When you take over another commercial property from another property manager, or perhaps even a landlord, it is really important to ensure that you capture all of the right information that has an impact on the property today and into the future.
Any errors that are made in the property management handover process can impact the property significantly into the future, and make your job significantly harder as a property manager. Unfortunately the previous records relating to the property may not be complete or accurate. Your questioning process needs to identify this challenge and work through the issues that it provides.
So here are some tips that relate to the handover strategy and your systems.
Ask for complete and accurate financial records relating to the income and the expenditure activity in the property over the last 12 months. You will need a detailed breakdown of the income and expenditure records for the financial year to date. This will be essential when it comes to reconciling the property at the end of financial year. The integrity and accuracy of those records should be questioned and checked.
It is always desirable to get records of previous property reconciliations and budgets for the two or three years prior to your appointment. This will help you in budget analysis and creation in the forthcoming financial period. When you create a budget, keep detailed records of your assumptions and findings. This is best done on a spreadsheet that is archived for future use in other financial years. All of your assumptions will be critical to your budget tracking process throughout the year. Simple things can be forgotten and complicate the overall property performance.
Get copies of all lease documentation that apply to the current tenants and the tenancy mix. Those documents should be checked against the current rental invoices as they apply to the property. Copies of correspondence relating to previous rent reviews and options should be obtained.
Look for situations of rental rebate, incentive, or discount. Some of these things can exist for a number of years under an original lease agreement. If that is the case, they will need to be merged into the new income budget for the property.
Meet with the tenants as quickly as possible during the handover process. The meeting is a personal process to be undertaken by the property manager, and will remove any uncertainty from the ongoing relationship with tenants. They should understand who you are and how to contact you if any property matters occur from the date of handover.
Every property is unique and special when it comes to maintenance matters. It is wise to meet with the maintenance contractor’s for the property as soon as possible after the date of handover. These contractors’ can tell you of the events to look for when it comes to property performance, repairs, and break down. They will also give you a summation of expected future property performance within their specialty of plant and equipment.
When taking on any new property, give special care and focus to the subject of essential services compliance to the current building codes. Some properties will have issues of compliance that will need to be addressed. Also look for any orders or notices relating to property occupancy or usage. Failure to address any of these items can see the property lose its ability to function as a property investment.
It should also be said that the terms and conditions of each particular lease should be checked to see if any matters of occupancy remaining outstanding or need to be policed. Obligations can exist on either the tenant or the landlord in a variety of ways.
So these are some other main things to look at when it comes to a commercial or retail property management handover. You can develop a checklist of the process which will keep you focused on task and allow you to maintain accuracy in any new property management portfolio. Always keep notes of the handover process so that any misunderstandings or omissions can be proven at a later date.
They say that commercial property management is a service part of the commercial real estate industry. Certainly it is that however it is very specialised, and the knowledge required behind the job is extensive. It requires top property managers that really know what they are doing on a daily basis.
When you take on a new client or a new property management it is tempting to give a base service fee that is set on the passing income. Whilst the formula is useful, it pays to understand what the landlord owner of the property wants regards reporting and service in the management of the property. If you adopt the base fee approach, you also have issues of the fee reducing when the property vacancy level rises.
Here are some ideas about working with new commercial property management clients and setting your fees:
Whilst you may want to set a fee based on passing net income (or gross income if that is your priority), always set a base fee that will be a minimum fee if the vacancy level rises in the property. The base fee will protect you when the vacancy level rises.
Your ordinary management fee that you charge should cover the general activities that are required for financial and physical management on a daily or weekly basis. It does not have to cover the extra activities that may be considered special in the property. They can be for the unusual things such as leasing upcoming vacant space, market rent reviews, attendance at court, lease assignments, lease subletting, and annual budget or reporting activities that take a lot of time and effort, beyond what you consider the ordinary property management tasks. You have a choice here so set the right fee for the work involved. Understand exactly what the property will throw at the property manager.
Ask questions of the client before the management agreement is signed just so you know exactly what they want regards reporting and control from the property manager. Rarely will you find that two landlords are the same. Consider the time involved in giving them the reports and the feedback that they require.
