The Essential Strategies to Follow in Commercial Real Estate Leasing

As you consolidate your career in commercial real estate brokerage, there are plenty of opportunities to be had across the segments of the leasing market. There will usually be a good selection of local businesses, landlords, and tenants struggling to resolve occupancy issues.

 

If this is the property market segment for you, then consider how you can boost leasing inquiry and provide professional services to both landlords and tenants. There are some critical steps to the process to help you build your leasing momentum.

 

Leasing Facts

 

Let me set the scene here in your local area:

  1. Some tenants are looking to relocate due to pressures of expansion and or contraction.
  2. Some landlords have vacancy issues and pressures to deal with. Look for the vacant properties and then talk to the landlords directly.
  3. Some properties are quite complex in tenancy mix and occupancy. The larger properties are likely to have an array of leasing challenges including variable market rentals, upcoming lease expiries, and a changing tenancy mix.
  4. Market rents are changing in your town or city. Track the market rentals that apply to the different property types and precincts.
  5. The factors of supply and demand in the local area will shift occupancy rates and market rentals. Look for the local developments that could influence future supply and demand. Adjust your marketing efforts based on the upcoming changes to occupancy supply and demand.
  6. Many tenants today are looking for improved conditions of occupancy and better buildings. In talking to the tenants locally, you will soon identify what they are looking for in any new occupancy.
  7. Some landlords are overly aggressive when it comes to market rental negotiation. The landlords that push the levels of occupancy and rental recovery are usually the landlords that lose tenants over time. They are likely to have higher vacancy factors in their investment buildings.
  8. Many tenants are looking for improved factors of economy and cost when it comes to lease occupancy. Understand how you can bring factors of occupancy cost improvement into the tenant lease negotiations. Market rentals, outgoings costs, and rent review processes are ways of achieving a better rental package for the tenants that you serve. If you work as a tenant advocate, this will be a big part of your professional advocacy services.
  9. New projects are coming onto the market, and those projects will require a professional occupancy and leasing strategy. Many project leasing opportunities are quite large and can take months if not years to complete. If this is the type of work that you are focusing on, then be careful when considering commission charges, marketing costs, and resources to be applied to the project. Many developers will look for lower levels of commission and minimized marketing costs. They will be looking to offload many of the project leasing costs to the marketing agent.

 

All of these things are happening in most cities at any given point in time. They are all related to leasing and property performance. You are the best person to help resolve these challenges.

 

So here are some of the rules that you must follow to improve your professional profile as a top leasing agent:

  1. Concentrate on the market segments that have the best levels of churn and opportunity. There will be certain property precincts and buildings in your town or city that are higher on the selection list for new tenancies and new tenants. Work the buildings, the landlords and the precincts that have the best opportunity for change and churn.
  2. In talking to local business owners and tenants, adopt a checklist approach to understand where their business is located now, what they may need for ongoing successful business occupancy, and when their current lease may expire. When talking with decision makers, understand the pressures of today that they may be experiencing, and how they are looking at their future in the location. Show them the economies of the area that could influence their choices to relocate. Most business owners and tenants will be attracted to factors of efficiency and economy.
  3. Track the market rentals that apply to the property types and the precincts. When any new lease transaction has been completed, seek out the facts relating the finalized lease, and the agreed rental.
  4. When focusing on new properties to lease, bias your activities towards the larger properties, the quality locations, and the good quality buildings. In that way you will achieve a higher level of rental and better levels of interest as you market the vacancies.

 

So these are all strategic issues that can easily be applied to the tenant and landlord leasing services locally. Understand the factors of attraction in the local commercial real estate leasing market. Work the factors of attraction through your prospecting and marketing processes. The better buildings, precincts, and market rentals will always attract good levels of quality inquiry. Work with your landlords and tenants on that basis.

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.

Traps to Look for In Listing Commercial or Industrial Property for Sale or Lease

Many agents specialise in just industrial real estate, be that sale or leasing.  That focus can be a good thing because the industrial segment can be quite unique when you consider the factors of large manufacturing and warehousing.

When you are listing a property that is industrially zoned or perhaps already has an industrial use, you need to get to the key issues of the property and how it relates to other industrial properties locally.  Comparisons will help you understand future opportunity and marketing potential for the asset.

