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.
The commercial or retail property management process can be time intense and quite frustrating. The observation is quite common. Most property managers will be intensely busy every day of the working week. On that basis they need to be organized to the tasks that really matter as part of providing quality professional services. Here are some tips from our Newsletter.
It is worthwhile noting that an experienced property manager will bring significant skill and opportunity to the landlords that they serve. That will be across the property in a number of ways including the specialized disciplines below:
Tenant mix strategy
Safety and risk management
Property value improvement
Renovation and refurbishment
So there are plenty of ways that the manager can bring growth and opportunity to the clients that they serve. It is just a matter of understanding the plans and the targets of the client as they relate to the future of the property in the region. It is a wise process to create a property business plan on an annual basis to manage the variables of property performance for the client.
So let’s go back to the tasks and activities of the property manager. If the correct person is chosen for the portfolio and the client, the other balances required will include the following:
Be aware of the amount of time it takes to manage a property for a client. Some properties and clients will require significantly more work than others. If that is the case, the intense workload should be reflected in the fee. One way of calculating a fee is to consider the amount of time each week a property will require for ongoing control. Consider the factors of the tenancy mix, lease documentation, maintenance, customer involvement, vacancy issues, and rental collection. The larger the property, more intense these issues will be.
With quality clients and properties, the reporting process can be quite specific and tedious. The factors of income, expenditure, lease management, maintenance, tenancy mix, and documentation will require special processes and established guidelines. In a large property, it is not unusual to be reporting to each of these factors on a weekly basis. That written report will support any verbal instructions given or communications made with the landlord.
The best way to get your job and portfolio under control is to work to a daily and weekly plan. It can also be said that the end of each month will be busier with reporting requirements and property analysis. So look at the factors of work that apply to each day, each week, and each month. Split the working day into two segments. The first half a day should be devoted to documentation and reporting issues. The last half the day can be devoted to clients and tenant contact. Obviously there will be some variations and pressures that apply.
So you work in a busy segment of the market. At least 80% of your time should be under control. In that way you will preserve the quality of performance and control that your clients require in commercial and retail property management.
When it comes to moving a tenant into a commercial or retail property, you can develop a checklist to keep you on task and cover the critical issues relative to the property and the parties involved.
In leasing and managing a property, there are many things that happen every day to distract you. The checklist process will cover issues well and help prevent errors. Moving a single tenant into a property is not all that hard, although the issues become much more complex with multiple tenant movements, just like that which you get when you are looking after a large project or shopping centre.
So here are some tips that can help you structure your tenant movement processes and controls.
As a general rule nothing happens until the lease is signed by all parties, rent is paid, deposit is paid, guarantees are in and validated, and any other lease requirement completed. Hold on to the keys until these things have been done.
Meet the tenant on site to inspect the premises together. As part of that process take plenty of photographs around and in the premises to record the state of the tenancy at time of handover.
Give the tenant a set of ‘fit out guidelines’ that control the building activity that is likely to happen in the premises. Those guidelines should also contain the plan approval requirements and the specification of materials and finishes to be used in the premises.
Give the tenant a set of ‘building rules’ that tell them exactly how things happen in the property. This strategy is wise when you have a building with a number of tenants. They all should occupy to the same set of rules. That will include access, common areas, security, property use, and risk management.
Note the condition of the premises in a ‘condition report’ that the tenant should sign at the end of the inspection. Give them a copy and you keep a copy on file. The report will be important at the end of lease term when the make good is under consideration.
Tenant fit out works should not commence until all the required plans and approvals have been obtained. This then says that you should get the plans and drawings from the tenant to submit to the landlord. If the landlord approves those plans, they can then be submitted by the tenant to the local building approvals authority. Fit out work should not commence until the approvals are in place.
Put the tenant details into the directory signboard system for the property.
Whilst the tenant is completing their fit out they should not disrupt other tenants nearby.
When the fit out has been completed, inspect the premises to ensure that the works undertaken comply with the approved plans and drawings.
Get a full set of tenant plans after the works have been completed.
You can add to this list based on the property, the landlord, and the tenant. Create your checklists to help you with all of this tenant movement.
When you manage a lot of commercial or retail properties you will know how frustrating and diverse the issue of security can be with many different property types. Each property will have factors of security that should be managed and optimised. Every tenant has to integrate into the security plans and systems for a managed property.
There is a lot of difference in security systems and procedures that are utilized in retail, industrial, and office properties. On that basis you really do need to know each managed property very well when it comes to security needs and responses.
A well-managed and operating property will be a reflection of the good property management systems that are implemented on the property. Security is part of that. Here are some security concerns and aspects that could be considered as you manage your portfolio.
Fencing around the property should be reviewed for effectiveness. That will include any breaches, lighting issues, modification, and stability.
Many properties will have car parks that require special security considerations. Customers and tenants using the property should be provided with a secure car parking environment both in office hours and out of office hours. The location of the property will have some bearing on this car park issue. Do not forget to look at how the car park is used at different times of day.
Loading docks in the property will be accessed at special times and with differing types of vehicles. How is this done and what security concerns evolve from this?
The entrances and exit points to the property should be looked at. As part of that process consider the door ways and the exit points that are involved in emergency evacuations. It is likely that you will need expert consultants to help you with planning workplace health and safety issues as they apply to property use and access in times of safety or emergency events.
