How to Rehabilitate a Commercial Office Tower Property Performance

city office buildings
Older office buildings present property performance challenges.

Some office investment properties struggle from time to time both financially and physically.  If you can predict and adjust to that change, then you can build a good average property performance over time.

So why does this change happen?

Many local property issues can be driving change and placing pressures on the property performance thereby impacting the investment.

You can adjust to the changes.

So to improve a commercial property, you should assess where things are now.

Here are some of the bigger things to help you get started:

  1. Before you get too far into things, define ‘Property Performance’ and what it means to you and or your client – You can’t improve something unless you define it and assess it. Then you can compare the property to others locally and regionally.  It should be said that some properties are so special that you could be making comparisons and assessments with other buildings far afield.
  2. Look at the property from different aspects – In understanding a property there are a few key indicators or categories of activity to review. Here are some of the bigger ones to help you get started – Financial, Physical, Lease Documentation, Tenant Mix, Vacancy factors, Occupancy costs, Net Income, and Maintenance.  There will be strengths and weaknesses in each category.  When you drill down into the separate categories you can see what you have to work with and any problems that may need resolving.  Some adjustments take months if not years to resolve.  The larger the property, the greater the variations of things to look into.
  3. Do a SWOT assessment – There will be unique issues in any property that could be impacting property performance. It is valuable to do a SWOT test for the property.
  4. Implementing a tenant plan – Some tenants will be better than others when you consider property performance over time. Understand how you can keep your good tenants and what you should do in preparation of any pending lease termination. Rents and incentives should be set as a target point for any priority tenants.
  5. Implementing a budget – A budget of income and expenditure will help you stay on task during the financial year for the asset. A budget also makes you look at the variables of property performance that you can see coming up.
  6. Review lease documentation – Some leases will be better than others from a landlord perspective. A standard lease for the asset can be set for targeted rent strategies, lease occupancy, incentive offerings, and fit out standards.
  7. Capital works programs – There will be big issues in property maintenance that fall outside of normal repairs and maintenance. For example you may have to purchase a large piece of plant and machinery.  That high cost component could be structured into the timed expenditure budget for the property.
  8. Regular property maintenance – Stagger the preventative maintenance routines into the property performance budget. The contractors will have plenty to say about what they believe should be done and when those works should occur.
  9. Rates and taxes – One of the biggest drains on property expenditure will be rates and taxes. At certain times of the year these big accounts will need to be paid.  A budget will help you plan how you can the payment of those larger accounts.
  10. Better quality leases – Generic leases are a big waste of time for a landlord when it comes to any high quality property. Remember that the leases in a property reflect the cash flow and the investment strength of the asset.  Get special leases prepared that reflect the investment targets of the client (Landlord).  Every tenant will want to lease premises on their terms and conditions, but the landlord owns the property and deserves a reasonable lease document to support the investment.
  11. Renovation plans – Understand how factors of ‘wear and tear’ impact the property. As the property ages, you will need to establish renovation plans of the common areas including car parks, entrances, foyers, and building surrounds.  It is hard to drive a reasonable level of rent in the property if the presentation issues are not kept up to scratch.
  12. Better tenants – There will always be some good tenants locally that you can influence in entering your property on a long term lease. Create a lease of targeted tenants that you will call on when vacancies are seen to be occurring.  Track lease expiry dates with those special tenants that could move into your property.  Offer the right deals at the right time.
  13. Improved market rent – Are the local rents going up or are they stable? Rents can be escalated if the lease document supports the defined landlord investment targets.  Be careful with market rents that are too aggressive; you want your tenants to run viable businesses for the long term.
  14. Outgoings costs review – Compare your outgoings costs to similar buildings in the same location. Rates and taxes will always be a variable given that they are structured on property values, however you can look at the averages and determine where your property sits by comparison.
  15. Third income streams – Look for extra income from extra occupancy strategies such as storage, signage, and change of premises, licenced areas, antennas, and increasing of lettable space.

So there are some good things that you can do here when you want to boost property performance and income potential.  Are you ready to make some positive changes?

You can get more tips on commercial property management from our eCourse Snapshot right here.

Commercial Property Managers – Rehabilitation Strategies for Older Office Properties

city office building
Stay ahead of property maintenance and performance.

Like it or not some commercial investment buildings will age and factors of change consequently occur in property appearance and performance.  When that happens, tenants are commonly attracted to newer properties in the same location.  Landlords can be under threat of a declining tenant mix and marketing rental.

