In commercial real estate agency each day, we are negotiating with many people across a number of challenging situations. Our ability to negotiate is a key part of growing market share and improving our commission opportunities. This then says that we should practice our dialogue and a negotiation skills at every opportunity.
A good negotiator in commercial real estate is one that understands the circumstances, the market, the documentary processes, and the intentions of the parties. It is sometimes a difficult equation to bring together. The clients that we serve expect their agents to be experienced and experts when it comes to the negotiation process.
So what are the negotiation stages and situations that we strike? Here are some of the main ones:
- The cold calling process is really a negotiation to establish a meeting with a new person. Your dialogue needs to be exemplary when it comes to communicating and connecting across the telephone. It is a specific skill that requires regular ongoing practice. In this way you can build connections with fresh prospects for your pipeline of new business.
- A cold call can also be something that applies to dropping into a local business to introduce yourself as a property specialist. The dialogue in that situation is totally different to the telephone process. This strategy can also reap significant rewards through practice.
- A sales pitch or presentation with a new prospective client is a negotiation to achieve a listing. That listing will involve a marketing package, marketing strategy, and listing process. It is interesting to note that the top agents within the market are very good at converting a new property to an exclusive listing. Those more ordinary agents in the market usually take the lesser alternative of an open listing. Unfortunately the ordinary agents struggle with market share as a result of this, and have little control over the deal that could possibly evolve. The message here is quite clear. If you want to convert more exclusive listings to grow your market share, then you need to refine your sales pitch and presentation process. A role playing strategy in your sales team meetings will help. Personal daily practice will also be necessary.
- When you find a suitable tenant for a buyer for a property, another negotiation stage will evolve between the parties. It is wise to remember the requirements and intentions of your client as the negotiation proceeds. Every stage of a negotiation should be carefully checked and documented. When you get to the final stages of offer and acceptance, the agreement document between the parties should be legally accurate, comprehensive, and correct. Some property transactions can be quite complex and for that reason you will need outside assistance to formulate the final document from the offer and acceptance situation.
Given these very common negotiation situations, you can see why dialogue improvement will help you strengthen your market share and commission opportunity in commercial real estate agency. Practice is required.
In a commercial or retail property today, it is the tenants that provide the backbone and the stability to income and rental performance. On that basis, you really do need to keep your tenants well in control given the prevailing market conditions and the current tenancy mix.
It is notable that a retail property can be highly volatile when it comes to tenant interaction and occupancy. Essentially all retail tenants are essentially small business people that rely on the success of the property and the overall tenancy mix to provide an opportunity for sales growth.
The tenants in a retail property will usually talk between each other on a regular basis. They therefore share information and perceptions relating to the property, the property manager, and the landlord. I go back to the point, that you must not let your tenants get out of control. Encourage good communications and build solid relationships with all of your tenants.
Here are some rules to apply to the tenant communication and connection process in commercial and retail property today:
- The tenant will be assessing their business performance continually during the year and the lease term. This then says that you should meet with your tenants on a monthly basis. This will help you when it comes to understanding shifts and changes relating to their business, customer base, or sales. If you identify any problems early, you can make the necessary adjustments to occupancy or leasing strategy.
- In a large property, it is likely that you will have one or more anchor tenants as part of the tenancy mix. The anchor tenants will usually be in occupancy for the long term with a lease document that extends over a number of years; in most cases the lease for an anchor tenant will be in excess of 10 years and will have options for lengthy renewal terms. Stay close to your anchor tenants so that you can understand how they are integrating into the overall property and any associated specialty tenants. The success of the anchor tenant will have some flow through to the specialty tenants.
- Most leases will have provisions for rent reviews and options as part of occupancy. The critical dates that apply to those lease situations should be carefully watched. Any rent review or lease renewal inside the next 12 months should be negotiated as early as possible. This then will remove the volatility from the property for the landlord.
- Every meeting or conversation with a tenant should be documented as quickly as possible. Whilst a simple situation or discussion today with a tenant may seem unimportant, it is quite common to have more complex issues arise in the future that started from some simple discussion or telephone conversation.
Get to know your tenants as part of the services that you provide for your client the landlord. In this way you can help the client understand the predictable changes that you can see with the tenancy mix and the lease profiles.
Leasing commercial real estate is something that can provide a good buffer of commission when sales listings and actual sales have slowed. It is also the case that a successful lease transaction can lead to a future property management or sales opportunity. This then says that all top commercial real estate agents should be prepared to lease ‘quality’ local property.
Notice that I said the word ‘quality’ when it comes to property selection. Determine the property size and type that will give you the appropriate fee for a successful lease transaction. Focus locally on quality, the good landlords, and the quality tenants. A lease transaction can take a reasonable amount of time to initiate and complete. On that basis you should only focus on the good deals and the good opportunities. Let some other agent have the small things to lease that have minimal fee results.
Here are some tips for taking enquiries from tenants today when it comes to leasing new premises or relocating:
- Make sure that you’re talking to the decision maker when it comes to the particular tenant. Get the contact details and the identity of the tenant sorted before you provide too much property information.
- Ask them about the property type that they are looking for when it comes to improvements, services and amenities, location, and permitted use. Also find out about the required lease term, the rental budget, and property usage.
- The tenant’s staff and the customers interacting on the property will create certain challenges when it comes to improvements and location. Car parking is a good example and case in point.
- There are big differences when it comes to leasing office, industrial, and retail property. Create checklists for each so you can ask the relevant questions with potential tenants.
- Is the tenant coming to you today from another property location? Are they new to leasing property locally? If they know nothing about the local area, you will need to fill in the gaps when it comes to business demographics, transport, communication, local area profile, and property usage.
