There are many things to explore as part of a new property management listing on your brokerage books. In this audio program, John Highman talks about the factors to question and review. Most particularly key matters to look into will include:
You can listen to the audio program here to understand exactly how you can approach the handover process in commercial property management today. It doesn’t matter whether you are managing a retail shopping centre, or a commercial office tower. The same strategies and processes apply. Attention to detail will help you with the fact review and gathering process.
There are many different strategies to consider when it comes to pitching for a new commercial property management. In this audio program, John Highman talks about the particular elements of a property management presentation that will be of relevance to most clients today.
Listen to the audio program and develop some specific ideas to modify your property presentation and management ideas. Don’t forget to talk about income enhancement, tenant mix changes, property controls, and risk reduction.
The idea of inspecting every property in your commercial real estate portfolio can be a bid daunting given that there are plenty of things to look at and investigate as part of the inspection. The greater the number of properties that you have to manage, the bigger the process of review and documentation. (NB – you can get our free commercial real estate course for brokers right here)
When you have lots of tenants in occupancy, the whole equation of inspection becomes more complex given that many tenants are in occupation and they all run different businesses. So the inspection process has to be comprehensive and records need to be kept. The property manager or the center manager has to implement the property inspection process regularly and in a detailed way.
In this audio program, John Highman talks about the routine inspection process that is all important in the commercial and retail properties under management.
The services that you provide in commercial property management are quite special and should be costed accordingly. Care and consideration is required when you are considering establishing a new fee or quoting on a property management service. There are variables at play that could have an impact on your fees suitability and amount.
If you set the wrong fee in quoting on a property management service, you could position yourself for loss of income over time when compared to the time you are committing to the property and the client. Under resourcing is a big problem in our industry.
Don’t provide the client with a low fee quotation simply to win the new business opportunity as a property management appointment. Understand the property, the client, and the tenancy mix before you set and finalize the fees for service. Look at the ‘big picture’.
So what do you do here?
You should understand all of the property issues that may put pressure on your management services. Many an agent has lost a property management client and property appointment simply because the agent has been unable to control the property efficiently and improve performance over time; under quoting the fee will very likely create that issue.
So what do you need?
You need the right people and the right processes to manage a complex office or retail building today. Don’t underestimate the required skills of the process and the demands of the property. Match the people and the processes to the property.
Here is another error that is all too common. As a general rule, don’t set your fees based on a percentage of passing income. Whilst that may percentage approach be an industry standard in your location, it is only an indicator and should be compared to many other factors and choices. There are other things to look at and consider before you finalize your fee structure and client services.
Assess all the factors
Consider the following factors as you work through this process of property management assessment and opportunity:
Landlord requirements – some landlords are unique and special when it comes to property management requirements and services. The complexity of the property and the cash flow can very likely create pressures on reporting and financial controls. You could find yourself generating many variations of reporting to satisfy the challenges of the property and the clients requirements for information. Interview the client as the landlord before you quote on the final fees for service.
Property complexity – inspect the property completely and thoroughly. There may be issues in the property to control and manage over time. Look specifically into the issues relating to maintenance, rentals, vacancies, lease management, tenant volatility, and property performance. Every property will have certain strengths to work with, and weaknesses to work through and resolve. The weaknesses are the ones that will challenge your task and time management. The weaknesses will also threaten the cash flow and property occupancy over time. Create a business plan for the property to address the known and upcoming weaknesses.
Tenant mix – review the tenancy mix as you inspect the property. Understand the tenants that are trading well and those that are struggling. Identify the tenants that may be under some form of pressure and develop a base plan as to how you may manage that occupancy and improve the overall results. It is a good idea to incorporate a tenant retention plan into the property performance strategy.
Time based comparisons and assessments – when you first take on the property under management, it is likely to be a busy period of time for the first few months as you work through leases, tenants, and maintenance issues. The question to consider here will be how you can get the property under control effectively and efficiently. Some properties can take months to reshape and control. If you are about to commence management of that type and intensity, be very careful as to how you set your fees for service.
