Boost Rents and Leasing Strategies in Commercial Real Estate

There are many different rent strategies that you can implement in commercial real estate brokerage.  The facts of the rental matter hinges on just how long the property owner wants to own the property. (NB – you can get plenty of commercial property leasing tips in our Snapshot program right here)

You can have rent strategies for the short term or the long term.  You can boost property value in a rental lift.

You can encourage a tenant to lease a property using fair and staged rents, or you can ask for the highest levels of income from the leased space and run the risk of a vacancy occurring.

Don’t forget that you also have net rents, gross rents, and incentives to work with in any lease negotiation.  The income or rent that you start with can be enhanced over time, so look at the bigger picture when negotiating with tenants.

Don’t focus so much on the start rent, but the income over time.  Look at the rent reviews and how they can support stable occupancy for the longer term.

In this audio program, John Highman talks about the rent and leasing strategies that are so important in today’s property market.  You can listen to the audio and download it here:

7 Ways to Get Ahead of the Competition in Commercial Property Leasing

In commercial real estate leasing, the competition that exists in your property market will very likely be talking to the same very people and businesses that you are.  In saying that, the quality of the connection between agents and businesses or landlords can sometimes be of poor quality, so you have something that you can work with and improve.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Focus on the Right Things

If you are going to stand out as a top agent in the leasing market, then you have to do the right things with real focus and control; and then you should work on the good quality buildings or locations from a leasing and vacancy perspective.

Stand out as the agent of significance for the location and property type.  When you work the better buildings, more inquiry will come your way.

Drill Down into Facts

To get ahead in the leasing market, here are 7 points of focus to drill down into with your landlords and tenants:

  1. Know who you are talking to – Always get to the facts when you are talking to someone new, be that across the telephone, in a meeting, or through a door knocking process in the local area. The people that you talk to will give you the momentum in your leasing business, but understand who they are before you say too much about the property or give out information.  If a person is slow to introduce themselves, then you should also be slow to give out the property facts. There is no point in wasting time on someone that is not fully honest and open with you.
  2. What do they need and when? – Get to the core facts of their property situation. What do they want from a leasing perspective and what will be the critical timing?  Ask about their critical points of choice or need with any property they may find or want to inspect.
  3. Where are they now? – If they are in business now, seek out the facts of that occupancy. It is also valuable to see their current location and how they use premises as part of a business operation.  You can see the interaction between staff, customers, business operations, and layout of the current property.
  4. Exactly what can they afford? – Rents change by location, not just by property type. Tenants don’t fully understand that fact, so a market rent awareness for a new location and property type is valuable.  Help them understand net rents, outgoings, and other operational costs such as water, electricity, and gas.  Those services will be consumable within the property, and the tenant will have to pay as consumed.  How will that happen?
  5. Business requirements for the change – When you ask about their current business, there will be many things to explore in property layout, configuration, improvements, access in and around the premises, and special zones such as showrooms, administration, sales, and storage. See how they are using their current property with these factors in mind.
  6. Staff and customer requirements – How will the balance between staff and customers be accommodated within the building? There will be special zones to consider such as car parking, customer service, customer sales, and showroom access. Remember also the factors of parking that may apply in the precinct and on the street. At certain times of the day there may also be issues with access from busy roads and freeways.
  7. Timing for the change – The timing of property change will be variable and will likely be impacted by individual business activities and seasonal business fluctuations. It takes time to move business into a new building and location. There will be a crossover of time that applies to the relocation into the new property. You may be able to help the tenant in understanding how the new occupancy can commence with rent-free periods and early access being given to the new property and location.

 

There are some quite specific things that you can look into as part of the leasing services and solutions you provide to tenants today. Ask the right questions and go deeper into the issues that really impact the relocation for the business.

The deeper that you can go into the tenant’s situation will show a degree of professionalism that other agents may struggle with. Be special, real, and relevant when it comes to the commercial property leasing market today. Show that you are the best agent or broker to assist when it comes to business relocation and leasing resolve.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Tenant Management Tips for Commercial Property

Human shadow figures in a building uid 1461085

When you lease and manage commercial property today, you really do need to monitor the activities of tenants within the tenancy mix and be ready to respond to occupancy issues.  Be aware of the changes within the building and the activities of tenants in each of the separate premises.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Why worry about this?

It is better to be ahead of the tenancy problems before they become overly large or pressured, thereby impacting the landlord and the asset.  It is better to negotiate with the tenant through their trading or occupancy issue at the earliest stages.

  • Protect the tenant mix, lower the vacancy factors in your asset, and keep your good tenants for the long term.

Most buildings today with multiple tenants in occupation will have some form of tenant retention plan to consolidate occupancy and cash flow over the foreseeable future.  Within that document will be the necessary lease strategies, rental indicators, and tenant profiles.

So what is it?

It is a landlord based investment planner to help with occupancy planning.   Shopping centres and large office towers would have such tenant planning processes in place, and then they adjust the plan every year based on what can be observed and predicted in tenant occupation and known vacancies.

Tenant retention planning?

So the retention plan is a document that allows you to prepare at the earliest stages for the worst and best possible leasing scenarios, and control the best outcomes.  In other words, you can stay well ahead of the leasing and tenant mix problems before they get out of hand.  Isn’t that what the leasing strategies should be in any investment property?

