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Tenant Lease Commencement

When a tenant commences occupation in a commercial building it is essential to set some solid rules and channels of communication early in the occupation cycle.   In this way you will have a harmonious relationship into the future that can benefit the investment property.

As landlord works near readiness for occupation, it is wise to inform the tenant of the next stages that effect them and methods of occupation that are to follow.   Standard letters and procedures are ideal for this purpose.

As part of this process there are 3 main outcomes that you should be seeking to satisfy in this process.   

They are:

  1. To control the way the tenant moves into the building and that the process is well managed.   This will involve the use of loading docks and perhaps lift and escalators after hours.   As a general rule the movement of a new tenant into any building is best managed after hours and on weekends.
  2. To identify tenant details that need to be entered onto the building directory and similar lists and displays used by occupants and customers that visit the building.   As part of this process it is important to tell other tenants in the building of the new tenant and their entry to the building.   In this way you preserve quality of communication to all parties concerned.
  3. To keep the new tenant well informed on property matters that will impact them into the future.   You should be seeking to inform the new tenant of the building rules, operational elements such as air-conditioning and security, and fit out guidelines and approval processes.

 

Elements of the introduction letter to the tenant can incorporate the following informational topics on the property and the building:

  1. Establishment of the move-in date to the property so that the security and lift access can be provided.   You are also seeking to avoid conflict with other tenants as the move occurs.   This becomes more complex and difficult if a number of tenants are moving into the property at the same time.
  2. The tenant needs to be approached regards the detail required on the directory board to the building.   It can also be that the graphics and design of the tenant’s logo will need to be incorporated into the directory board layout.   It is debatable whether the tenant should pay for the entry of their business name onto the directory board.   This will come down to the landlord’s decision on the matter as a gesture of goodwill in the leasing process.
  3. Any tenant signage on the entrance doors to the tenancy or the building will need to be approved so that it does not conflict with other design elements of the property.   In some circumstances it may be necessary to seek architectural comment on behalf of the landlord before the tenant can proceed with their signage.   Take particular care with colours and location of the signage.   If the signage is on the outside of the building, it is likely that the local planning authority will need to approve the signage before it is installed.   Engineering comment may also be needed for signage placement on the exterior of the building.   Signage of the tenant can or should attract a separate rental for the landlord particularly if the sign is in a place of prominence on the outside of the building and the building is located on a main road with high numbers of passing cars.
  4. Car parking licences should be established for the tenant’s vehicles and the parks then clearly laid out on a car park plan.  It is normal for car parks to have separate licence documentation that provides for both the unique elements of the property function and the use of the car park by tenants.
  5. Communication systems access points such as those for telephone and data should be explained to the tenant.   Any matters of access or special charges should also be outlined to the tenant.   Take care with the tenant using the risers to the building to run cables as riser space is limited.   Some landlords will charge a rental of space within the riser for this very reason.
  6. Electricity switchboards and access points should be outlined to the tenant.   Any methods of recovery of tenant electricity should also be explained.   It may be that the landlord buys the energy for the building in bulk and then charges the tenants for their consumption on a monthly arrears basis.   As an alternative it can be that the tenant is buying energy direct from the local energy supplier.   Importantly the property manager needs to know what is correct for the property and the local energy supply legislation.   Today energy supply and consumption is a critical part of building cost management; both tenants and landlords want to know that the energy supply and consumption systems on the property are correctly managed and charged.
  7. Services and amenities that are available for the tenant should be clearly described and any costs thereto detailed.   A plan of the building or the floor should detail the services and amenities that are available and how the tenant may access them.
  8. Use of common area facilities should be shown on the appropriate floor plans.   This can include toilets, showers, tea rooms, entrance foyers, lift foyers etc.
  9. The use method and operational hours of the air conditioning for the building should be detailed and explained to the tenant.   In most circumstances the air conditioning supplied by the landlord will only operate during certain daylight hours between Mondays to Fridays.   Any tenant usage beyond those hours should incur a special hourly charge based on the size and type of air conditioning unit.   In such circumstances the tenant consumption is metered and charged.   If a tenant is a sole occupant in the building then the air conditioning running costs and maintenance may be the responsibility of the tenant; in such cases the lease of the premises should explain and support the process.
  10. Security access systems should be explained to the tenant so that they can order the necessary security passes for staff and the passes are coded to the hours of access that the tenant needs for each individual on staff.
  11. Security Patrols and Guards need to be briefed about the new tenant to the property and any emergency contact points or response methods documented for that tenant prior to their move to the property.
  12. Door keys should be ordered to the access needs of the tenant.   It is likely that the building master key system will be part of the keying system for the tenant doors.   It is normal for tenants to seek any new keys for the premises via the property manager as the authorized party on the master key system.
  13. Emergency evacuation procedures must be communicated to the tenant at the earliest opportunity and prior to occupation.   Any threats and evacuation needs of the tenant must be efficiently handled in the evacuation plan established in the building.  If the tenant brings any unusual and special threats to the property and the other occupants, then the property manager needs to take action on any needed changes to the evacuation procedures.   It is normal for the property manager to appoint an expert contractor to design and implement the correct building evacuation plan for the building.   That contractor will then also maintain the tenant training needed for the evacuation plan in keeping with local building and safety legislation.
  14. Building rules and regulations are typically written into a building manual that is supplied to all tenants.   From time to time the building manual will be updated.   This becomes a great tool of control for tenants and building function.  It also supplies the tenant with all the important and critical information relevant to the property in a concise and specific form.
  15. Fit out procedures and approval processes must be understood by the tenant, as they will need to make changes from time to time to premises design and usage.   Local planning and building codes can dictate that any tenancy changes must firstly be approved by the planning authorities.   In moderate to large buildings with multiple tenants it is normal to create a fit out guide and supply such to the tenants in the building.   This then becomes the rules for any changes to the tenant premises.
  16. Property Manager and Property Maintenance contact methods should be outlined to the tenant in a contact register supplied to them.   From the earliest stages of occupancy things will not always operate each and every day on the property.   The tenant needs to know where to call to advise the right people of any problems.   The property manager as part of this process needs should have a procedure to keep the tenant up to date on any advancement on repairs and delay times.  Not all maintenance matters can be attended to quickly and efficiently if large items of cost or unusual parts are required to complete the work needed.