Look at the complexity and the age of the property. Older properties require extensive control and management. The maintenance activities in the property may also be higher on a regular basis.
The size of the tenant mix and the complexity of the lease documentation will place pressure on the property manager from a time and knowledge perspective. More tenants in the property will lift the time requirement.
Assess the vacancy factor for the property now and in the future. Is the property manager required to market the vacancies and what fee will they get for that?
So there are some special considerations here that should be worked through. When you carefully consider the property and the time involved you will soon see the property management fee that you charge in a different perspective.
In this slower commercial property market, there is a lot of pain and discomfort being experienced by some of our clients and local property investors. That being said, we as the local agents and realtors are the pain relief behind the equation. We can solve a lot of problems for our clients. We have the market processes and tools to do that.
Here are the typical frustrations of property investors in commercial and retail property today:
Higher vacancy factors and selective tenants
Protracted vacancy periods
Poor tenants in the tenant mix and unstable market rents
Less quality enquiry for a property that is taken to the market for sale or lease
High property outgoings in maintaining the property for occupancy
Extended time on market when it comes to selling or leasing a property
Reduced price or rent outcomes from a contract or lease
Difficulties with finance requirements and lenders
Rest assured that the property market does change and will get better. Remember that just 5 or 6 years ago we had just come through a huge boom period of commercial and retail property sales and leasing.
In these more challenging times, we as the local commercial agents and realtors are best placed to solve property problems for our clients. We have the tools and the ideas to move some of these challenging properties over a slump or hurdle.
Top agents can thrive in this market because they have the contacts and the database to do a lot of good things for their clients and property listings. When the market gets tougher, the top agents simply focus with more action and relevance; they know what is required to help their clients and they set about doing just that.
So here are some tips to work with focus in this property market today:
Work with a focus on the local business community. They are likely to need property change or relocation. Some businesses will be more successful than others; sort through the local businesses to see who wants help with expansion, contraction, or relocation.
Some local property investors will be needing help with tenant retention plans and occupancy changes. Your database of tenants will help them.
Look at the older buildings that tenants are leaving. Those buildings may be a case for renovation or redevelopment.
The methods of sale or lease in this market should be carefully considered with due regard for the property and the surrounding area. Exclusive listings for a lengthy period of time are the norm and not the exception.
Vendor or client paid marketing should be obtained for every listing that is made exclusive.
Take every listing into the local area personally to the business proprietors within regional proximity. A current listing is a reason to talk to others.
In this property market, we are the specialists that can solve many issues for our clients. It is just a matter of how that is to occur.
When it comes to leasing commercial or retail real estate today, there is a distinct timeline to the process that should be optimised and driven by the commercial agent or realtor. Failure to drive the process can see the landlord or the tenant slow the entire process down. When the property market is tougher like that of today, a slower lease transaction is not a good outcome for any of the parties.
As a special note it is worthwhile observing that many a solicitor working on the part of the landlord or tenant will also be a source of slow action or response. Yes, I know solicitors are busy people, but the landlords lease document and transaction is really important.
So here is a timeline to develop and use in the marketing and leasing of commercial or retail property today. These are the main issues to consider in leasing, and you may be able to add to the list based on your location and property type.
Inspect the premises to be leased so you really know the features of the property and just how you will take people around the premises. A well-considered inspection process will help in negotiations and conversions from initial enquiry to the creation of lease.
Remove any hurdles or presentational issues in the property before the marketing starts. That may mean renovation and carpeting or similar upgrades.
Define the target market for the property to be leased so that you really capture the right people from your marketing efforts.
Establish a targeted marketing campaign to attract the right enquiry. As part of that process, choose the right factors that help you promote the property on the internet and in the newspapers. What features exist in the property that will help lease it?
Get a signboard on the property early in the marketing campaign to send the message to all the local business owners and property investors. When the signboard
goes up, take brochures to the local nearby businesses to spread the word about the property availability.
Qualify the tenants coming off the marketing efforts before you show them the property. The same rule applies when someone rings you off an advert in the newspaper or on the internet. Ask the questions; in many cases the call may not be genuine and could be competitors seeking information.