Income and expenditure review – the history of the property can tell you something about financial management and cash flow. Understand how the income has been changing over time and if there are any weaknesses in market rental currently. Rental and income weaknesses need to be identified and addressed quickly and efficiently. Comparisons to the prevailing market conditions will be required, and negotiations will need to be commenced as soon as possible. Seek your landlord instructions and comments as part of an income review and opportunity assessment. Know all the facts. Also review the expenditure within the property and the history of net income. Has the property being improving through good financial management or are their hurdles to address? Are there issues or weaknesses of current and future income, and will there be expenditure volatility to be dealt with?
So there are many things to look at when it comes to pricing your commercial property management services. Understand the client, the property, and the tenancy mix before you set the final fees and commence your professional services. Build your brokerage portfolio with care.
The commercial property management business is quite special in so many different ways and the same can be said for retail property management. From a portfolio of managed buildings, as an agent or broker you can generate many sales and leasing opportunities over time.
There is one specific thing to remember here. Property investors require specialized help in an ongoing way when it comes to optimizing property performance, improving the tenancy mix, maximizing cash flow, and serving both tenants and visitors to the property.
If you really understand property performance and how to enhance it, then that can be a good way for you to build your real estate business.
Are you the ‘Go to’ Property Manager?
Given that you should understand the local property market in a comprehensive way, you can be the best person to provide targeted solutions to the clients that you serve. Those solutions can be matched to the property, the tenancy mix, and the client. That’s how you grow a property management portfolio over time. Be specific and be real in the way in which you serve the commercial property and the client.
Show the client that you really have a grasp of the industry, the management process, and local tenants. There are some clever ways to do that.
Here are some other strategies to help you grow a property management portfolio:
Look at your location so that you understand where the best assets and buildings are located. When you manage, lease, and sell properties in the prime locations, your image and profile as a local agent will escalate quite quickly. Tell the local property market about your recent major appointments in management.
Find the better properties through deliberate assessment. Check out the properties for income potential, vacancy exposure, tenant popularity, and lease stability. You can learn a lot about particular properties by talking to the occupants, the landlord, and other businesses in the proximity.
Connect with the better landlords so that you can convert ongoing leads and transactions through well established relationships. The property owners locally will fall into different categories. Understand how you can serve individual property owners, corporations, public companies, small investors, and property trusts. In any town or city, there will be plenty of people in each category to connect and work with.
Use a professional software program for all of your property managements. It is a known fact that you cannot control and manage complex assets without using a significantly proven and well tested property management software program. When you have a number of tenants in a building there will be many active issues and things to control. The property management software needs to cover the bigger factors such lease documentation, rental cash flow, occupancy compliance, maintenance, budgeting, and financial performance. There is no way of managing a complex building without the right software to help you.
Integrate and assess your tenant lists so you know what is happening in a property and across a location. The tenants in a building will tell you a lot about the location and other businesses nearby. That market intelligence is valuable.
Improve property performance so that your services can be seen to be valuable in the bigger picture of property growth and change. When you are successful in turning around a difficult property, poor tenant mix, or refurbishment project, tell the local property people about that through articles, editorials, and social media.
Portfolio growth with any of your clients is a possibility. If you have some bigger clients in your portfolio, they are very likely to be candidates for alternative services such as project refurbishment, leasing, tenant relocations, and vacancy minimization. You can have a strategy for each.
Fees per management should be critically assessed so that you get the fees for the job involved. So many agents under quote to win a property management appointment. That is a recipe for disaster. Know every property for what it is and its demands, and then decide how much professional time you will need to devote to managing it on a weekly basis. Set your fees accordingly. It is easy to work out just how many hours you should be devoting to managing a property; from that point it is simply a matter of determining how much your time is worth.
In commercial real estate today, the leasing process will offer a typical agent or broker with many leads and opportunities servicing local landlords and property investors. Over time that leasing arrangement can be the precursor to selling properties for the same client.
So the smaller commissions earned in the leasing process, can give you the opportunity to move on to a sales commission with the same client in the future. One thing can lead to another when it comes to working with different clients and high quality properties. Be selective when it comes to choosing the right properties to lease.
Establish long-term relationships
Commercial real estate is all about building relationships with the right people, and the leasing service that you offer today can help you start that. Be selective when it comes to establishing long term relationships with the right property owners. It stands to reason that the quality of your leasing service can help you convert more clients over time. To find those clients in the first place, it is a matter of understanding the factors of attraction when it comes to office leasing. Why will someone use you as a local property leasing expert?
