Every commercial property is unique and on that basis every property investor will have special challenges to work with their asset. In every property location there will be special factors to consider and challenges to resolve. You can be the specialist for the location to help investors through the challenges that they experience. The value that you can offer through a set of comprehensive property services needs to be carefully considered and promoted.
Know the facts locally
To successfully work with commercial property investors, it is simply a matter of understanding what they are experiencing in the local property market and how you can be the solution that they need. With particular clients you can drill down into the unique challenges of a single property, its ownership, and its location.
So how can you do this? You can do an analysis of property performance and property opportunity. You can provide a real property performance plan based on solid recommendations supported by strategy and opportunity.
What can you do?
As the local property specialist, you can add considerable value to the services that you provide your investor clients. Specialise completely and thoroughly within your location and within a small number of property types. That specialisation will be of great value to the clients that you serve.
Here are some of the most common challenges that you will strike with property investors today. These particular issues all require solutions:
- Timing – Many property decisions will be based around factors of timing. Time will impact property cash flow, rental, tenancy mix, and occupancy. Ultimately over time there will be property based issues that will flow through to changes in capital value. Understand the timing factors for your location when it comes to selling, leasing, and property upgrade. When it comes to selling or leasing a property, you can show your clients the best strategies of timing matched to the challenges within the asset.
- Financing – Some investors will need to change financing strategies and structures during the ownership cycle for a property. There will also be the need for property valuations to support mortgage funds. Understand the duration of financing applies to the clients that you serve. You will need to strengthen the tenancy mix and the rental income to improve and enhance the financing position. The loan value ratio between advanced funds and property value is a ratio to watch.
- Cash flow – The leases within the tenancy mix will support the rental cash flow. Can add cash flow be improved? How does the rental cash flow matched to the prevailing market rentals? You can do a rental assessment and compare the results of the assessment to other properties in the location.
- Portfolio performance – When you delve into the factors of property performance for your client, you can cover off on matters of income enhancement, maintenance management, expenditure controls, tenancy changes, and lease changes. All of these things each year will flow to the end result of property performance.
- Vacancy factors – How can you improve the occupancy rates within the property? How can you find the best tenants to strengthen the tenancy profiles and lease covenants? A good property will be strengthened by the tenants in the mix. Look at how you can encourage and shape the tenant occupancy over time.
- Property maintenance – You cannot own an investment property without spending money. You can however develop a strategy of timing that takes into account known expenditure and the performance of the asset. You can set a budget in place incorporating rates and taxes, repairs and maintenance, capital expenditure, and property renovations. Understand the future of the asset and the maintenance that will be required to improve it over time.
There are some good things here that can be tracked and managed for your investment clients. You can provide some stability and controls to enhance property performance over time.
Understand the asset for what it is, and look at how you can bring change and opportunity to the tenancy mix, rental strategy, lease documentation, and property value. Your clients will appreciate the real strategies that you bring to the process of property ownership and investment.
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The clients that we work with in commercial property management expect experience and confidence in the managers that they use. Those clients like to know that the person chosen to manage their property can handle the variables of income, expenditure, tenant mix, and lease negotiations.
So why worry too much? The experience and confidence in any property manager will be important to the client service process and also to the brokerage fees charged for services rendered.
Inexperience is Dangerous
An inexperienced property manager can be a costly and concerning problem in property performance for any investor. Invariably that is the time when errors and omissions occur with the critical factors and tenancy activities.
So the property manager needs the confidence, knowledge, and experience to know how to look for upcoming concerning issues in the leases and with occupancy, and how to position the property for better results in investment outcomes.
Every landlord and property owner will have certain unique targets to merge into that property performance equation, so the balance becomes a bit tricky. That is where the right property manager for the asset and the client should be considered.
The complexity of many office and retail properties requires specific experience and knowledge to help the property stay on track from an investment perspective. Errors or omissions create problems with any property and its performance.
