Most commercial investment properties will have vacancy pressures to deal with from time to time. The larger the property, the greater the potential for vacancy issues to frustrate rental cash flow. If you are involved in the management or lease of any large investment properties, it is essential that you understand the intentions of sitting tenants when it comes to future occupancy. The concept is called tenant retention.
Tenant Retention Plans
In an ideal world, vacancies should be resolved quickly and effectively for any landlords that you act for. The only way to achieve that level of control will be through a mix and match of the following strategies:
Understanding the intentions of sitting tenants when it comes to lease expiry
Monitoring the upcoming lease expiry dates approximately 18 months in advance
Negotiating any lease expiry’s early so you can deal with the vacancy in a timely way
Keeping in close contact with all of your sitting tenants within the tenancy mix so you know what they are thinking when it comes to occupancy
Understanding the local business sentiment applies to rents, relocation, and property requirements
Keeping in close contact with all local businesses to attract new tenants to your property when required
Understanding the requirements of the landlord when it comes to market rental, cash flow, outgoings recovery’s, and lease documentation
Any leasing agent providing a specialised leasing service locally should satisfy and engage in all of these mentioned issues. All of these issues can be merged into a tenancy mix plan and a tenant retention plan for a major investment property. Large office buildings, and large retail shopping centres would be suitable for those control processes and plans.
To provide a top-quality leasing service, any vacancies currently or into the future should be controlled and filled. A top leasing agent will stay in contact with the landlord and all the tenants to ensure that vacancy downtime is minimised.
Any vacancy in an investment property can be a significant drain on cash flow over time. Not only is there a loss of rent, but the outgoings for the vacancy will become a landlord cost and therefore not recovered. Any property with a high vacancy factor will find it difficult to negotiate rent reviews and options with sitting tenants. Market rentals will also be hard to establish and maintain because of the high vacancy factor.
If you are involved in the management and leasing of any complex property with multiple tenants, it is essential that you track and control vacancies as they apply to the tenancy mix. Work well in advance to negotiate existing lease options, minimise vacancies, and attract new tenants that could be thinking about coming to the property. Why is your property more attractive than others in the area to tenants? When you know the answer, you have the basis of your lease marketing campaign.
Many times I have seen brokers and agents change brokerage and property market location thinking that the change will bring them more opportunity with listings, commissions, and clients. Whilst that can sometimes be the case moving to that new brokerage, do not overlook the issues of personal performance.
Many agents and brokers struggle with the requirements of personal performance in commercial real estate. They are commonly not prepared to do what it takes, or disciplined enough to take the necessary steps with personal performance; they fail to develop the correct disciplines to improve their market share personally.
Like it or not, the results that you achieve in commercial real estate are largely personally generated. The brokerage and the real estate brand that you work for can only support you in a minor way with a small amount of enquiry and market share. Most of the sales and leasing opportunities created largely come from personal efforts and prospecting activities. Your database is so important in the process.
Know Your Personal Performance Issues as a Broker or Agent
Before you consider moving brokerage, have a serious look at what you are doing every day with prospecting, marketing, database activities, and your client list. Those four factors will have a lot to do with the results that you achieve. It is a lot easier to improve personal performance than to waste significant time in changing brokerage and a new sales and leasing territory.
Here are some ideas to question if you must move to a new location as part of a new brokerage structure.
Location – Understand the location and the territory that will be yours to farm and extract listings from. Get the history of the area when it comes to sales and leasing activity. Determine how much more new business can come from that area.
Other Agents – Consider the amount of competition and other agents in the location. Some of those agents will be well established and top performers in their own right. Would you be able to compete against those agents and on what basis? You will need a strategy of approach when it comes to marketing yourself in a new area.
Sharing Commissions – Look at the commission splits that apply to any sale or lease transaction that you create. The commission splits are likely to be influenced by the administrative costs and support services provided by the brokerage. It is far better to work for a brokerage that provides a comprehensive support structure, thereby allowing you to get out into the marketplace to generate leads, listings, and commissions.
Property Specialization – Determine if and how the brokerage will allow you to specialize in a property type within a defined geographical area. Can you be given exclusivity to work the patch and the property type?
Database Ownership – Who will own your database and the information contained in it? Given that you will be loading the database with fresh leads and opportunities, who will own that data in the situation where you want to leave the brokerage and move on? It takes months if not many years to establish a good database of buyers, investors, and tenants. In an ideal world, that database should be your property in all respects. Ask plenty of questions when it comes to the ownership of this valuable information.
Operational Costs – There are certain operational costs to be considered in working as a broker or an agent. Desk costs, telephone, administrative support, marketing materials, and stationery are commonly charged back to the agent or broker. Understand how these things work and how they will impact your commissions earned.
So the message here is quite clear if you are considering changing brokerage or location. Get all of the facts relative to the market, the brokerage, and the location. You can and should also assess factors of personal performance to ensure that you are fully committed to prospecting, client contact, and growth of market share. That’s how top agents rise to the pinnacle of the market in their location.