Here are some ideas to help you build on that opportunity cycle in a professional leasing service; to help you work for those high quality for property owners and investors in your local area:
The size of your tenant database – It is a fact that the size of your database of tenants will help you attract landlords when they require a vacant property filled. Market your services to landlords using your database as a factor of attraction.
Property pressures – Some tenants and businesses will be put under pressure when it comes to property occupation; changes in the economy or business sentiment can do that. You can find those tenants by staying in constant contact through a direct approach, be it in cold calling or door knocking. Look for those businesses that are under pressure.
New People – Generate leads and opportunities every day in your local area; make it a priority to meet new people in your territory. When visiting one property or business in any location, leave your business card with nearby businesses inviting future contact if they have a property pressure issue or need to relocate.
Lease expiry – As part of building your database, track the upcoming lease expiry and option dates in every major office building and with every good quality tenant. The only way you will know those dates is in making the regular cold calls to local businesses. When you know an upcoming lease expiry or option date, you can work the tenant in the 12 months leading up to the critical date. Relevancy is a way of attracting their interest; they will have a need to understand market rents, vacancy factors, new property developments nearby, and lease incentives. A tenant will seriously consider relocation if the current pressures of occupancy are high; that can be in rent levels, available space, car parking, transport, customer locations, and occupancy costs. Ask the right questions and you will soon find some pressure points that may interest them.
Current vacancies – Some landlords will have a problem with current vacancy levels or upcoming vacancies. Look for properties that appear to be under vacancy pressure; contact the owners directly to see if you can help.
Rental and leasing strategies – When you know a lot about lease and rent structures you can offer real strategy as part of leasing a property. Some landlords have little understanding of the ways to improve property returns and cash flow through a lease; they will just focus on finding a tenant. You can explain to the landlords that you serve how a gross or net lease can bring benefit to their property returns, and you can add some strategy around rent reviews, options, relocations, renovations and occupancy costs.
So as you can see it’s quite easy to offer a professional leasing service to landlords in your area. Lift your leasing skills and market yourself as the property expert that the landlords and property owners require.
Leasing is a lucrative part of the commercial real estate brokerage market. There are always vacant premises to lease and landlords to serve. The leasing agent with the largest database of tenants will usually make more in commission income than those agents that do not have a good database.
It should always be remembered that a good lease opportunity today that is converted to a successful transaction will quite likely move towards a sale opportunity in the future. It stands to reason that your personal leasing services and specialisation will help you with growing market share in a number of different ways. When you get to know a number of landlords, you build the levels of trust and the key relationships that are required for sales opportunity.
The fees for leasing a vacant property or tenancy will reflect the size and the quality of the premises. On that basis you should concentrate your leasing efforts on the better properties and the larger tenancies. In that way you will achieve better inbound enquiries and inspection conversions. Low quality listings are just as much work if not more than the better quality properties.
In considering the commission and fee opportunities from a landlord or a property, understand the following factors:
Lease rent review fees
Lease renewal opportunities
Assignment and subletting requirements
Vacancy management and leasing
Tenant mix advice
Lease renegotiation as part of a refurbishment
Franchise leasing opportunities
Tenant advocacy work
So there are a good number of ways for leasing brokers to attract fee opportunities from professional leasing services. Local area specialisation and leasing knowledge will help you achieve the momentum required. I go back to the point that the size of your database will be critical to the market activity and commissions that you generate. As a leasing specialist, you do need to know a lot of tenants and a good number of high quality landlords. That is where your database will help you greatly. Every day it needs to be nurtured and grown through ongoing contact.
So let’s look at some strategies and that you can implement in your professional leasing services. Here are some of the important things to understand and implement. You can add to this list other factors relating to location and property type:
Review the history of the area as it relates to business change and opportunity. There will be certain properties and locations that are more popular than others. Understand the locations that will create the best levels of interest when it comes to property occupancy.
Check out the market rentals that apply to your property type. Give due regard to the variables across suburbs, towns, and cities. Those market rentals will vary greatly and have a lot to do with property condition, ease of access, services, and improvements.
Lease incentives will vary subject to the factors of supply and demand for lettable space. Watch the number of new property developments coming into the area that could change the balance of occupancy. They will also have an impact on incentive size and availability.
With this basic information, you can focus your efforts when it comes to property leasing opportunities. Every day you should take further steps into building strong tenant and landlord relationships.