 

So these details can be a way of introducing the tenant to the building and controlling ongoing occupancy.    Add to this list as your property requires.  A standard letter can be framed to incorporate the necessary information relative to the tenants lease and the site.

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Finding Buyers Commercial Real Estate

In this commercial real estate sales market you need to find well qualified buyers effectively and quickly.  As part of this process it is worthwhile to sit down with the seller of the property to brainstorm all the regional property activity and history that they have seen recently.  You do this by asking specific questions at the time of listing. 

Well directed questions give you a well directed property campaign.  In many cases you can set your sights on a good channel of buyers by just taking some of the further steps below.

Local Market Intelligence

Certainly some of the local market intelligence you should bring to the seller as part of the property listing and appointment process, after all that is the main reason that they will hire you as the real estate broker or agent.  Do not however overlook the market intelligence that the seller could have gained from owning the property and the business in the region for a number of years.

It is quite likely that these questions below will help you extract more ideas from the property owner and perhaps even highlight the ideal type of buyer that you should be targeting.  After all is said and done, the seller of the property knows the property, the industry, the precinct, and its history better than anyone else.  This then makes your job of selling the property all that much easier. 

Key questions to explore to help find the right property buyer:-

  1. Who has a similar property and possible expansion objectives in the area? – This should be all the local businesses in the precinct for the surrounding 1km.
  2. What companies in the region have recently undertaken acquisitions? – Even in a difficult economic or financial market, some businesses are still going very well, so you need to look out for these growth activities or needs that require more property to occupy.
  3. What companies in the area are highly active and quite profitable?  Who or what are they and do they need more space in your precinct?
  4. What are competitors of the subject property and its business?  Do these competitors need more property to operate from in your area?
  5. What established contacts have enquired regards other properties recently from other sale campaigns?  Are they still active and could they look at the new listing coming on the market?
  6. Who sells to the same customers that the subject property sells to?  Could this be a channel of interested buyers?
  7. Are any of the existing customers of the property vendor considered potential purchasers of the property today?
  8. Are there any industry related executives seeking to move into their own property and run a similar business themselves?