From a good property inspection, any lease negotiation should be evidenced and initiated in writing. This will be by way of a well-constructed letter of offer or lease agreement. Get the parties to show their intention on paper. As part of that process ensure that you get a good deposit commitment from the party making the offer. That should also include an agreement to provide a bond or band guarantee to the landlord as part of taking a lease from the tenant.
If agreement is reached between the parties to do a lease, then documents should be prepared quickly by the landlord’s solicitor. There should be a follow up process to ensure that the signing of the lease can occur quickly and effectively. Add to that the necessary paperwork and deposit or rental money and you have a complete cycle of lease.
When all factors of the lease agreement are correctly actioned by all parties, then and only then should the keys to the premises be made available to the tenant for fit out works to commence. As part of that, the landlord should be approached to obtain the approvals of the new fit out construction and configuration.
So there are a lot of things to do here. Be well prepared and use a checklist to the process. Your leases will then be more effective in both negotiation and completion.
When you do a commercial property presentation today to win a listing, the competition agents are likely to be ‘breathing down your neck’ and connecting with the client with all types of bonuses and ideas. On that basis your presentation just has to be the best and most relevant to the client.
Why are you the best agent to market this property? The client has to see the answer quite clearly and efficiently. Your presentation will do that.
Here are some common problems that we see in today’s market.
The competition agents will be chasing your client or prospect constantly for a listing. They will be filling the clients head with misinformation and ideas to destabilise your listing or opportunities.
The price or rent that you offer the client is likely to be different than that which they require. Show them some relevant market evidence to help them understand the circumstances of the market today.
The listing type that you need may not be what the client wants to give you. Always go for an ‘exclusive’ listing. Open listings are a great waste of your time and effort; if they sell or lease, it is more from luck than anything else.
Your fees in both commission and marketing can be a hurdle. Set fees that are based on a quality service and the time that you are going to apply to the listing. Tell the client how you will take their property to the market.
The method of sale or lease can be of concern to the client. They may not want to take too much risk in the sale or lease process. That being said, if you know the right way to sell or lease the property then have strong evidence to support your arguments.
Here are some presentation tips to use as you present your ideas to the client about their property and their needs today.
Do not use a fixed or written script that is likely to limit the presentation. Be open and natural as you talk to your prospects to show your confidence and knowledge that can help them. The confidence that they see from you will come from the body language and the words that you use.
Use all the clients’ senses to convey the message. Bring together two or more senses in your presentation so the client is involved and connected to your story. You can do that by giving them something to hold (a proposal) whilst you show them some images or photos of the property, and as you explain your ideas and strategies. Fully connect at all levels.
Have solid recommendations that are innovative and relevant to the best outcomes for the client.
Show them the competition properties that they are up against and how you can adjust around those issues.
Know the market and the relevant property solutions that are applicable to your market. It is notable that many agents and realtors are too general in the presentation. You must build your presentation on relevance and speciality that is connected to the property. The client has to see that you are the best choice of agent to help them.
When it comes to managing commercial and retail property, it is very important to optimise the income for the landlord. The income for the property should be looked at both individually with separate leases, and across the entire property and the tenancy mix.
At the beginning of every financial year, there should be some form of budget created for the tenancy mix and the potential property income. All of the leases currently existing will have rental strategies and rental increases to merge into the income budget. This income budget can be incorporated into the business plan for the property for the upcoming year. The best time to do the budget is in the months of April and May, just prior to the beginning of the financial year.
Here are some tips relating to income optimisation in commercial or retail property management:
Always allow for some measure and method of adjustment given that the property market is always changing in your local area. When you set a property income budget, it should be reviewed on a monthly and quarterly basis. Any established trends in the local area should be tracked and then be used as a form of rental adjustment for the landlord if those trends are firm and established.
The vacancy factor in your local area will change based on the supply and demand of available property. To monitor this process, you should track down the changes to the property development plan in the region. Look for any new developments that could have an impact on your property. Those new developments will have a timeline of construction and occupancy; it is likely that those developers will also have an allowance for rental incentive to attract tenants into their property. That incentive will have an impact on your property leasing strategies.