- If they are coming to you from another property location, they may have some timeframe to satisfy or a property disposal requirement. Ask the right questions to get the complete picture. You may even find another listing requirement with the property changeover.
- Has the tenant looked at other listings with other local property agents? It is quite likely that they have seen other listings and may have current negotiations underway through other agents. It is good to know if this is the case so you can adjust your strategy accordingly.
Don’t be too eager to take a tenant to a property. Get all of the facts together prior to the inspection process so that you don’t waste your time with the incorrect strategies or listings. Match the tenant to the property before you leave the office; qualify them. If necessary take them to a number of properties to give them a comparison of current market conditions.
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The retail shop leasing process is quite specific and special. It requires property agents that are very familiar with the retail industry and shopping center dynamics.
It is no secret that the retail shop industry is changing due to the impact of the Internet and the current economic circumstances globally. That being said, the retail shop industry doesn’t disappear it just changes. We are best placed has specialized leasing agents to help tenants and landlords move through the process of change when it comes to shopping centers and specialist retail properties.
Here are some tips to help you with creating your retail tenant mix and plans for shopping center leasing optimization:
- Check out all of the other competing properties in the local area. They will have factors associated with vacancy, tenant movement, and tenant success. Make a list of their tenants for direct contact and cold calling. Some of those tenants will be more successful than others. It is those tenants that you should encourage to move to your property.
- Look at the other competing properties with regards to property improvements, customer access, and customer profile. Also look at the factors of car parking, public transport, and property size. Are there any weaknesses in these factors that can be optimized in your property?
- The franchise groups in the local area will always be a good opportunity for tenant enquiry and new leases. It is simply a matter of understanding the properties that they are looking for. It is likely that they will have specific lease terms and conditions that apply to any premises that they negotiate on. You will need to brief your landlord on the standard terms and conditions that the franchisor requires. The franchise agreement needs to integrate with the lease of the premises. Your landlord needs to understand that fact so that the business can operate within the branding and business agreement requirements of the franchise group.
- With any larger retail property, it pays to stay ahead of any lease issues. They include rent reviews, options, and lease expires. Look at all of these events at least 12 months in advance. This then allows you to plan the interaction with the tenant given the conditions of the local property market.
- If you want to be a retail leasing expert, grow your knowledge with regard to business viability and different business types. Some businesses have different requirements as to cash flow and occupancy costs. If those requirements are exceeded, it is likely that you will have an unsuccessful and volatile tenant. Ultimately that will mean a new vacancy.
- With your existing tenancy mix, consider the factors of expansion and contraction as they apply to each particular tenant. Help the existing good tenants within the property to adjust the leasing needs and remain in occupancy.
- The anchor tenants in a retail property are very important to the overall success of sales, specialty tenants, customer visits, and market rental. Stay close to the anchor tenants as part of an ongoing lease strategy.
- Retail leasing and shopping center performance are quite unique strategies to be developed for each landlord and property location. It is not unusual to have a business plan developed for each medium to large property. In that plan you will have income profiles, expenditure management, maintenance plans, tenancy strategies, tenant retention solutions, and reporting requirements.
Retail shop leasing is perhaps one of the most interesting and rewarding segments of the property market today. That being said, it does require people that understand retail business and property viability.
In commercial or retail property leasing, it is important that you are prepared for the property inspections that you take with prospects. You only have a short time to create the interest of the tenant prospect and move them to a lease offer.
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So what is the focus of the leasing inspection? It should be to create the interest of the tenant and remove any questions that they may have regards the property. To do this you have to be prepared.
Here are some leasing tools that you can use as part of the leasing inspection of vacant premises:
- Be aware of the competing properties in the local area. The prospective tenant is bound to have seen those properties with other agents or at least be aware of the space availability and the asking rent. You will have to know the differences in properties and why one rent is more relevant than another.
- The asking rents for your property should be in parity to the market rents locally for properties of similar type. Have you checked that out? Is your asking rent within the reality of the current market rents? How will you pitch the rent requirement to the tenant when they challenge you? How can you sell that rent package? You will need to have your answers ready.
- Take some measurement tools to the property. That will usually be a laser measurement tool to calculate distances, plus a measurement ‘wheel’ that you can use to walk around the property. It is important that you do not certify areas and distances as you are not a surveyor, however you can give approximations to the tenant so they know approximately what factors exist in the property.
- Always have a camera with you to take photos of relevant parts of the property. It is remarkable where those photos will come in handy in later conversation with tenants.
- Take a list of services and amenities in the property, together with fixed improvements that may be relevant and important to tenants in occupation. Some tenants are very interested in communications and power capability in the premises. Ensure that you have the information at your fingertips.
- When it comes to inspecting office premises, the tenants like to know about the finishes that are required in any fitout changes. If your property is a modern property with quality finishes, there will be some guidelines to apply here when it comes to negotiating tenant fitout design and standards. Get details of these things from the property manager or landlord.
- The plans for the property will show as built factors relating to structure, electrical, air conditioning, hydraulic, and lighting. The plans will also show you where the riser is in the building for the tenant to tap into the property services.
- Take notes of all representations made and comments given in a leasing inspection. Those comments could become critical in the ongoing lease negotiations.
- Lastly you should have a reasonable knowledge of the outgoings to be paid by the tenant in the property. Those outgoings will be impacted by the type of lease to be used. Those outgoings should be in parity with other properties of similar size and type in the local area.
When you are fully prepared, the leasing process and inspection becomes much easier. Top leasing agents are always prepared to give the right information in the property leasing inspection.
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