Critical Confidence Factors
Here are some ideas to help you with this. Any property manager should be specifically familiar with the following topics as they apply to the location, the client, and the property type:
- Income – The levels of income in any property will be impacted by local vacancy factors, current market rentals, and business sentiment. If a property is to grow its income base with rentals that are market aligned, the property manager really does need to have advanced skills with tenant management and property leasing. Remembering that many leases exist for a number of years, the property manager is the person responsible for qualifying the tenant, then establishing and growing the cash flow.
- Expenditure – Rarely will property expenditure decline and that is why a specific budget is required to keep property expenditure under control. Energy costs, operational costs, and property usage place pressures on expenditure each year. Operational costs within most properties are escalating. There are seasonal factors to look into as well including climate conditions, and the associated energy consumptions.
- Tenant placements – When you have a number of tenants within the same Investment Property, you will have challenges when it comes to positioning, occupancy, and property use. Some tenants have an impact on other tenants around them. As part of any lease negotiation, specifically choose the right tenants for the right location and then control them within the existing lease documentation. Understand the businesses in each case and the types of people that will be accessing the tenant and or the property. What pressures will happen as a direct result of tenant existence and occupation? You may need to put certain controls within the lease document to keep things on track within the tenancy mix.
- Lease negotiations – Every lease negotiation should be looked at in balance allowing for current market conditions, vacancy levels, market rentals, and the locations of other tenants within the property. Some leases will come to an end within the same property at a particular point in time. Most owners cannot afford to have escalating vacancy factors across a large percentage of the property. Negotiate your leases so that the cash flow of rental is not overly impacted by lease expiry dates.
- Vacancy strategies – Like it or not vacancies will happen in any property. The impact of those vacancies can be lessened through finding new tenants, moving tenants around, and modifying the property use.
- Maintenance strategies and costs – During the year things will happen in any managed property. You will have maintenance issues occurring for all types of reasons, and some of those repairs will be timed whilst others will be unexpected. You need response systems for all levels of maintenance including emergency responses.
Are you ready to improve your confidence and knowledge in commercial property management? A successful property management division in any brokerage will bring many advantages to the business over time.
You can get more commercial property management tips in our Snapshot eCourse right here.
In commercial real estate agency, you will work with many different landlords. They will have tenant and rental challenges. You can be the leasing expert to help them.
Have you ever seen a landlord owner of a property that tries to lease the vacant premises themselves? They usually put a sign up in the window and drop a few adverts in the local paper; they then sit back and wait for a result. The vacancy then ‘eats its head off’ in lost rent and outgoings costs. The ‘hope’ process doesn’t work well in commercial and retail property leasing.
So let’s say that you are going to approach one of these landlords to see if you can list the property for lease. Only do so on the basis of an ‘exclusive listing’. If you don’t do that, the landlord is likely to market the property and the vacancy around you. Any tenants that show an interest may also try and get a lower rental from the landlord directly. Protect your efforts and your commissions with wise listing processes.
You have real value that you can bring to a landlord in this situation. As a leasing ‘expert’ you should have a comprehensive database of tenant contacts locally that you can refer the listing to. Your database is very valuable when you pitch for listings. Improve the value of your database by prospecting for tenants and buyers every day. Sell your leasing services around your database.
Why is it that agents take on ‘open listings’? It can be a method of quoting the property to your database if there is no other way of you getting a ‘foot in the door’. That is the only reason you should take on an open listing. Control your market with ‘exclusive listings’. That is how you dominate market share.
The leasing advice that you give landlords as part of listing a property (or pitching for a listing) should include these issues:
- Define the target market specifically for the vacancy. This will help you stand out as an agent of relevance.
- Show the landlord what is happening at the moment with rentals, incentives, leases and marketing.
- Get a list of competing properties together so the landlord knows what the asking rents are like locally.
- The time on market will vary from time to time during a business year. Track that trend so you can give the landlord some solid recommendations regards property promotion and marketing.
- Ask for marketing funds to use in the property promotion. Any landlord that is serious about marketing will participate in the request.
- Provide some marketing alternatives so the client can make some choices.
Your leasing recommendations should stand out as the best in the area. Use your database to show the landlord that you have a few tenants to take to the property as soon as it is listed.