In tenant advocacy, the real estate agent works for the tenant and has them as the client. This is a deliberate shift from the normal work that a real estate agent will do with a landlord in letting vacant space. Most particularly tenant advocacy is a real and significant service for corporate businesses that require relocating.
In normal circumstances corporate tenants consult with their solicitor to assist them with the lease and relocation process. In real terms, the solicitor will usually know nothing about the property market and only becomes useful when legal documentation is to be prepared.
The tenant advocacy service is therefore a specialised offering for the corporate customer requiring new premises. In this market, as we adjust to a new commercial real estate cycle, the movement of businesses and corporate tenants is becoming more frequent and will remain so for the next couple of years. The corporate real estate customer will be looking to seize the opportunity of new premises at realistically lower rentals. At this point in time, landlords are still under pressure to find tenants in many locations. This produces lower rentals, higher incentives, and tenant favourable lease documentation.
Tenant advocacy, as a specialised service offered by a real estate agent to a tenant, effectively costs the tenant nothing when handled correctly. This is because the real estate agent provides real savings through market intelligence and negotiation skills. The tenant pays for those skills through commissions. They get the expert they require for finding the new premises.
For some property agencies, this is a significant shift in mindset; they would normally work for the landlord. This can also provide difficulty if they work for landlords in a smaller precinct or real estate market. In a larger property market it makes no difference.
If you are in a smaller property market, or are worried about the impact of working for tenants specifically, the best way forward is to appoint a specialised staff member who will focus only on this tenant advocacy market segment and therefore not cross over to the landlord client relationship. Conflict of interest is therefore reduced, although it should be said that the tenant as a client should never be introduced to a property that is listed with your real estate agency from the landlord client relationship.
You can get more detail on Tenant Mix and Tenant Advocacy at our website http://www.commercial-realestate-training.com/
Do you want more commissions and listings? You simply have to be great at prospecting and cold calling. The rest of your business will follow.
Guess what? Most real estate agents and brokers are not sufficiently disciplined to do the right levels of prospecting on a daily basis. That is the most significant opportunity that exists in the property industry; you just have to be better than the rest at prospecting. Sure listing, negotiating, and closing are other important skills, but they will come as a natural by-product of prospecting.
Focus on cold calling and prospecting. So how do you do this? You set some prospecting rules and you start practice. The words ‘rules’ and ‘practice’ are another couple of problem words for many in the industry. Many struggle with doing both.
So let’s get away from the negative and presume you have the determination, the focus, and the drive to prospect for new business on a daily basis. Here is a ‘killer prospecting model’ that really works. The rest will be up to you. This model takes 3 hours a day, 5 days per week.
- There are no gaps and Saturdays and Sundays are the only days off in the prospecting process. That is the first rule; probably the most important.
- The second rule in the process is that you must prospect on the telephone in the morning because after that you will be distracted by other things and not stick to it. Without going deeply into it, there are established facts of personal performance in business that show the morning is the right time to do prospecting.
- Get away from setting any meetings in the morning. Tell the boss that you prospect at that time and that you would prefer to set meetings with him and anyone else in the afternoons. Even meetings with clients and prospects should not occur in the morning unless it is an absolute necessity. The only reason to break the rule is if the meeting is for an active deal that is closing.
- The 3 hours of prospecting each day in the office is done from the telephone. In commercial real estate you are predominantly dealing with business people and they generally will take your call if commercial real estate is an issue for them. If it is not an issue then you simply move on. Do not set up a meeting with someone who has no interest; remember that your time is precious.
- Drop the cold calling scripts and use your own words; that will be the way you will feel comfortable with the process. Use trigger words to flow the discussion, but do not use scripts as the listener will sense the processes and turn off.
- Know that it takes you about 20 minutes of cold calling every day to get the process into momentum. Once you are through the 20 minutes you must keep going and not stop for 2.5 hours. In that way you will make progress.
- Find a quiet place to make your calls so that you can focus without distraction. Your success in tele-prospecting depends on it.
- Research your call list the night before so you do not waste critical call time in research. This is critical to the call process.
- Create a series of simple forms to use in the call process so that you can capture the results later in the database. You must not stop the call momentum.
- Try to contact 10 new people on the telephone each day. If they are not in the office when you call then simply make a note to call back. You should be able to make 50 calls in 3 hours.
