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Cold Call Prospecting in Commercial Real Estate

In commercial real estate you have to make many cold calls every day.  The people that make the most income and take the best listings are the ones that make the calls.  Everyone else, and that is the majority, are earning smaller commissions and getting less listings.  You have a choice.

It is interesting that many salespeople avoid the cold calling process and rarely do it every day.  There are some averages which show that you need to make about 100 calls to get one good listing.  The calling process creates a funnel of opportunity that revolves every day.  Without you making it happen, the business will not come.  If only more salespeople had the discipline to make the calls.

Taking the 100 call number, I recommend that the salesperson has a system of calling that allows them to call about 50 people a day.  It will take about 2 to 3 hours if you are organised.  Understand this, you will not be able to get to 50 people on the telephone, in fact you will only get to about 15 to 18 people, however of those people you are likely to get 2 or 3 appointments.  That is where the business starts to grow.  It’s all up to you.

When you get good at the calling process, and that will take about 2 weeks of struggle, you will be converting more appointments, and that will lead to listing opportunity.

To make the calling process work for you there is a base plan which should be considered:

  • Plan your calls the night before so that nothing holds you up in the 2 to 3 hours
  • Start your calls at the same time every day regardless of any other pressures.
  • For the first few weeks of making the cold calls, do some practice each morning before you leave for the office
  • Do not use a fixed script, but use your own words.
  • Find a private area with no distractions to make the calls
  • Choose a simple group of words that guide your conversation
  • Get used to people saying ‘no’, as there will be a lot of that
  • Make the call simply to see if they have a need, not to push where there is no need
  • Only make appointments with people that have an interest in what you are saying – your time is too precious to do otherwise
  • Keep a tally of calls made and appointment converted as you proceed, the numbers will encourage you
  • Businesses in the area are a great source of call targets and you can get those from the telephone book

So if you are new to commercial real estate and you want to generate market share the best way to do that is to talk to many people each day on the telephone and then later in face to face meetings.  Use the technology that sits on your desk to its fullest capability.  Good hunting.

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Lease Details Matter in Sales

As the opportunity for listing commercial investment property arises, we can sometimes be too eager to take the listing without getting all the important facts that effect price.

Check the leases on a commercial investment property before you talk about price on the property as the leases may assist or hinder the sale.  They can also dictate a sale strategy.  This says that a good commercial real estate broker or agent must know the structures of a lease and what makes a good lease.

Depending on the age of a property, the next phase of its lifecycle may be refurbishment, demolition or remix of tenancies.  Every phase is different.  The demographics of the region in which the property is located will also have something to do with the future of the property.

A property that has a majority of leases that are soon to expire may be attractive to a purchaser that wants to owner occupy the property or a developer that wants to change the site and create a new building.  On the other hand the same property in such circumstances will not be attractive to a new investor unless they want to undertake refurbishment works and re-position the property with new tenants.  Decisions are based around strategy needs and timing; as agent or broker for commercial property you need to be the ultimate strategist.

When looking at the potential sale of the property, the lease aspects requiring future awareness and understanding in the sale include:

  • Rent review profiles – are they strong and well timed or do they just gear to the consumer price index?  Also look for the market rent reviews and see if they are well timed or
  • Lease expiries – these are always a concern if the property requires stable cashflow, so look for multiple lease expiries that are close to each other and that may consist of a majority of the lettable space in the building.
  • Option periods – from a landlord perspective, lease options are not always a good thing to have as they can frustrate the future of the property; it really depends on what the landlord thinks that they want to do with the property.  It is of note that many large shopping centres and malls do not allow lease options for that very reason.
  • Details of any current incentives with existing tenants – some lease incentives carry on impacting the property for some months or even years.  When the property is to be sold, these incentives must be offset or discharged at settlement as the future purchaser may not want to take over the burden of such.
  • Outgoings recoveries – leases and most particularly net leases will allow the landlord to get back some of the building operating costs.  It pays to check the leases to see exactly what those recoverable items may be as it can impact the property sale or buyer interest
  • History of income and expenditure performance – I always go back at least 3 years to check these numbers and to see what have been the major changes in the outgoings.  What you are looking for is overly large imbalances in outgoings from year to year that indicate that something major has impacted the property or a strategy has changed.  Get reasons for any changes of this type so that any astute buyer can be given logical explanations.
  • Current budget of income and expenditure performance – every commercial investment building of any type should function to a budget each year and the details should be available for your review.  Parts of the expenditure that impact greatly on the property are the rates and taxes as they take up on average a full 33% of most building expenditure.  You need to know that these rates and taxes are on average with other properties in the region.

