There are all sorts of procrastination problems in commercial real estate brokerage today. Don’t let them hold you back or derail your business efforts. Break through the barriers and issues that are holding you back. Time is your most valuable resource, so use it well and dedicate your time to the things that really matter.
Get your business diversions under control and stop procrastinating. Know what is important to your market share, client list, listings, and commissions. Somewhere in that awareness will be listings and leads. You (and only you) are the person to resolve the ‘quandary’.
Your key resource?
So, as I have said, the most important resource that you have is time. Use your time wisely and specifically. Yes, you will have challenging and difficult things to deal with every day, but do the work in an organized and specific way; that is how you build your real estate business. Are you ready to move ahead in the industry?
Solutions to common problems?
Here are the solutions to help solve procrastination, given the typical commercial property agent problems:
- Unrealistic clients – some clients will waste your time, so don’t let that happen. You are (or should be) the property expert, so tell the clients what you can recommend with the property listing and or the challenge of the client; if they won’t listen, then you have a choice as to whether you should take on the property and the challenge. Don’t take on a listing or client requirement that is too far off the market. Give good reasons for your recommendations and be very specific when working with clients. Be prepared to walk away from an unrealistic client in a professional way.
- Too many meetings – some brokerage businesses are overly controlling of their agents and brokers. The fact of the matter is that top agents don’t need to be controlled; they know what they have to do and they will go and do it if you let them. One brokerage meeting per week is more than enough to control and direct a real estate business, and that meeting should be at a time of day that is not ‘peak’. On another note, any of your junior agents and trainees should be controlled through direct mentoring and not frequent meetings involving others. Allow your good agents and brokers to get out into the market each and every day. ‘Kill’ the extra meeting requirements.
- Complex listings – some of the larger properties take a lot of research and investigation before the property is released to the market. That is your job and you can’t avoid the full property investigation requirements. However, when the investigation is done, the mundane listing issues can be done by others. Make sure you have the right administrative support to get this extra work done.
- Complex marketing campaigns – this is a special problem to watch. Your marketing has to be specific to the property and the location. You should be taking a good degree of time in structuring and releasing your marketing campaigns on your exclusive listings. Sure, open listings are a different situation and they should not take much of your time, but differentiate your marketing efforts and only spend extended time on your exclusive listings.
- Unqualified inquiry – we have all been impacted by people that seem to say that they can purchase or lease a listing. Deeper qualification about their market awareness, intentions, budget, and inquiry will prevent you spending too much time on ‘time wasting’ people.
So you need a plan to solve these things. What could you do with that plan? What could you put into it? Some of the answers here will help you get your plan in motion.
In commercial real estate brokerage, you can find plenty of opportunity locally when you delve into the factors that support and drive the business community. When you understand the business community, you can turn that understanding into property leasing and sales activity.
Property Investments thrive and change when the local businesses are growing and relocating. As part of your brokerage prospecting model, get to know what businesses are doing and what they are thinking when it comes to growth and location.
Don’t be ‘Average’
Far too many agents and brokers wait for the listing opportunity to come to them through some inbound telephone call to the local real estate office; that is the slow way to grow market share.
If you want to get anywhere faster in our industry, then get out into the property market daily and talk to local business owners.
Find out what they are thinking about the pressures of their business and industry segment; some business segments are more active than others and that is what you can work with.
Ask questions about:
- More or less space
- Growth pressures
- Head office changes or merges
- New businesses moving into the location
- Improvements serving the business needs
- Access to transport or end user markets
- Lease duration or end of lease
- The decision maker involved in finding new business locations
As an extension of this idea, you can work with particular types of businesses such as:
- Franchise groups
- Bulky goods warehousing
So when you put these variables into a ‘local area equation’ of prospecting for new business, you can ask some valuable questions about business intentions, shifts, pressures, and requirements. Don’t be afraid to talk to new local people.
Local area business
Most of your new business will come from the local area. You want people to remember you so get out into your zone or territory and talk to the right people in a positive and direct way. Do these things:
- Create a list of streets for your location where the better businesses are located.
- Segment the businesses in size or type.
- Research the leaders of each business before you make the call or contact.
- Look for any property pressures in the location by travelling the streets and looking for the tell-tale signs of pressured property occupancy.
The good thing here is that there will always be local businesses looking for help in finding new premises. Whilst it is always good to know the owners of properties, you should also get to know the occupants as businesses as well.