Local property developers

It is a fact that property developers for any new project are likely to be offering incentives and relocation strategies to pull across tenants and businesses to boost their project cash flow and occupancy.  If you are a leasing expert or property manager for your location, you will need some real strategies to underpin property performance for your clients.

Maintain the mix and the rent cash flow

As any investment property ages, a renovation strategy is a wise solution to maintain tenant occupancy and net income.  Such a plan should be incorporated into the annual business strategy for the property and the associated capital works programme.  The leasing and or property manager for the asset should be part of that assessment process.

Property performance strategies

So the message here is quite clear for any property owner and or property manager.  To sustain reasonable levels of property performance within any investment building, a real initiative needs to apply when it comes to property upkeep and occupancy.

There is a balance to consider here between the incomes achieved or achievable for the property, the regular maintenance required within the asset, the prevailing market conditions, the cash flow requirements of the landlord, and the demands of the occupants.  Are you ready to balance the equation?

Why does this happen?

It is worth understanding why these problems evolve and then taking action accordingly.  Some of the older investment buildings struggle for a number of reasons such as:

  • POOR SPENDING: Insufficient spending on property upkeep over a period of time can be a real challenge. Some landlords are too tight when it comes to property cash flow and maintenance costs.  They hold back on discretionary issues relating to maintenance.  Over time the property then degrades and the visual appearance suffers.  As tenancies move towards lease expiry, they are quite likely to reconsider occupancy costs, and look after moving into other more modern assets locally.  Protect your tenancy mix and lease income.  Understand what the tenants require to run a successful business.  Understand the needs that they have when it comes to staff, customers, occupancy, and business activities.
  • LACK OF MAINTENANCE: Poor quality maintenance routines and poorly selected contractors are an all too common problem. Building design and layout will dictate particular standards of property maintenance and upkeep.  The plant and equipment will also have maintenance upkeep requirements.  Establish a routine of property maintenance review and risk controls.  On a quarterly basis assess property performance and degradation.  The larger remediation items of a capital expenditure nature can be programmed into the property cash flow and budget process.  If
  • NEWER COMPETITION: An abundance of newer properties coming into the market can change future supply and demand; the older properties are likely to suffer. Property developers will always study market conditions and the opportunities for a new project.  They will predict occupancy into the future.

All of these issues are simply structured around asset positioning.  If you are working with the property owner in a regular and ongoing way, and you understand the opportunities within the property tenancy mix, you can make the right choices when it comes to property rehabilitation and upkeep.

When you optimise the net rental income and the tenancy mix, monies are usually available to sustain property presentation and maintenance.  It is a fine balance but it does work.  Get involved with the assets that you lease and manage.

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

Commercial Real Estate Brokers – Why Reputation is So Important in Your Career

blurred picture of man and woman
Understand the significant value of commercial real estate broker reputations.

Assess the reputation of your commercial real estate brokerage today as it stands in the current property market.  Also assess your reputation as an agent in the location.  What are the levels of reputation currently? Can things be improved?

Trust and reputation are big issues in commercial real estate today.  There are some ‘reputation’ issues here to consider when it comes to commercial real estate brokerage performance and market coverage.  Where do you stand and what is the position?

Why is this so?

The reputation of any brokerage and or agent can significantly impact current and future enquiry rates and conversions.  The reputations can also impact future referral conversions and repeat business over time.

Many of us will have seen agents and brokerages that are struggling to find listings and convert commissions.  There are many potential reasons for those things to be problems; however real estate brokerage marketing and reputation are key elements and indicators to watch in the success of any agent today.

If you are to be newly employed as an agent by a commercial real estate brokerage, explore the local area first to understand the reputation of that business today, and what it may have been over the years.  There will be strengths and weaknesses of reputation to identify and review, some of which will impact your ability to locate and convert new business.  You want to work with the best brokerage in the best location.

The Indicators

What are the indicators that you should look for here and question when it comes to the brokerage reputation?  How can your business activities fit within the brokerage?  Consider the following:

