Posted on

Best Shot Commercial Real Estate Market Intelligence – Talk to Local Businesses

In today’s commercial property market, the tenants in your local area will tell you a lot if you ask the right questions.  For that very reason you should merge local tenants and businesses into your prospecting activities.

Any local building with multiple tenants should be merged into your call canvassing program.   Providing the owner of the building is not a client of your agency through some other business relationship, there is great advantage to be had by calling down all the tenants on a regular basis.

You can ask the business owners and managers questions such as:

  • Do they own the property?  Property ownership may be an opportunity for a sale and lease back at some stage in the future.
  • Do they lease the property?  If that is the case they will have lease change over issues and lease expiry dates coming up.  Most tenants have no idea about the availability of leased premises in the local area or the current market rentals.
  • When will their lease expire?  If you know this date you can provide market information to them in the year leading up to the lease expiry.  They may be prime tenants for relocating.
  • Do they have local storage needs?  Existing businesses can sometimes be under some pressure to expand storage or relocate staff into nearby local properties.  Ask the questions to see what pressures of occupancy may exist.
  • What type of business are they?  This will have bearing on the type of property and the improvements required in leased occupation.
  • Some businesses have a significant lead time to relocate given the way in which they operate and the plant and equipment that they may use in that business process.
  • What labour force requirements do they have?  The location of the business should be convenient for labour sourcing and access.
  • Some businesses need to be near public transport or have a significant onsite car park for staff and customers as part of business operations.  Find out what the business requires in case a special property in the local area could come onto the market one day.
  • Ask the business owner about the landlord of the property (if they are a tenant).  If you can identify the landlord, you can approach them at a later time regards leasing and property requirements.

In addition to all of the above, the tenants know a lot more about the local area than you do, and the right questions about other businesses in the street may very well turn up a property opportunity.

The best way to gather this information is to call by local businesses on a daily basis.  It takes time, but if you do between 5 and 10 a day, you will get valuable leads to work on.

Posted on

Industrial Property Sales – The Importance of the Liquidity Factor

 

When you work in industrial property sales there is a thing called the ‘liquidity’ factor.  It is quite relevant to the property type and has an impact on the marketing campaign that you will need to create and run.  A high ‘non-liquidity’ factor could radically change the way you market and sell a property.

Meaning?

So what does ‘liquidity’ and ‘non-liquidity’ mean?  It is the ability to move the property and sell it.  Depending on the property this may be easy or difficult.  A lot depends on the industrial property size and uniqueness.

  1. A property with a high ‘non-liquidity’ factor will be difficult to move and sell.  There will be clear reasons why this is so.  The property will be so unique in size and type that it will attract only a small number of buyers.  The risk that the property presents will limit buyer interest.
  2. A property with a high ‘liquidity’ factor will be easy to sell.  This industrial property would be ‘main-stream’ in size and highly flexible in usage.  From an investors perspective there will be low risk.

So the more specialised the industrial property in design, size, and usage, the more difficult it will be to sell.  This is a common factor in industrial property given the way the property is designed or used.

An example may be a ‘cold store’ industrial property that is leased as an investment to a tenant for a long period of time.  Whilst the lease may be attractive to an investor from a cash flow perspective, the uniqueness of the property could scare off many investors if and when the property comes up for sale.

Assessment?

So the ‘liquidity’ factor is something that you assess in setting up the marketing of the property, as well as pricing the property.  If the property is likely to be very difficult to sell, it may be better to market the property confidentially and directly to specific companies and investors that have a special interest in that property type or location.  A property with a high ‘non-liquidity’ factor will likely be difficult to price, understanding that there will be few comparable properties to establish a pricing benchmark.

Recommendation

As part of establishing a price and marketing plan for the property, do a ‘liquidity assessment’ for the client.  It will be a point of difference in your agency service and may even be a trigger for gaining the listing appointment.

Posted on

Tips for Auctioning a Commercial Property Today

City buildings on river

Even when the commercial property market is slow and difficult, there are certain advantages in the auction process that should not be overlooked or underestimated. The greatest advantage for all concerned is that the auction process gives momentum to the serious buyers that are available today and those that are looking for property to purchase.

Even in the toughest of property markets, there will always be buyers available for most quality properties. The auctioning of a property is a very focused method of sale; it is implemented over a period of 6 to 8 weeks. During that time the appointed salesperson, the agency, and the client all have a vested interest to implement the strategy required to create buyer interest.

If the client is serious about taking their quality property to the market, then an auction process is worthwhile considering. The property may sell on the day or it may sell soon thereafter. Importantly the salesperson in the auction process has done the necessary work to flush out a few potential buyers that will be lodging offers as appropriate.

series of charts in commercial real estate presentations
Commercial Property Presentation Strategies

 

 

Realistic Auction Clients

The client or owner of the property that is to be auctioned has to be realistic regards expected current market prices; that conditioning or information process is really the job of the salesperson to provide and implement. The client needs to be fully informed regards the factors of the local property market as they apply to the property type and the method of sale.

 

Unconditional Contract of Sale

Another clear advantage of the auction process is that the resultant contract is normally unconditional and will proceed to a precise and timely settlement. The factors and delays of due diligence and subject to clauses that you see in normal contracts do not normally apply in auctions between the time of sale and settlement. That being said, the client must ensure that all relevant facts and property details are accurate and correct prior to the auction marketing and inspection process. The bidders on the auction day need to be fully informed about the property prior to the placing of their bids.

 

Auction Success Rates

The auction success rates will vary from time to time in your local area based on the amount of enquiry and the number of people that attend the property auction on the day. That being said, every property that is taken to auction has to be taken through a serious amount of marketing and deliberate attention to detail so that the correct amount of enquiry can be generated. Here are some clear strategies and tips that can apply to the auction of listing and marketing process.

  1. The auction method of sale is a timed strategy designed to flush out the buyers in the market. Genuine buyers always exist for a quality property; you just need to find them.
  2. The momentum of an auction should be timed across a period of 6 to 8 weeks. Most of the marketing campaign should be expended in the first half of that time period.
  3. Create a quality information memorandum relative to the property prior to the commencement marketing. When people make enquiries, and they are suitably qualified, you need to be sending out the information memorandum quickly and efficiently.
  4. Depending on the property, there may be a need for confidentiality relating to the information memorandum that you are to issue. This is normally the case when you’re dealing with larger properties with extensive tenancy details and matters relating to financial performance. On that basis, you may need a confidentiality agreement to be signed prior to providing the information memorandum and inspecting the property with qualified prospects.
  5. Design a comprehensive marketing campaign that is targeted to a specific target audience and regional location. Most purchasers of commercial property today come from the same general region and the key asset under promotion.  Get to know all of the local people in your property market that could be active.
  6. Check out the prices for similar properties in the region over the last two years. Identify any competing properties that will be on the market at the same time as your subject property.
  7. Get all the necessary reports and documentation together that support the function of the property, the improvements, the tenancy mix, and the property ownership. All of this should be done prior to any marketing commencing. Remove any hurdles or problems as part of this preparation process.

In any commercial or retail property market and at any time, the auction process is worthwhile considering as an alternative method of marketing. If that is to be the choice applicable to the subject property then the property owner, the agency, and the salesperson need to establish a firm mutual strategy of auction marketing, inspection, and promotion to get the correct message of the property out to the targeted audience. If the client wants a timely result in selling their property then the auction process is worth considering.