- Your only reason for calling prospects is to see if they have a need or an interest in commercial property. When you really understand that yourself, then the calls will be easier and the quality of the discussion will be higher.
- Have a great database to record everything. Use something that you are comfortable with. At the basic end of the database alternatives you can use Microsoft Outlook, or Access. Both are useful, low cost and user friendly. When you want to move to something more relevant to the property industry you can spend many hundreds dollars; personally I believe you can do very well with the basics providing you know how to use a computer well (in that you have no choice).
These are the rules that you need to set in your cold call prospecting. After you set the rules, you start the practice and you will need to do that for a couple of weeks until things are moving well. To your success in commercial real estate prospecting! You can get more detail on prospecting and cold calling in real estate here at http://www.commercial-realestate-training.com/
In commercial property the handover of premises is a critical time to take note of important issues and matters requiring attention. These notes can later support the tenant or the landlord in any matters of debate or dispute. There is a handover and the beginning of occupancy and again at the end of the occupancy.
In all respects the occupancy of the tenant and the premises handover should be in accordance with the lease. This says that you as a property or leasing manager must read the lease and understand it. Even in a single property with many different tenants, the leases can be different and usually are. The ‘make good’ clauses and the ‘handover provisions’ of the lease are unique and should be understood relative to each tenancy.
Taking photos also is part of the documentation of premises at handover time. It is recommended that the photographs taken are date and time stamped in the camera, and the photographs are later saved as ‘gif’ files and not ‘jpg’. This is because ‘gif’ files are a more stable and fixed format that cannot be manipulated by software editing tools such as ‘Photoshop’. If you want the photograph to be evidence of something important, then the ‘gif’ format is a reliable choice.
Whilst every tenancy is unique, let’s set some rules to give you some benchmarks to work with at handover time. You can then add some other matters that may be applicable to the location or property that you work on.
- Take ‘gif’ format photographs as evidence of important things and levels of presentation
- When taking photographs it pays to put a scale reference such as a ruler into the picture
- Take notes of any comments or agreements from any parties to the lease
- Check all walls and painted surfaces for damage and or current condition, taking photographs as appropriate to record the current condition
- Check ceiling tiles and t-bars for ceiling presentation and integrity
- Look above ceilings for the satisfactory removal of any unnecessary cabling that should have been removed
- Check all floor coverings for any damage or deterioration beyond normal ‘wear and tear’
- Look for any floor or wall penetrations that exist or need to be remedied noting that any penetrations must be fire rated to the standards of the local building codes.
- Check air conditioning function and note any need for air conditioning balance due to fitout or altered or installed partitions in the leased space
- Check lights and light switches for function and safety. It may be necessary to replace all tubes in the light fittings as part of the make good provisions of the lease
- Check all doors and locks for safety and security. Do not overlook the need for doors and locks to comply with all building codes. All keys to the doors should be provided or returned as appropriate. If a master key system is installed in the building then check that the keys all comply with the master system
- Check windows for function, security, and safety
- Check electricity supply to the tenancy and any metering of consumed energy
- Check the installation and compliance of any signage for the premises and that such is in accordance with architectural rules set for the building.
- Look for any matters of change to the structural integrity to the building and the premises
As part of the checking process it sometimes pays for the landlords contractors to inspect the premises and provide a full report of any complex or sensitive issues. This will support any later legal dispute over make good terms and conditions.
When keys are exchanged between the tenant and the landlord, or the landlord and the tenant, a receipt should be obtained as a record of handover of the keys. The real estate agents actions in the handover to any tenant should also be supported by notes. It is surprising how many disputes arise later when you least expect it; in such case your notes are invaluable.
Never hand back any bond money or bank guarantees to tenants until you are absolutely certain that all make good requirements of the lease have been satisfied. It is also of note that all make good must have been done at and before the expiry of the lease; it is not something that is done after lease expiry.
Efficient make good and handover procedures are a critical skill for the real estate agent to develop and implement on every lease situation. You can see more about this on our website here http://www.commercial-realestate-training.com/
Commercial real estate is such a diverse property type across industrial, office and retail property. Closing and negotiating the property deal is therefore specific to the property type and the parties to the negotiation. You have to be the best negotiator that knows the market, the deals, the people, and the regional trends.
