Commercial Real Estate Brokerage – A Custom Designed Strategy to Work with Commercial Property Investors

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.

Get the Snapshot eCourse

You can get more commercial real estate brokerage ideas in our Snapshot eCourse right here.

Shopping Center Managers – How to Reposition and Improve a Retail Shopping Center

Any shopping centre today can be a challenging asset from a performance perspective.  There are many challenges to track, balance, and manage.  The skills of the property manager and or leasing manager applied to the task will be critical to asset performance.

Fees for services

It should also be said that the fees to manage any retail property are also usually higher than the fees charged within industrial or office property management.  The skills of the people deployed on the property will reflect on the asset outcomes, so you must employ the right people for the task.

People Costs

Good quality people with the retail experience will cost more from a salary perspective.  The property outgoings should (subject to local retail leasing laws and regulations) be structured through the leases for management fees and staff salary recovery.

Taking on a new property?

If you are taking on the management of a shopping centre from a previous owner or previous property manager, there are many things to look at immediately and specifically.  Getting things under control quickly should be a priority with a retail asset.  You can use a checklist for that process.  Here are 4 specific ideas to help you get started:

  1. Arrears – Let’s start at the money or rental end of property performance. Understand where the rental arrears are and why they are happening.  Separate strategies will be required to get those things controlled.
  2. Vacancies – What and where are the vacancies now in the property and how are they impacting customer and tenant outcomes? Look at filling the vacancies quickly even if you must do short term rentals at lower base rents.
  3. Tenants and tenant mix – Assess the tenants in the property for current issues and volatility. A weak tenant mix will drag down property performance.  Talk to the tenants and ask about customer sales and customer requirements.  It is very likely that the tenants will know what is needed in a retail property to resolve shop placement and mix problems.
  4. Income and expenditureReview the cash flow results for the property over the last 12 months. You will see the timing factors from high cost issues such as rates and taxes, as well as capital expense items.  Then look at current rental levels, vacancy factors, and upcoming rent reviews.  From these things you can create a budget for the property.  The object here is for you to comprehensively control the money coming into the property and flowing out to the various stakeholders.  You can then shape the financial factors of the property in a controlled way into the future.

These 4 factors will lead to greater property understanding and control.  When you can see what is happening in the retail property or shopping center, you have something that you can base your future strategies around.

You can get more tips about Shopping Center Management and Leasing in our eCourse right here.

How to Choose the Right Commercial Property Management Software Solution

In commercial real estate brokerage today the property management division of your business will need a dedicated and specialised property management software program to control asset performance for the clients that you serve.  There are many different software packages around, some of which are of the highest quality, whilst others are very average.

Quality is important

If you plan to provide a professional property management service across the best buildings in your town or city, then you will need a high quality software program that can comprehensively cover the needs of the clients and the challenges of the properties.  There are significant and different management requirements across industrial, office, and retail property types.

In saying that you do need to choose the right software program, there are costs associated with all of the specialised solutions available.  Most of the high quality programmes are reasonably costly although they can be easily funded by the correct management fee structure and a good size property management portfolio.

Understand the reporting solutions

If you want to attract the best clients to your professional property management services, you will need a good software solution to support your activities.  You need something that is well proven and cost efficient, and yet something that is easily able to produce the reports that the clients require.  An informed client is more readily able to make the best decisions in a timely way.

Know what you must control

Understand the informational needs of the clients that you serve across an array of activities.  Consider some of the most common challenges that you strike on a regular daily basis, including:

  • The lease documentation and updates
  • Tenancy mix details and variations
  • Expenditure activity across the various cost codes
  • Arrears controls and reporting
  • Regular tenancy correspondence and communication
  • The landlord reporting requirements and report formats
  • Property maintenance records
  • Risk management and documentation
  • Energy management and tracking
  • Environmental issues and controls
  • Income controls and optimisation
  • Rental strategies and budget expectations
  • Property budgeting for both income and expenditure
  • Premises and area detail
  • Tenant contact, correspondents, and records
  • Outgoings activity and performance
  • Cash flow projections

So these are some of the most common requirements in most commercial property management activities.  At a minimum, the software solutions that you use need to cover these and other issues effectively and directly.

The Categories?

You can see from the list that some of the matters are financially orientated, whilst others are linked to documentation, and also tenancy mix occupancy.  One software package has to cover all of the issues in an accurate way.

Choose the best commercial property management software package that suits your typical client profiles, property types, and property portfolios.  Understand the factors of growth that will occur with your property portfolio so that the selected property management solution you choose can give you the best ongoing support into the future as the portfolio grows and building complexity increases.

You can get more commercial property management tips in our eCourse ‘Snapshot’ right here.

A Busy Day in the Life of a Shopping Center Manager

A Retail Shopping Center Manager when compared to others working in our industry is perhaps the busiest person by job type and specialization.  The type of retail property and the size of the tenant mix will place a lot of pressures on work load and business processes for the Center Manager.  That is why property management fees and support team requirements are significantly higher in retail property when compared to that of office or industrial property.