Important Facts to Investigate

Here are some factors to investigate when assessing the potential of an industrial property from a sale or lease perspective:

  1. Zoning – There are differences in industrial zoning, and therefore the types of work, manufacturing, and or business that can be generated in an industrial site or warehouse. Check out the zoning regulations that apply to the location and the listing; understand what types of business and manufacturing can occur on the property.
  2. Orders or Notices – Some industrially located properties are impacted by factors of the environment and location. Ground water, soil toxicity, topography, and stored or manufactured chemicals are just a few factors that will impact the use and or occupancy of the property.   Ask about orders or notices that may have been issued to control the way things happen in the property.
  3. Warehouse and building floor area – There will be locations in the property that are used in a specific way. The configuration of those particular areas may suit or typify the standards of a particular industry; that means some of those areas could be redundant to the next property occupier.  Review the areas and understand them.  Typically you are looking at the spaces relating to warehousing, office, laboratories, storage, power plants, machinery, production, loading bays, and hardstand.  There may also be special requirements associated with the certification of plant and equipment such as cranes.
  4. Warehouse size and construction – Storage of goods today involves pallet stacking, forklifts, floor loading, and staging areas. Every industrial business will have factors that are quite special in the way they receive, move, and store goods.  Clear span warehousing will help with the logistical factors of goods movement, pelleting, and storage.   Modern warehouses tend to incorporate clear span design.
  5. Access – Most industrial businesses today require truck access and special loading and unloading facilities. The efficiency of the moving of goods can be a big part of cost control and customer service for any industrial business. A large loading dock and infrastructure will be helpful for many occupants of business types.

Given all of these things, a good industrial property will be situated in a location that is well supported by service infrastructure such as electricity, gas, water, roads, rail, and airports.   Why not do your full property assessments before you decide on the best way to market the industrial property to attract potential buyers and tenants?

Commercial Real Estate Brokers – Critical Dates Management is Essential to Property Lease Performance

In managing a commercial or a retail property you will need to watch the critical dates applicable to each lease and each tenant in occupation.  Those dates will be relevant to important investment decisions and can have a major impact on property occupancy and rental recovery.

If you manage a large property, the number of leases and the variety of tenants can put pressures on lease management and the monitoring of critical dates.  To help with that, you should get the software program to integrate into your property management systems.  That software program can track the upcoming lease events and tenant management issues.

Here are some of the critical dates to look for within a lease document.  Always read the lease document completely and thoroughly as part of identifying upcoming occupancy issues for both the landlord and the tenant.

  • End of lease – The end of the lease is something to be planned for.  At least 12 months out from lease expiry make the decisions relating to any occupied area.  That means you should have a look at the terms of occupancy currently existing, the potential for renewal, and the existing tenant for relevancy within the tenancy mix.
  • Rent review – The prevailing market conditions will have a lot to do with the levels of market rent applicable at rent review time.  If the lease stipulates that a market rent review will apply then it is necessary to identify comparable properties and comparable leases.  Factual information relating to market rental conditions will allow you to agree on a new lease rental with a tenant in a timely way.  Given a tenant’s sensitivity to increasing rent in today’s market, make sure that you have a full awareness of market conditions, lease enquiry, and lease absorption.  The vacancy rates in the local area will also have something to do with incentives offered to tenants and rental levels negotiated as part of any new lease or market rent review process.
  • Renovation requirements – The renovation of a property or part of a property may be required as part of lease occupancy.  That is certainly the case when it comes to leases over the longer term.  It is also a common practice when it comes to retail premises and those within shopping centres.  With any lease for a term longer than five years, it is wise to include a renovation requirement clause within the lease document.  That clause will then have a critical date response by the tenant to ensure that the renovation is undertaken at the right time and in the right way.
  • Insurance – Many leases today have important obligations on the landlord and the tenant regards insurance.  In reading the lease document you will see obligations for both parties relating to risk management, public liability, and the insurance of the building and premises.  Each year that insurance will need to be renewed at an appropriate level; the critical date associated with that renewal is something to be watched and carefully administered.  A landlord or a property manager would usually obtain a copy of the insurance cover note at the appropriate time given the critical date nominated within the lease.
  • Lease compliance – There are many different situations in a commercial or retail property today that could require lease compliance and response on the part of the tenant or the landlord.  To understand those factors, you can read the lease document and extract the necessary dates relating to any event or any situation involving the parties.  Take a note of the issue and note the relevant date into your software diary system.
  • Documentation – At different times of the year certain documentation may need to be exchanged between the landlord and tenant.  As an example you may find that the tenant in occupation should be supplying to the landlord the retail sales figures relating to business turnover.  Commonly, and in that situation you can find that the rental charged to the tenant is geared to the level of retail sales.  In a shopping centre situation the provision of sales figures by the tenant to the landlord would occur monthly or quarterly to allow for rental adjustments to occur.  That is then another example of a critical date linked to occupancy and the lease document.

From these points you can see how the factors of lease compliance and critical dates are so important when it comes to commercial property occupation and property performance.  A good property manager or landlord will take the time to completely review all lease documents relating to the tenancy mix and the managed property.

Stay ahead of the critical dates and the upcoming diary events.  In that way you will reduce problems within the property and help the property stay on track when it comes to tenant occupancy and rental income for the landlord.