The role and rules you set in the property negotiation are critical to your success and the outcomes you get. The normal variables apply at the start such as:
- Lease details
- Contract terms
- Settlement dates
- Occupancy dates
- Subject to provisions of contracts
- Availability of finance etc.
But there is more. The real ability to close more leases and sales deals comes from your ability to ‘inoculate’ yourself from the threats to the deal. This means you must be prepared for the negotiation before you start.
To ‘inoculate yourself’ for the negotiation you have to know all the ‘BATNA’ elements of both parties. This is a common term used by experienced negotiators and means simply one thing. You have to know the ‘Best Alternatives to No Agreement’. When you know the BATNA’s, you can have your answers ready and the strategy ready.
So how can you do this? Both the buyer and the seller (or landlord and tenant if you are doing a lease deal), will have alternatives to fall back on if no agreement is reached. The lesser number of alternatives they have the better, as it will keep the negotiation simpler for you. Whatever their alternatives are, you need to know them. When you work from this position, your negotiations can be more direct and successful. Your property deals will be better as you will be the ‘clever negotiator’ that is well prepared. You will be more aligned to the arguments you present, and it will be harder for the other parties to the negotiation to counter your proposal.
Your client will be one of the parties that you want to help with the BATNA concept. To know their BATNA’s is productive from the outset, and they need to know that. The concept should be discussed with them beforehand because you are to chase the best outcomes for them.
The third party is the person that will not always tell you the BATNA’s so you will have to work them out yourself through clever questioning at the time of property inspection. Whatever BATNA’s they have should be lessened so that they have little alternative than do agree to the property offering.
So the moral of the story is to know the complete BATNA picture of both parties and then to negotiate from a position of strength into that picture. You can see more about this on our website here http://www.commercial-realestate-training.com/
Not all rentals are the same when it comes to commercial property. Property Investors and Real Estate Agents and Brokers should understand this when considering property leasing and pricing. Use the right rental in the lease that suits the landlord, and the market. Know the long term impact of a poorly negotiated rental.
So there are two main types of rental and they are:
As the name suggests, a gross rental is an all-inclusive rent for the tenant. They pay one amount of money to the landlord. To strike a rent like this, the landlord has to carefully assess the outgoings or operational costs for the property and load them on top of what would have been a net rental. There are some dangers in the process in that the landlord has to get their figures right from the start. If they do not, then the rent reviews applied to the tenant during the lease term may not keep up with the prevailing market rent. The property then becomes underperforming as an investment and will not be attractive at time of sale. Visit our site here to get more detail on this http://www.commercial-realestate-training.com/
Commercial real estate is all about cash flow; today’s cash flow or that which you can get in the future. Cash flow and rental are linked and the lease for the tenancy will protect the cash flow for the future. When purchasing a commercial property the lease has to be reviewed for its future cash flow and stability. An astute buyer knows this, and will want to see some advantage that the tenancy can provide.
Net rent is the base rent on top of which the tenant will pay outgoings for the premises. Whatever the outgoings are, the lease will again be a part of the protection of payment of outgoings for the landlord. Reading the lease will tell you exactly what outgoings a tenant needs to pay and how that will be done. The more outgoings the tenant pays the better.
Should property investors read leases themselves or leave that to their solicitor? The real answer is that a good property investor must know how to read commercial leases, and they should also have a good solicitor that will support them with a deeper review of the document as required and particularly before purchasing the property. This is called ‘due diligence’ and is one of the checking processes before the settlement of a property it made. Property Investors that are purchasing a property should make their contract and purchase subject to a satisfactory due diligence process. Expect that the due diligence process will take days if not weeks depending on the size of the asset.
One other matter that affects leases and rentals is the existence of an incentive in the tenancy. This incentive would have been created at the time of lease commencement to influence a tenant to take the lease of the premises. Incentives are common when the property market is slower or there is a lot of space available to lease at the time. Incentives could be:
- Low rent start
- Rent free period
- Fitout payment
- Cash payment
- Discounted rent, etc
If in doubt ask questions. Incentives can exist for months and possibly years after the commencement of the lease, and on that basis a purchaser of the property has to know about them prior to purchasing the property. The purchaser may choose to get the seller of the property to payout or discharge the incentive at time of sale.