From the above list, you will achieve an ideal profile for the property being sold and the targeted buyer that is suitably placed to purchase.  Document the profile to the seller of the property and achieve mutual agreement on the profile before you start any campaign.  You should be attempting to profile the purchaser with the following categories in mind:-

  • public or private company
  • private individual or investor type
  • target industry
  • target equity
  • target timing
  • target location
  • target cash flow

From the above list, you can then match your property promotion to the buyer profile most easily.  The sale of a commercial property and the location of a buyer is not just a function of advertising and waiting for enquiry.  Gone are the days of advertising the property and waiting for the telephone to ring.  In this market you have to make the telephone ring.

The most successful agents and brokers in this market are exploring many channels of property interest for buyers.  In markets like this, it is the targeted market that you identify and how you tap into it that really matters.

You can get more on this strategy for finding property buyers here http://www.commercial-realestate-training.com

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Due Dilligence Commercial Property

commercial buildings on river

As you promote, sell and then document the property transaction you will soon come across the fact and event of ‘due diligence’.

This element of the commercial real estate sale is very common and will be the subject of most contracts with the exception of those that adopt the auction method.

As you would expect the process of due diligence can make or break a sale.  For this reason, it is wise to question a seller well in the listing stage of the sale to ensure that no ‘deal breakers’ or problems are hidden in the cupboard.  Due diligence will likely find most problems on and with the property.

commercial office leasing system
How to find more tenants for commercial and retail buildings.

 

What is Commercial Property Due Diligence?

So what can be looked at in ‘due diligence’?  Consider these:

  • Due Diligence is simply a detailed checking process that is undertaken prior to sale and settlement by ‘experts’, to review all relevant data involved in the sale.
  • Usually, solicitors and/or audit specialists are the nominated parties to undertake the work on behalf of the purchaser.
  • The concept of Due Diligence is that the sale and settlement of the property will only occur if the Due Diligence process is successful.
  • On large commercial properties, it is not unusual for Due Diligence to continue for days if not weeks.  A special condition of the contract will allow this to occur.
  • The process is undertaken under the strict control of the Seller. It usually occurs in the Seller’s property management office or at the Sellers solicitor’s offices and is usually in a controlled environment (locked room).  Only authorized parties are allowed into the room so as to preserve security and confidentiality of documentation.
  • A good Agent or Broker will provide total support to the Due Diligence activity.  Expect Due Diligence to check just about everything involved in the sale.

The five professional areas usually covered are:-

  • Engineering
  • Environment
  • Finance
  • Legal
  • Management

 

Cover These Property Issues Plus More

Expect questioning and document discovery to include the following:-

  • Engineering:  Includes verification that the property structures and building services comply with the Building Code of Australia and Local Government building Approvals.  Questions will cover safety risks or non-compliance of structures, fire protection, air conditioning, electrical supply, hydraulics, lifts, escalators, and stand-by emergency power.  Expect the questions to involve adequacy of structures, mandatory service compliance, remaining life expectancy, capital expenditure, and sinking fund requirements for future major repairs or replacements.
  • Environment:  Includes a wide range of issues such as identification and analysis of environmental and physical risks to the property or land and its use.  Issues will include site contamination, dangerous goods and hazardous substances, asbestos, hazardous industrial waste, trade waste, stormwater management, occupational health and safety, heritage factors, and statutory requirements.
  • Finance:  Includes all actions and dealings associated with property financing, review of taxation implications, substantiation of income and expenditure statements, arranging mortgages, financial analysis and modelling, company or entity investigations, plus all other supportive or related documentation.
  • Legal:  Includes all conveyance documentation, easements, permits, titles, contracts, leases, searches, incentives to tenants, site details, compliance with any legislative requirements, outstanding litigation, and any town planning issues.
  • Management:  Looks at any issues associated with ongoing asset management, facilities management, building management, lease management and negotiation, rent collection, arrears, financial reporting, insurance, car-park supervision, cleaning, pest control, landscaping etc.