Can you ‘hack’ the intensity of retail property performance and the specialization that goes with that?  If you can, then the retail segment is a good place to work and grow market share.

Let’s look at the average working day for a Shopping Center Manager.  They have plenty of things to do, and here are some of the most common:

  1. Tenant contact – Most tenants in a shopping center are of the smaller and individual type.  They thrive when the shopping center is performing well; they struggle when the reverse is the case.  For that very reason a good manager will keep in close contact with all the tenants in the tenant mix, and watch the integration of anchor and specialty tenants from a customer and client perspective.  They look for the strengths and weaknesses and work with both.
  2. Marketing – A good shopping center will be comprehensively marketed to the customers and the local demographic.  A market budget will certainly help that occur but the money for marketing has to be carefully controlled to the shopping seasons and the activities within the property.
  3. Competing properties – In any city or suburb it is likely that other landlords and Shopping Center Managers are attempting to draw on any good tenants that they find in other properties.  For that reason it pays for a Center Manager to have a tenant retention plan and leasing strategy to help minimize the vacancy factor.
  4. Tenant mix – A successful tenant mix is one that matches closely the customer requirements and anchor tenants in a property.  The larger the shopping center, the more complex the controls and choices become; there are then issues to consider with clustering of tenants, renovation and relocation issues, and market rents.
  5. Arrears – In the ‘real world’ of shopping center management it is the case that arrears will happen with some tenants from time to time; a lot depends on the success of the property and the permitted use or offering of the tenant.  Look for arrears and catch them early before they do too much damage to the property cash flow.
  6. Lease updates and critical dates – Every lease will have dates to watch.  Those dates will be critical from a leasing and rental perspective.  If the shopping centre has plenty of tenants to watch, then the critical date management process will be all that more complex.
  7. Landlord reporting and contact – Some landlords require intense reporting on a daily or weekly basis; the end of month reporting can also be complex and significant.  The Center Manager has to fully commit to the landlord reporting and contact process.
  8. Maintenance and Risk Management – In every property there will be maintenance issues to fix; to do that efficiently the Center Manager should have a reporting and response process to maintenance that takes into account the elements of urgency and damage potential as well as personal injury potential.
  9. Contractor – Some maintenance contractors are better than others when it comes to maintenance response, prices, skills, and knowledge.  It is not unusual for the contractors in a large shopping center to be assessed annually for the services they offer given the demands of the property.

From these things it can easily be seen that the Shopping Center Manager should have very special skills and good business systems.

Anchor Tenants Bring Value to Shopping Center Tenant Mix

Anchor tenants today bring a lot of value to a shopping center and the tenancy mix.  The right anchor tenants should be chosen on the match as it applies to the local shopper demographic.  In some cases you may have a few major tenants of this type positioned strategically around the property.

So there are many different types of anchor tenants, some large, some small, and some being part of a much larger group or franchise chain.  What ‘anchor’ would you see as appropriate for a new shopping center in your area or town or city?  It is a question that arises very often as new shopping center developments are created or planned.

Retail leasing experts bring great value to a shopping center when they can introduce quality anchor tenants to the mix and the future of the property.  Here are some questions to consider as part of providing a service like that:

  1. In what location should the larger tenant be located to optimise their function and integration with other specialty tenants in the building?  To answer that question you will need to know why people will visit the property and how they will move through it.
  2. Understanding the demographic of the shoppers coming to the property will help with planning the leasing process, rentals, and market rentals.  Essentially a good tenancy mix will underpin property performance in a major way.  To get to know the shoppers and their needs, undertake a marketing survey in the area and review the transport methods that will bring people to the property.  As part of that, understand the roads and highways that may have an impact on access and exposure to passing traffic.
  3. Most anchor tenants will require occupancy for a long period of time.  That will usually be 10 or more years.  They will ask for options for renewal as part of that initial lease negotiation process.  In considering these facts the landlord should require an early advice as to option renewal.  If the tenant does not require renewing their lease it is wise that the lease provides for notification of such at least 18 months prior to the event.  In that way the landlord can start looking for a new tenant.
  4. The rental structures for this type of larger tenant will be different and sometimes based on turnover with a base rental.  On a ‘per square foot’ or ‘per square meter’ basis the rents will be considerably less that the rent that is paid by the smaller specialty tenants.
  5. The anchor tenant should be heavily involved in the marketing of the retail property with all the other specialty tenants.  There should be a marketing levy for all tenants to contribute to.  As to how that levy is implemented and controlled is a question for shopping center management.

In closing on these points, it should be said that the lease structure for a larger tenant of ‘anchor’ status will likely be a lot different than the standard lease applied to the ordinary tenants.  An expert retail leasing specialist can bring a lot of relevance to the lease negotiation process and thereby optimise the integration of the main tenant into the mix of others.

Commercial Real Estate Agents – Control Your Tenants for Better Leasing Results

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:

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

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.