  • Previous transactions – Any active commercial real estate brokerage should have had plenty of previous business activity in a location. That will be a good indicator of market coverage and market share.  A brokerage with a good market share will be an advantage to you when it comes to prospecting for new business, listing conversions and client growth.
  • Referral business – Over time you will want to convert referral business where possible with your existing clients. That means you will need a good business reputation and a high level of professional service to support your referral activities.  Asking the right questions at the right time with your clients will help you convert referral business.  Most clients will allow you to access referral opportunities if your professional skills are sufficiently high and they have a good level of trust in working with you.
  • Repeat business – Some other clients that you work for will be repeat customers in many different ways. You will be able to move across sales, leasing, and property management opportunities.  Will your brokerage have the necessary staff and skill mix to support those special property disciplines?
  • The client database – Any established brokerage should have a comprehensive and up to date client database. That then allows for cross selling and leasing across the broader client and listing inventory.  Ask a few questions about how you can interact with in the client database of the brokerage.  Also ask a few questions about how you can grow your own database and who will own the data within that prospecting effort.
  • Market coverage – Look into the area and the precinct that the brokerage currently covers. From that investigation you can assess the levels of competition and the levels of dominance that you will be competing against.  Get to know the top agents and or brokerages that you will be the competing with.  When you understand those competitive factors, you can modify your marketing and prospecting activities accordingly.
  • Client interaction – Our industry is predominantly client related. Most of the listings that you create will be centred on client interaction and the client relationships that you build over time.  If you convert new clients as part of your prospecting activities, how can you protect those clients from your competitors?  How can you stand out as the agent of choice when it comes to the location and the property type?  Your strategies relating to client interaction and market coverage will need to be well defined and established.
  • Online marketing – The brokerage should have some active and professional online marketing strategies underway at all times. Generally those factors will include the industry portals, websites, social media, and database interaction.  How can you tap into those specific online marketing strategies?
  • Newspaper marketing – Understand the levels of newspaper marketing undertaken by the brokerage in your location. What are the levels of marketing that apply?  How much inbound enquiry comes from newspaper marketing today?  Marketing is not the only way to pull in the new business although it is a big part.
  • Community involvement – Can you say that your brokerage is deeply involved in the local community, and particularly the correct segments? Is your brokerage doing everything it can to attract enquiry from local property investors and the overall business community?  Given that most commercial real estate activity comes from the business community and the investors that are investing locally, your brokerage should have specific strategies active at all times across community groups to tap into both of those segments.  How can you be part of that community involvement?  What community groups can you join?

So there are some good things for you to do here when it comes to reputation building and brokerage coverage.  Ask plenty of questions within your brokerage as to each of these factors mentioned.  You will soon see the place for you to build your marketing and listing activities, as well as commission opportunities.

You can get more broker marketing tips in our eCourse ‘Snapshot’ right here.

How to Attract New Commercial Real Estate Business in the Best Ways Possible

business men talking outside building
Focus on the best ways to convert new commercial real estate business.

To get a reasonable market share around you in commercial real estate brokerage you should consider your daily efforts and actions.  Understand what you are doing and not doing.  Understand the things that are wasting your time.  From that point it is just a matter of change.

Caution!  Some agents and brokers never change their ‘problem’ habits, and on that basis they struggle for their entire career.  Things don’t need to be that way.

How’s Your Business?

Perhaps you are wasting your own time in real estate due to a lack of process and quality in your business systems?   So it is time to step up to move into a better level of property performance.  It’s  a good year in the industry and there are things out in the market to be done.

If you are lacking listings, enquiries and clients, then you are likely to be lacking good business processes centred on the best clients and properties.  Here are some ideas to help you resolve that:

  1. Think about and action your prospecting around your listings – When you have a listing in your area and within your property speciality, you have something to work with. Use your listings as reasons to talk to others in the street or suburb.  Remember that business owners need to relocate from time to time, and property investors look to upgrading their portfolios.  Help those people remember you at the right time by getting in contact and staying in contact in a relevant way.
  2. Referrals – When you have finished a successful transaction you will have the opportunity to explore referrals, leads, and repeat business. If the client is satisfied with your professional efforts then there are things to do with referrals and leads.  Help other people to direct you to the next clients and property owners that you can serve.
  3. Previous clients – Go back in your sale and leasing records to find those people that you and or your business has helped over the last 5 years. It is likely that some of those people are still active in the property market.  Do they want some more help?
  4. Other agent’s clients – Don’t be afraid of positioning yourself with clients that currently use other agents and brokers. There could be some reasons for those clients choosing a different agent.  Professionalism will help you connect with those people and stay in their memory for the right reasons.
  5. FSBO – This is a strange market segment, although a useful one. Some FSBO owners eventually give up trying to resolve their property problems.  Let’s face the facts; they probably don’t have the contacts, the database, or the skills to negotiate a sale or lease deal professionally.  Can you help them?
  6. Investors – Local property investors are great clients for the long term. They need all types of help across tenant mix issues, leasing, selling, renovating, and portfolio mix.  When they trust and respect your skills, you can do something to help them.
  7. Business Owners – Stay in contact with local business owners. They will require professional property assistance at some time in the future.  Keep them up to date with prices, rents, enquiries, and stock availability.  Share your facts about the property market and pull in the local business owners that can use your help.