Somewhere in that owner/occupant awareness, you will find property change and churn requirements. Grow your property market on the basis of local area awareness. Talk to more people every day and build your business directly.
The shopping centre management process is quite special in so many ways. That is why only certain brokers and agents take up the challenge of retail leasing, management, and sales. There are things to know and things to do. The benchmarks and the indicators are different in ‘retail’.
The goals and targets that are standard to the retail process are usually improving income, reducing vacancy factors, and keeping your good tenants for the long term. You could say that they are the major internal factors of property performance for a typical retail property or shopping centre today.
Know the Retail Factors of Influence
So what else do you need to think about? In addition to the nominated items, there are the ‘external factors’ that are harder to control. The external factors are typically shopper spending patterns, shop visits, frequency of shopping, and the amount of money spent on average per shopper. The marketing of the property will be part of the overall plan.
You can now see why a property performance plan is really important in any retail property today. So let’s put some of this together.
To keep all of these things in balance and on track there are a few business factors to implement in the running of a retail shopping centre. Here are some of them:
- Develop a business plan – A business plan in retail shopping centre performance is and should be all encompassing, generally covering all the issues of the daily running of the property and the involvement of tenants, customers, and investors. With a good business plan, you can make choices when it comes to rentals, tenant movement, renewals of leases, and property expenditure.
- Know your tenants and their priorities – Some tenants will be trading more successfully than others. Look for the differences to see what can be done with trading and sales. It is wise to look into gross profit and net profit margins with any tenancy group. The averages will tell you if a tenant is trading more successfully than others.
- Review all of your leases – The shop lease is the foundation of income recovery and growth over time; with all leases you must know how they work and what is involved in enforcing lease conditions when matters of change or risk occur. Each lease is different so you will need to build a profile of the tenant’s lease and the critical dates. Track the critical dates so you can take action early in any issue or problem.
- Establish a tenant retention plan – Differentiate your tenants so that you are protecting and encouraging the best tenants to stay in the property for the long term. They may need encouragement, so a tenant retention plan lets you set the rules to the process.
- Watch the sales and trading figures – You can watch these figures if you have the cooperation of the tenants in the property. You can gain and protect that cooperation through the terms of the lease. From those figures you create graphs that show moving annual turnover (MAT) and sales in merchandise or retail segments. Ideally the tenants in the property should have to produce turnover figures for their shop on a monthly basis. From that point it is easy to see the retail segments that are selling products well, and also the other segments that may be struggling. That is where the tenant placement and tenant mix then has a valuable strategy for the property. You can build clusters of tenants around the property so that customer interest is encouraged and sales are boosted between like or complementary tenants.
- Develop a marketing plan for the shopping centre – A plan of this type will allow for the retail sales seasons at different times of the year. There will also be themes for the local area and customer interest.
- Reduce vacancies with a tenant retention plan – The only reason you need vacancies in a property is when you are about to renovate and move tenants around. A few vacancies will give you the flexibility to change the property. When you look at the total tenant mix in a property, some tenants will be more important than others to the future of the asset. That is where the tenant mix plan comes in; you decide who you want to keep in the property and for what reason. You then build a rent a leasing plan around those factors.
So there are some good things that you can do here with retail shopping centre leasing. Understand the property in a comprehensive way. Then you can match the property strategically into the location and the customer demographic.
When you work with the commercial property or asset, the income stream and particularly the levels of market rental within the asset will have a large impact on investment performance.
As the local broker or agent for the area and for the property type, it is your job to understand exactly what the market levels are doing for the property and for the location.
Consider the following market rental questions and issues as they apply to assets that you may have now for sale or for lease:
- What is the market rental today in the property and how was that rental set? The true market rental must be something that was set through negotiation between willing and involved parties to a lease situation. The landlord and the tenant must have been fully engaged in a property negotiation to determine the real market rental.
- What are the differences between the tenancies when it comes to location? Some locations are importantly different when it comes to setting and negotiating rent. Any building and any particular tenancy will have location factors to consider when looking at rent. Make sure you inspect the properties comprehensively to identify the location differences. Look at the strengths and weaknesses of the properties as you review income from the leases.
- How will those differences impact in any market rental establishment or review? When there are differences in location, the market rental should be adjusted accordingly. Assess every comparable rental and look at the strengths and weaknesses evolving from location. Also determine the rental type in any lease, i.e gross, net, face or effective.