Curiosity Wins More Business in Commercial Real Estate Brokerage

They say that ‘curiosity killed the cat’, however that is not the case in commercial real estate brokerage.  Curiosity is a good thing for any agent or broker to develop, and will encourage the right information that helps with results in prospecting and marketing efforts.  Are you ready for the ‘curiosity’ challenge?

So it is a fact, being ‘curious’ should be a core skill to develop for any property agent or broker.  Asking questions in a professional way will help you get to the right facts of the market, and the best people looking to do something with local property.

In a sensible and professional way, questions well-crafted will help you find listings and client opportunity.  An agent or broker that cannot or does not ask lots of questions will not succeed as a top agent, and will struggle to find market share.

Here are some basic ‘sample’ questions to explore as part of that process of questioning and establishing professional agent curiosity:

Owner Occupier Buyers

  • What property types do you prefer?
  • How did you find this property?
  • What have you looked at recently?
  • Do you need to sell another property to make this work for you?
  • When is the right time for you to buy?
  • What improvements do you need on your short list of requirements?
  • What budget do you have?
  • What services and amenities will you need in the property?

Owner Occupier Sellers

  • When is the right time for you to sell given your current property use?
  • Why will you need to move?
  • What strengths and weaknesses do you see in the property?
  • Will you need to relocate and have you found something else?
  • Given the property market today, what expectations do you have of the sale process?
  • What are the outgoings for the property today?

Tenants

  • How much space do you need?
  • What’s your rental budget?
  • What have you looked at locally?
  • What improvements do you need?
  • What staff access and amenities will you require?
  • How does car parking and customer access impact your property selection?

Investors

  • How long will you be holding the property?
  • Is your priority centred on income or capital gain?
  • What priorities will you have in tenant mix and lease tenure?
  • Is redevelopment a consideration in your purchase?
  • Have you explored financing options today?
  • Is this a ‘blue chip’ single investment for you or part of a portfolio balance?
  • Is this purchase a part of a portfolio strategy?

Business Owners

  • How will you be using the property?
  • What are the critical improvements and fitout configurations that you must have?
  • When is the ideal time of property changeover for you?
  • Are you moving from another location?
  • Who are the decision makers when you finally find the right property?
  • What have you looked at elsewhere?
  • What have you liked about where you are now?
  • How do raw materials, customers, or end user markets impact your property decisions?

Are you ready to ask some good questions?  I hope so; the best property agents do it all the time.

Create a Rich Source of Tenant Leasing Needs in Commercial and Retail Property

When you work in commercial or retail property leasing, you need a rich source of tenants and business leads.  There are a number of resources that you can use for that purpose, and on that basis it is simply a matter of selecting the ones that work for you and your property market.  Develop your leasing strategies.

Here are some of the best leasing sources of business names and tenant identities:

  1. Check out all of the major buildings in your leasing territory.  When it comes to buildings that contain multiple tenants, it is a matter of taking down or capturing the details from the directory board that is located in the property.  The easiest way to do that is to take a photograph of the directory board on your mobile telephone.  You can process and review the photograph later.
  2. From the details that you get in the previous ‘directory board’ step, it is a matter of telephoning down all the businesses in the particular buildings to discuss future leasing and occupation needs.  Leases come to an end at some stage for all types of reasons.  Some tenants prefer to move when that occurs, and on that basis you can be the source of market information and relocation opportunity.
  3. Get a copy of the local business telephone book as it applies to your location, town and city.  It is preferable to use the telephone book in hardcopy rather than online.  That is simply because the telephone book can be logically processed and marked off with a colored pen or highlighters as you proceed through it.  Starting at the beginning of the telephone book work through every business name to find those businesses that are located in your priority suburbs and leasing territory.  Whilst this process may seem tedious, it is simply a matter of reviewing one or two pages of telephone numbers each night in preparation for your prospecting processes the next day.  One telephone book can take you an entire year to move through.  You will however see that the system is quite easy to implement and soon you will be covering 5 to 10 pages a day as part of that process.  One page of the telephone book should give you two or three numbers to call; cold calls lead to information and potential meetings with the right tenants.  You may wish to choose a greater number of businesses given the filtering process and the criteria of targeted tenants locally.
  4. You can also get some good leads and opportunities from using the Internet methodically and specifically.  In your town or city, there will be a business ‘Yellow Pages’ telephone book online that you can use for this very purpose.  In most cases you can search the ‘Yellow pages’ based on targeted business types and by suburbs.  From that search process you can get specific names of businesses and tenants to put into your prospecting activities and cold calling systems.

So these four strategies are quite simple.  You can see why things need to be methodical and systemized.

When you create a large list of local businesses and tenants, and then take the time to understand their occupation needs from a leasing perspective, you are of high value to the landlords that you serve.  Use your database as leverage in this way when it comes to winning a property leasing appointment.  Tell the landlord about your database and how accurate and up to date it is.  They will find it difficult to ignore an agent with a comprehensive and up to date database of tenants.