These simple strategies will help you attract more new business in the best possible ways.  Make yourself known locally as the agent of choice; that agent that people must go to when property challenges present.

You can get more tips on business building in our eCourse ‘Snapshot’ right here.

Reflecting on the Change Opportunities in Commercial Real Estate Brokerage

city buildings
Look for the change in your commercial property market.

In the commercial real estate market, change happens all the time, and that change will bring with it opportunity with listings, clients and commissions.  So the message here is that you should look for change locally in your town or city and ‘tap into it’.

Where’s the Right Change?

So what sort of change can you find?  How can you use it?  You gather information from a number of sources.  Think about some of these for starters:

  • Local businesses – Watch for changes in local businesses. Most particularly that could be in manufacturing, staff, or business direction; perhaps even a new contract being granted for a new project in a business segment.  A good way to tap into those things will be through the names and the stories that you find in the local newspaper.  Go to the business section of the paper and read it to get names and information about things that are happening in different business segments or corporations.
  • Use Google – You can set up the Google search engine to send you news alerts about particular things and issues. You should at the basic end of the concept have Google alert you to stories about your suburbs and city.  Perhaps you can add other search criteria to the alerts such as commercial property, shopping centers, industrial property, and property investment.  Each time you go into the news segment of your browser you can then see if any new stories appear.
  • Search CEO’s – Through the search engines search out the names of CEO’s and important people for the bigger businesses. When you have a name you have something to focus on in contact calling and direct mail or email.
  • Local franchise groups – Go on to the internet and search the local franchise council (or equivalent) so you can get the franchise group names that may be active in business segments. From that point you can make direct calls to the franchise groups to see what they are doing and needing from a property perspective.
  • Annual reports – Some of the local public companies and businesses will put out annual reports for their shareholders about their business results and future directions. Get the reports and review them for change and challenges; information like that is valuable.  Look at the property asset base for the larger businesses and understand what those annual reports are saying.  Those companies may own or lease properties locally.  What help do they need with property?

So the message here is that you can find change in your local property market.  You can then do something with that information and build fresh leads and client activity.

You can get more tips and ideas for commercial real estate brokerage right here in our ‘Snapshot’ eCourse.

Commercial Real Estate Snapshot Podcast 225 – A Focus on Commercial Real Estate Leasing

audio headset
Commercial real estate training MP3

In this podcast I thought I should spend some time focusing on Commercial Real Estate Leasing.  That is for a number of reasons, the most important of which is that property leasing introduces you to the landlords and property owners who will eventually need more help in the future with things like sales and property management.  In other words a simple lease transaction can lead to other things.

I have split the audio program up into a number of  segments.  The summaries of the program are below:

  1. Why you should not let your tenants get out of control – in any property containing a group of tenants, the communication and control process is very important.  Tenants talk to other tenants and that can be a problem if issues exist in the building.  So this is all about those buildings with multiple occupants and how to connect with them.
  2. How you can be a commercial real estate leasing expert – you can do so much with your leasing knowledge.  You can establish tenant advocacy services, landlord leasing services, tenant mix advice, and basis brokerage leasing.  What sections of the leasing market can you see reasonable leverage and commission activity evolving from?  This part of the audio program will help you with ideas.
  3. How to work with franchise tenants and why that is a good idea – the franchise section of the commercial property market today is forever evolving and growing.  If you connect regularly with local franchise groups you can help them with property selection choices and any required relocation’s.   Get to know a few franchise tenants locally and come to understand what they need by way of property and when that is likely to occur.
  4. Some simple ideas for qualifying industrial property tenants – the industrial part of the property market is generally the first to respond in an upturn and also a downturn.  That being said it is a reasonably uncomplicated part of the industry.  Get to know a number of industrial tenants and businesses locally; see if you can help them with current and future property needs.

These are parts of the audio podcast by John Highman.  You can listen to the audio below.

Commercial Real Estate Online – Podcast 224

audio headset
Commercial real estate training MP3

At the start of the new financial year, now is a good time to look at what we are all doing when it comes to prospecting and new business activities.   In this podcast I have covered topics that are sales related and most particlularly:

  • How to work with direct mail in commercial real estate brokerage
  • Why you should focus on the right people as part of your prospecting model
  • How you can work with expired and withdrawn listings

The marketing activities that we deploy now are likley to bring momentum over the coming months.  When you consider that we are at the start of a new financial year, these topics will help brokers and agents focus on the right strategies in today’s property market.