- Understand the impact of any incentive that may still be active in the establishment of a tenancy and lease situation. Incentives should be discounted from the face rental so you can understand exactly what rent is really being paid.
- What is the permitted and legal use of the premises? The use of the premises should be similar when you are comparing properties and market rentals. Also look at the factors of property zoning that apply to the different assets being compared.
- How recent are the reviews undertaken? Rentals change over time so always determine the dates on which rentals would have been established in any review and market situation. If the date of review is relatively old, you will need to look at the property trends in the location since that review.
- Where are the comparable properties and tenancies located? What are the differences that apply to services, amenities, and improvements? When you look at each and every property involved in a market assessment, location factors will have a big impact on the final rental outcome. Those location factors and other variables will include ease of access, visibility, branding, local transport, highways and freeways, and also are the services and amenities applicable to each property. That is why it is so important that you physically inspect any property involved in comparing market rentals.
- How large are the tenancies that you are using or identifying as comparable? When you compare properties, understand the size of each tenancy space involved in each market review, and also look at the quality of the fit-out in each case. The larger the space, the lower the level of rental per unit of area under lease and of the area of space occupied. The quality of the fit-out will also directly impact the achieved rental.
- Are the properties of the same type? You can only compare tenancies and properties when they are of the same type in a very similar location or precinct. Make sure that all the factors of property use and occupancy are fully aligned in your comparisons.
- Have you reviewed the lease documents as part of the comparison? You can always get to the complete facts of any lease market review when you look into the lease documents and the terms and situations that applied to the last rental establishment and occupancy agreement.
- Critical dates will apply to the market review and certain understandings will also be outlined within the lease document. Whenever and wherever possible, ask to see the lease documents that apply to the market review that you are using in the property performance and market rental assessment.
So there are some important and relevant things that you should look into and review as part of undertaking a commercial market rental assessment and property performance investigation.
Take the time to look into things comprehensively, and as part of that process inspect the properties, interview the tenants, talk to the landlord, check all elements of the documentation, and assess the rental trends for the location.
The income for a commercial Investment property will have a direct impact on the potential price that sale. On that basis the income needs to be fully understood and investigated as part of the preparation for listing.
Any agent or broker listing an Investment property should take the time to review everything that could have an impact on current and future property income. Look for the strengths and weaknesses that apply to the property income stream and the cash flow for the asset.
Strengths and Weaknesses
The buyers for any Investment property will always undertake a due diligence on the listing and the location; weaknesses will be found so make sure you understand where those weaknesses are and how to address them. They will be looking for things that will have an impact on property performance over time. Some problems in cash flow will have a direct influence on a negotiation for property purchase.
Here are some ideas to help you review income performance for the assets that you might take to the market for sale as an investment:
- The gross income for the asset in today’s terms will always be the starting point of an income assessment. Look at the actual volume of rental created from the existing leases and the tenants in occupancy. Understand the elements of cash flow that make up the income stream. Those elements will usually include rental, rental by type, outgoings, special licensed areas in the property, casual rentals, and permanent tenants.
- Look at the cash flow per month over a period of time. Understand the gross rental achieved each month over the last 12 months. There will be patterns to the income stream driven by the tenants in occupancy. If there are vacancy factors in the property to deal with, then that will have a reflection in the collective rental. Review the number of vacancies and the negative impact that those vacancies have on the cash flow for the asset.
- Understand the vacancy threat that maybe upcoming in the property tenancy mix. Some tenants will be leaving or relocating within the property, and on that basis you should develop a full understanding of how those vacancies will be handled. Some vacancies will be harder to lease than others.
- Property expenditure on a monthly basis will reduce the gross income to a net income. The age of the asset will have an impact on property expenditure and maintenance. Compare the expenditure in the property to other similar properties in the same location. Look at the averages, and in that way understand how your asset compares.
- Some of the rentals in the property would have been determined on a market rental basis. Compare that market rental to other properties of similar type in the same location. Is your property correctly rented, or under rented?
Simple strategies of investigation including these issues mentioned will help you fully understand the income stream for the investments that you sell, lease, or manage.
Different Income Streams
From the examples provided you can see that there are many different elements of income to look into and review. Some of those income factors can be improved over time, and that’s where the skills of a leasing and or property management specialist are quite valuable.
As an agent or broker, develop a comprehensive investigation process applying to the analysis of the income stream in any investment performance. An income checklist will be very useful as part of that process.