Lighting in a property will always be of concern. Lighting should be checked frequently to ensure that it does the job it is required to do. If the building is used after hours by customers or tenants, the lighting will need special consideration.
Guards and security patrols may be required in a managed property. It really depends on the property location and the tenant mix.
The age, design, and location will always impact the way that a property is used by the tenants and the customers. It should be noted that a retail property will usually have greater levels of security coverage and response to keep the property safe and secure for occupants and customers.
Security is a valid need in property performance and function, and on that basis should be structured into the outgoings costs recovery for the property.
In commercial real estate you will be inspecting many different properties for many different reasons. Over time this can become second nature, however complacency in the property inspection can see you overlooking an important item or fact that can have a real impact in your property transaction.
Given that there are a few different property types that you will work on, you can have a checklist approach to all of them. In other words you can a specific checklist to work on each property type. For example:
Office property single level and or single tenant
Office property high rise with multiple tenants
Retail property single shop
Retail property multiple shops on single level
Retail property medium to larger size with multiple tenants
Industrial property of various sizes including warehouse and office configurations
All of these property types can be quite specific when it comes to inspecting and listing. Respect the differences and have a selection of listing checklists and questions that you would ask relative to the property type. When you do this it sends the right message to the client that you really do know what you are doing and that you have the knowledge to handle this property well.
In many situations you will be inspecting the property with the client in preparation for potential listing. For this very reason it pays to have a comprehensive approach to documenting and questioning as you move through the property.
Here are some things to incorporate into your inspection checklist:
Get the title search and legal property description before you meet with the client. This will help you will the facts of what the property is and how it is positioned in the location.
Check out the zoning and the permitted use of the property relative to the existing local development plan. If you are going to sell or lease a property, it pays to know that it is ‘legal’ in its function.
As you move through the property with the client, take notes of what is said as you may have to fall back on those notes later in evidence or in support of key negotiations. Some clients are well known for selectively telling you things about the property, and not all the issues that you should know that could impact the sale or lease. Look at the property with a questioning mind; look for the issues and the problems that a property presents to you in marketing and negotiating.
Take digital photographs as you move through the property as this will help you remember the conditions and configurations of the improvements.
Services and amenities should be documented as tenants or buyers to the property will want to know those details.
As a general rule, you should not ‘price’ a property until you have had time to consider the property detail, reviewed the competing listings, and looked at comparable sales or rentals. If you do this effectively it will help make the listing of the property more relevant to the market and the current levels of enquiry.
Selecting a tenant in a commercial or retail property can be a challenge. Vacancies can occur within the property from time to time throughout the year. Some of those vacancies will be expected, whilst others will be the result of a tenancy default.
When you manage or lease a commercial or retail property, it is wise to incorporate a lease management and tenancy mix strategy into the property business plan for the property each year. The lease management plan will help you when it comes to finding and negotiating with new tenants to the property.
Given that each particular property is unique, and every landlord has special priorities relating to their property investment, the selection of a tenant to fill a vacancy is quite important. Here are some tips that can be applied to selecting a new tenant for your commercial or retail property:
In an ideal world, you want the tenant to be of good quality and high profile. The tenant of this type will bring stability and benefits to the overall tenancy mix. Other tenants in the property can benefit from a new high profile tenant entering the property precinct. For this very reason, franchise tenants and the associated branding they take with them will be quite desirable in the tenant selection process.
The landlord for the property should be encouraged to establish a standard lease that matches their property intentions and property investment. This lease can then be easily used when you negotiate with a new tenant. It should be noted that many solicitors acting on behalf of property clients do not understand the property, its location, or its functionality. Encourage the client’s solicitor to visit the property first before any standard lease is put together.
The age of the property and the intentions of the landlord will have impact on the refurbishment and renovation activities to occur. The lease for the tenancy should be prepared with due regard to tenancy renovation, and property refurbishment. It is not unusual to ask the tenant to renovate their tenancy every three or four years as part of occupancy. A condition can be placed in the lease to this effect.
Any tenant seeking to occupy vacant premises should be able to provide some history occupancy in another property. It is desirable to talk to other landlords or property managers to ensure that your intending tenant is of high quality. If on the other hand the tenant is a new business, then you will need to satisfy yourself when it comes to business stability and long term occupancy. When that is the case, the form of guarantee or bond that you use in the leasing arrangements will be quite important.
The prevailing market conditions will have impact on market rentals, rent reviews, and lease options. It may also be the case that a lease incentive will need to be provided to attract a tenant to the vacancy. Assessing market conditions will therefore be critical to the leasing negotiation and finalization.
Every commercial or retail property will have standards that apply to hours of trade, and terms of occupancy. They in turn will have impact on property access, security, customer access, and operational costs. Any property that is closely geared to higher traffic flow such as that in a retail shopping centre, will have higher property operating costs to consider and structure into the lease rental.
When you create a good lease for a property and the landlord, it strengthens the overall investment for the long term and helps the property sell if and when that is to occur. Taking shortcuts when it comes to lease documentation will reflect badly when it comes to property performance and tenancy mix stability.
If you want more free tips for Commercial Property Agents you can get them in our Newsletter on this site.
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