 

Property performance elements such as these will affect the potential income from the property well into the future and will also dictate the best time to sell the property.  In an ideal world you would time the sale so that the income is optimised and the outgoings are controlled to acceptable levels.  This cannot always be done especially in markets like that which we have today, but you should know where you stand on the property performance before you proceed into a sales program.  Strengths and weaknesses of cash flow should be identified and logical reasons provided before any sale campaign starts.

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High Value of Real Estate Agency Advice

Some clients in commercial real estate are unaware that they have a problem with their property, or do not really know or can define specifically what the problem is.  They struggle to find the way ahead; they do not really know or will admit that they cannot get themselves out of a property problem.

Do you think there are some businesses and property owners out there at the moment with problems? Of course there are, and you as the real estate agent or broker have to be the relief to the property pain.  You can only be so when you really know what you are doing.  That means a really good knowledge of property types, leases, and rents, building costs, regional demographics, and operating costs.

It is not sufficient to think you know how to sell or lease a property.  That skill is not enough as most other agents will think the same.  After coaching agents for many years, I know that the reality is most of your competition is very ordinary in knowledge and property understanding.  That is the leverage you should work with to generate a massive real estate sales and leasing business.  Serve your clients as the best choice in the industry.  Is that hard?  Perhaps it takes more personal effort and certainly more study, but the rewards are significant.

Let’s just look at the types of clients you could have for a moment; they are landlords, business owners, tenants, and investors.  Within those groups you have differing relationships to the property improvements, rent, lease, location, operating costs, tenancy mix, and the list goes on.  So what do you know about these things?  What should you do?

Become an expert in every sense of the word.  Supply the best and most important information about property that you can for the client.  Make sure that you are better than the rest of the real estate people in the local area.  Become the property strategist and not just a salesperson; know what are the real reasons for a sale or lease, and help the client understand them.  Provide the best timings to use in the sale or lease processes.

The problems and challenges that these client groups have are radically different than each other.  Your solutions and responses should be set accordingly.  The best model for a real estate agent or broker in a client relationship is to become an advisor that is trusted.  Your knowledge should stand head and shoulders above the rest.  There are three stages to the process.

  1. Seek to become the clients trusted advisor from the outset.  This means building the relationship before the client really wants to do something with their property.  Prospecting is essential every day of your business life.  Your database is the tool to progress.
  2. Get the client to agree that there is a need with their property or business.  Knowledge of the property types, performance issues, lease strategies, development alternatives, tenant mix alternatives, are just some of the things to learn.
  3. Plan your solutions around the problems.  When the client fully understands the problems that you have identified with the property, and that you really know what you are doing, the choice of property agent becomes an obvious choice.

Stop thinking that as an agent you must discount your commission, or pay all the advertising costs for the client just to win the new business.  These clients are not the ones you want.  In most cases they are the hardest to deal with because their motivation is ‘cheap’.  Logical decisions are not part of their mindset and negotiations are therefore harder with these clients.  More often than not the listing does not sell because the client will not listen to the market trends and choices (they think they know better).  Time does invariably take care of these unreasonable clients, with no sale resulting and a distressed property sale or lease later on.  You can then move back into the picture to offer your special services.

Be the best real estate agent out there and make sure your clients know it.  Chase the quality listings owned by quality clients that will listen to the market trends and choices that you offer.

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Neighbourhood Shopping Centre Leasing Strategy

The neighbourhood shopping centre is the first level of retail investment property and is closely integrated to the community.   The tenant mix should be of a convenience shopping nature.   That will be the key to its success.

When designing your tenant mix strategy for the neighbourhood property, think about convenience and basic needs of the immediate community.   Is the surrounding community growing and in what way?  What do they spend their money on and how frequently?  Are they younger families or older retired families?  These questions dictate how they will spend their money.

Sometimes to really answer these questions you need a survey undertaken from the surrounding homes and families.   They know the neighbourhood better than you do and can usually tell you what the community thinks about the property and what it is missing.

Once you have your answers to these basic questions you can then move on to finding the right tenants.   As you do, give due regard to nearby competition properties and new property developments as they will have an impact on your property. 