Market rentals will change from time to time. They do not always go upwards, and more commonly will stagnate or slightly reduce when the property market slows. To help you with the levels of market rental, you will need to understand the impact of incentive in the market rental structure as it exists today. If an incentive exists in any market rental negotiation, it creates what is called a face rental. That face rental will be discounted by any property valuer back to a level that is truly aligned to the effective rental and the market. Incentives create a false level of rental.
Business sentiment will change from time to time based on the local and regional economy. Some business segments and business types will be more active and successful than others. Track those business segments and monitor the needs for property change or occupancy. Some of those tenants could be relocated to your property if the opportunity arises.
Existing tenants in the property should be categorised into long-term tenants and short-term occupants. Some tenants will be more attractive to the landlord and the performance of the property over time. They may have a tenancy profile or business identity that encourages other tenants to the property. Reviewing the tenancy mix is called tenant retention. You can create a tenant retention plan as part of your business planning model.
Pressures of expansion and contraction will change from time to time with all other tenants in your tenancy mix. Look for those changes, and keep close to those issues through the business year to identify any pressures of change that may need to be accommodated in the building. It is better to have a tenant in your property that you understand and appreciate, than find a new one that is unproven and costly in occupancy changeover and leasing costs.
The income for a commercial or retail property can be enhanced when you fully understand all of the above factors and adjust the property accordingly. It is not unusual to adjust the business plan or for a property three or four times during the financial year.
In today’s commercial property market, listings and commissions can be a bit challenging. That being said, top agents know how to prospect on a regular basis and build their pipeline of opportunity. It is the pipeline that helps them with quality listings stock and qualified buyers or tenants.
In any property market, the prospecting process or system that you adopt should be well managed and implemented on a daily basis. Prospecting is not something that you can do once a week, or when you get sufficient time. It is also something that should not be delegated over to someone else; far too many agents are remote and distant from their market for this very reason.
It is interesting to note that so many agents and realtors will overlook the prospecting process if they have other things to do that they consider more important. This single one decision impacts their future business in a major way.
Top agents prospect every day regardless of market conditions. They know that the prospecting process will reap benefits over time. Developing the habit of prospecting and cold calling takes significant effort on a personal basis. That is where many salespeople struggle and give up.
Here are some tips to help you establish your prospecting model in your local property market place.
Take charge of your time and commit to prospecting for 2 hours every day. Choose the same 2 hours where you believe you can connect with your group of prospects and business owners. In the space of 2 hours you should be using the telephone as the primary and introductory point of contact.
When you make the cold call over the telephone, you are simply seeking to understand if the person has a need or an interest. Many people will not require your services now or in the future. The cold call that you make should filter those people out of your database list.
As a general rule, you should never pitch or sell your services over the telephone. That does not work in commercial real estate given that the services you offer are quite complex. To help you here I go back to the point that your telephone call is simply to see if the person has a need or an interest.
The dialogue that you use in the telephone call should be friendly and conversational. To achieve this advantage you will need to develop your script and practice the words. When the words you use become natural as part of the conversation, your conversions to meetings in and from the telephone call will escalate.
Set yourself some targets to be actioned as part of the call process. That will normally be the number of outbound calls, and the number of meetings achieved. Typical ratios will be one or two meetings from 40 or 50 calls. In making 40 or 50 calls you will not get through to that many people. In fact you will only get through to maybe 20 people at the most. On that basis you need to be prepared for the well-known rejection factor.
Keep your prospecting and call processes organised so that you can follow up old clients and people spoken to previously. At some stage in the future, they are likely to be prospects for active property activity.
When you have done your daily calls, you can get out of the office and into the sales territory for any meetings that can occur. Meet more people at every opportunity.
The prospecting process in commercial real estate is quite specific and specialised. That is why it never pays to pass the task on to someone else. Passing the ‘buck’ and avoiding the issue simply doesn’t work. Top agents do their own prospecting on a daily basis understanding that they can achieve significant market knowledge and advantage from talking to other people.