate is quite long.  It can be months if not years for some of our prospects to take action or deal with a property matter.  Your success in the industry will be strengthened by the number of people that you know and the frequency of direct contact that you make with them.

When you look at a list like that mentioned above, you can turn every market ‘negative’ into a ‘positive’.  For example:

  1. You can specialize in finding tenants when they are few and not overly active.
  2. You can improve your negotiation and marketing skills to put urgency into the average property transaction.
  3. You can get to know lots of local business owners and property investors so you have people to talk to when a quality listing comes onto the market.
  4. You can become a specialist in selling or leasing a good property ‘off market’ when other agents are struggling with the traditional way of finding buyers and tenants.

You can turn every negative market situation into a positive one if you work at it as a specialized commercial real estate agent.

Big Tips in Tenant Mix Analysis for Commercial Real Estate Agents

When it comes to leasing and managing a retail property today, the tenant mix strategy and analysis process becomes critical to rental stability and minimising the vacancy factor in the property.  Given that this property market is under some pressure currently, you as the leasing manager or property manager need to protect your tenancy mix and the income that comes from it.

A good tenancy mix will reflect in the stability and growth of trade for the smaller tenants in the retail property or shopping centre.  That being said, you still need to have the right tenants in the property that satisfy the needs of customers.

Here are some ideas to help you with improving the tenancy profile across your property.

  1. Maintain close business relationships with all of your tenants.  When it comes to managing or leasing a retail property, you should be meeting your tenants quite regularly; that will usually be two or three times a month.  Retail tenants are quite volatile and will react quickly if sales are down or the property is performing poorly.
  2. Understand the leases as they relate to each tenancy.  That will include rent reviews, lease expiry dates, lease renewal options, make good provisions, outgoings recovery, and other critical terms and conditions.  Make sure that all of these issues are correctly captured into a diary based software program that can tell you well in advance of the actions that you need to take.  As a general rule, any issues that are to occur inside the next 12 months should be commence early.  In this way you will be well prepared for protracted and slow negotiations if they are to occur.
  3. Understand what the customers are looking for when it comes to visiting your property.  The best way to do this is through some survey process on the property over a period of two weeks each quarter.  You will then get a reasonable idea of shopping needs, and customer requirements.  You will also identify the weaknesses in the property that can be addressed before they have impact on sales.  It is a fact that retail shopping patterns are changing, however they will not disappear.  You simply need to adjust your tenancy mix over time to suit the requirements of today’s trends in retail marketing.
  4. Develop a series of clusters within your tenancy mix.  These clusters should be comprised of specially selected tenants that complement the retail offering of each tenant nearby.  A customer can then move from one shop to another as they purchase goods.  You can also choose tenancies for your cluster that retain the customer’s interest in the property and the location.  A coffee type tenant in a cluster will extend the shopping potential of the customer in the cluster zone.
  5. Within the property you are likely to have one or more anchor tenants.  They should have been chosen for their relevancy to the surrounding customer demographic.  You can then position the specialty tenants and the clusters based on the location of the anchor tenants.
  6. It is interesting to note the different shopping habits between males and females.  Generally speaking the shopping patterns of females is far more complex to that of males.  A female spend far more time in the property moving from shop to shop and looking at many different things.  A male will generally go to the property to purchase one or two things and then leave.

It is a fact that customers expect a vibrant property when they visit.  This will include presentation, other customers, and great tenants.  For all of these reasons, you will need to balance your tenancy mix accordingly.

Commercial Real Estate Agents – Commercial Property Marketing Tips for You Today

When it comes to marketing a commercial property for sale or lease, you can improve the results that you get through some simple steps and strategies.  Gone are the days of generic marketing.  Every advertising dollar needs to be optimised.  Property enquiry just has to be created for the best possible result.

Here are some tips that can be applied to the property marketing process in your area and by property type.

  1. Review all competing properties before you form an opinion on price, rent, or marketing method.  There is no point in repeating problems or errors that others are making in property marketing.  Check out those other properties for price, rent, and enquiry.  Your marketing strategy needs to be better so decide what ‘better’ means from your new listing perspective.
  2. The first 3 weeks of your marketing effort are really important, so decide what will be done in that period of time and monitor the results.  Use a ‘Gantt’ chart to establish your processes for the client.  The chart will help them see what you will be doing and when.
  3. Keep the client fully briefed through each part of the marketing effort.  You should have vendor paid funds for that property promotion, so spend the money as part of an agreed marketing and advertising effort.
  4. Every enquiry that you get should be qualified and then put into your database.  Over time that database will be a key component of your business processes and networking.
  5. The internet is a really important part of every marketing effort today.  Search out the ‘keywords’ on the search engines that are being used for property enquiry today.
  6. Local businesses should feature in the early stages of the campaign.  A quality listing is a great excuse to talk to the local business people and see what they know or may be looking for when it comes to a property move or upgrade.
  7. A good signboard will help the property effort.  Get the signboard onto the property as early as possible.  When that occurs, talk the nearby property owners and investors.  You will get a lot of market intelligence that way.
  8. A ‘high end’ property advertising campaign is something that builds brand and identity.  Tops agents use ‘high end’ campaigns to create enquiry from the local and regional area.  This then says that all of your campaigns will strengthen your identity as a good agent if you let the marketing set a solid benchmark of quality and relevance.  ‘Ordinary’ is not a good word when it comes to property marketing.

Commercial real estate is a people based business.  When you really understand that fact, you will know what you should do every day as part of building your momentum in property marketing.

Commercial Real Estate Agents – Lease Renegotiations are Fee Opportunities

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.