Once you know who you want for your tenant mix and property, it’s time to pursue them:

  • Set up your target businesses by type.   Given that your property is convenience in nature you will likely need tenants in the categories of fast food, fruit and veg, baker, newsagent, chemist, hairdressing, liquor retailer, smaller supermarket.   Choose your tenants well with due regard to established trading history from other properties.
  • Cold-call the small family businesses in the area and particularly in competition properties as they will likely be interested to talk to you about your offering.   They will also tell you about the performance of the other properties.   This market intelligence is invaluable.
  • Follow up with the property managers and franchise managers or retail franchise chains.  Cracking into a well known retail chain might take several letters and follow-up phone calls.  The seeds of interest you plant today may take weeks or months to germinate but consistency and persistence will get you through the door.
  • Follow up with the supermarket chains for relocation or new premises opportunity.   The supermarket industry is highly competitive and most chains would like to keep the opposition away from getting into their ‘patch’.   The rentals on the supermarket anchor tenant are lower than the specialty tenants and they will be selective on paying their share of outgoings for the property, but you will get an anchor tenant for a long lease term to support your property.   Choose well.
  • Pay attention to the local media in new ways, with ears and eyes open for business prospects.  Even in a slow economy there are businesses that are successful.   Convenience shopping does not disappear; it just changes priority and offering to the shopper.   Read the newspaper daily, listen to the radio and watch your local TV stations not just for business news, but for ads from retailers that seem successful.  You’ll find out who’s growing, who’s moving and who (by their absence) is almost dead in the water.
  • Use local telephone books, the internet, industry groups, chamber of commerce directories and publications from local economic planning offices to tell you who’s who in the marketplace and who might be interested in moving.  Make the calls and ask the questions.  It is the secret to building a great tenant mix for your property.
  • Visit other shopping centres at different times of the week to examine the operations of potential tenant prospects.  Learn to think like your targeted retailer, understanding the operation’s strengths and weaknesses.  Know what it’s like to turn the key in that shop and what it takes to stay in business.
  • Always return every phone call from a prospect or an enquiry.   A potential tenant with a dynamic operation may be prospecting you and your property.  It doesn’t matter how off the wall or strange a person or idea sounds.  You might find some gems of occupancy among the strange and different ideas.
  • Know your trade patterns for the subject property, and that is peak trading days, traffic patterns across the property, popular established tenants, how the community uses the common areas, how the car park supports quick access to the property for the convenient shopper.
  • What is the branding of the shopping centre and do you need to do any face-lift upgrades of common areas?  Tenants will not move to something that is degraded, lacks identity, and is poorly maintained.  Poorly presented properties are a common problem in owner managed premises where the owner is inexperienced or at the smaller end of the investment scale.  You must spend money on the presentation of retail property, otherwise the rental, customer interest, and tenant base will diminish.
  • It is likely that existing tenants and potential new tenants to a property will talk before any decision is made to accept a new lease offering.   Tenant harmony and relations is therefore critical to future property occupancy and rental success.   Happy tenants usually mean good property performance.

Understand how real estate leasing brokerage can fit into the overall picture for the shopping centre.  The leasing broker or property manager can always open the door to valuable prospects, but it’s up to you to also sell the shopping centre and its future in the community.   When you know the community well, you have the keys to a great tenancy mix and property performance.

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Tenant Mix and Analysis for New Leases

Every retail shopping centre property is different and should be assessed individually to ensure that you locate the new retail tenant well in the tenant mix.  When you get the balance wrong it will impact your foot traffic, rental, customer interest, vacancy factors, sales, and other tenants.  So what should you do?  Gather all the right property information and take the time to assess what you find; this is well before you make a placement change or tenancy decision.

 The old adage ‘position, position, position’, still rings true with retail property tenant mix.  Each property is a mixture of good, average, and bad locations.  To assess this and improve it you should immediately understand:

  • the entrances points to the property
  • visitations needs and decisions of the average customer
  • the way in which people travel into and through the property
  • the car park interaction, access, and usage
  • public transport impact on the property
  • common areas of the property where people congregate
  • the time spent in the property by customers
  • the days of the week that people prefer to shop
  • what people want when they shop
  • the most popular tenants and the reason why they are so favoured
  • Are your most popular tenants leaving in the future and if so why?
  • the most unpopular tenants and the reason why they are so disliked or avoided
  • signage impact and placement across the property at all points of entry and exit
  • tenant lease duration and termination dates
  • existing vacancy factors and threats that could destabilize the tenant mix

All of these factors will put you on the track to a reasonable property assessment and improvement.  A visit to other nearby shopping centres will also help you to identify what impact those properties are having on your property.

Customer surveys and questions taken on different days of the week will help you know what the community thinks about the property and its benefit to the customer.