 

  • Look for the indicators and the pressure points of occupancy.  Given the pressures of the economy and business today, tenants can sometimes suffer with pressures of cash flow emanating from variations of staff structure, seasonal sales, production, and intellectual property.

 

So what can you do here?

On a regular basis look at how the tenant and their business appears to be tracking, and wherever possible identify any weaknesses that could impact occupancy.  In simple terms, you stay close to the tenant in every way possible through a series of telephone calls, meetings, and email exchanges.  You take plenty of notes, and you negotiate through any issues as early as possible.

Here are some ideas to help you with that lease management strategy:

  • Inspect the property and the tenancy frequently so that you can see when changes are underway.  Where necessary, take photographs and plenty of notes to support your observations.  You can see variations with staffing, management structures, production, on-site storage, and business activities.  Look for the indicators and asked plenty of questions.
  • Stay in contact with the decision makers of the business so that you can identify when they are under any particular pressure of occupancy.  In any corporate structure there will be different levels of management to interact with.  Take notes and make observations when it comes to any meetings with tenants and management personnel.  A simple thing evolving from a meeting today can be a major issue in the future.  Understand the impact of a shift in rental or tenant occupancy within the asset.
  • Watch for any shift or change relating to staffing and management within the tenant business.  Are they still employing the same number of people? Has the management structure changed within the business?  When you see changes, ask questions.
  • The lease document will be important when it comes to enforcing lease conditions and rental cash flow.  Review the lease regularly for the necessary critical dates and methods of response that apply to the occupancy process.

Given all of these things, the landlord needs to be fully briefed on any lease issues and recent tenant meetings.  Those facts can be merged into the end of month reporting for the property leasing and tenant management updates.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Commercial Real Estate Leasing Vacancy Solutions and Strategies

Large entryway with tiles and plants
Vacancies in office property can be resolved through strategy.

In commercial property management and leasing, you have to closely watch the tenant mix and the leases for any upcoming vacancy risk and or tenant in distress. The property market changes all the time, and each city will have unique pressures that can set the momentum to move tenants around and impact business performance.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Local Issues?

So what is happening locally for you in your location? Do you have clients and properties under vacancy pressure? It’s an opportunity to resolve. You really do need to know why vacancies are happening and then work on a strategy to resolve them.

Before I go too far into this concept, I will say that the leasing market is lucrative from a commission perspective, if you focus on one or all of the following:

  • Quality properties – some properties are better than others. Look for the differences in local properties and buildings in your location. Choose the better properties from a leasing perspective.
  • Larger tenancies – the size of the tenancy will dictate more rental and therefore more fees per transaction.
  • Corporate tenants – the companies and corporations in any town or city tend to need property help in relocating and expanding or contracting. You can have an appointment to locate their next property lease.
  • Particular property types – when you look at the rents per unit of area per property type, you will soon see the property types that create better interest from tenants and better rents. That is where you should focus your leasing efforts.

Given these 4 facts, you now know what types of leasing factors should feature in your prospecting model. Take deliberate care to stay within your set leasing criteria. You will then find the tenants and the better properties.

What value do you bring?

So why are vacancies happening in any building or location, and how can you help? To get to the answers, you really do need to look into the following factors and do the appropriate assessments:

  1. Rental pressures and shifts – rents that are consistently climbing will reach a plateau where business owners will resist leasing. In a city where rents are escalating, understand the realities of a business paying higher occupancy costs. What are the limits?
  2. Competing properties – other properties locally are likely to be competing for your tenants so watch the problem and intervene where necessary.
  3. Occupancy costs – rent and outgoings all add to the cost of occupancy; a tenant has to be able to afford the total occupancy package.
  4. Tenant mix problems – some tenants have issues with being close to others and other business types; look for those problems.
  5. Permitted use or exclusivity – in a larger building where you have multiple tenants, ensure the balance of tenant mix, and avoid giving away exclusivity (retail properties in particular).
  6. New properties being developed – any new property will shift the balance of supply and demand, thereby pushing businesses out into the leasing market.
  7. Landlord issues – some landlords are very difficult to work with, and will give tenants a good degree of frustration as part of lease negotiation and occupancy.
  8. Quality of services, amenities and improvements – buildings age as do the services and improvements.

From these things, you will find the properties and the businesses needing leasing assistance. At that point you have some advantages to work with.

(N.B. these ideas are also sent out to regularly to our friends in Commercial Real Estate Online Snapshot to help amplify brokerage results…. Get your access here)

Commercial Leasing Agents – Strategies for Finding New Tenants Today

business man thinking
You can plan your commercial property leasing strategy.

When the property market slows or changes, you need to develop specific strategies for finding new tenants in commercial and retail property.  Specialist leasing agents have ongoing tenant connection strategies for this very purpose.  Here are some tips from our bulletin for Commercial Agents.

As business and economic cycles change, tenants will come and go from the local business community.  Importantly you really do need to understand the changes and opportunities that are occurring locally.

Regular contact with business leaders and business proprietors will give you greater leverage in future tenant placement and lease negotiation.  Every day you should be talking to more tenants in the local business community.  Once the door of contact has been opened, it is wise to speak to these business leaders at least once every 90 days.  Potentially they will at some stage require some property assistance and a new lease or lease occupancy.

Here are some strategies for finding new tenants in this property market.  Given the volatility of your business community and local area, you can add to this list as appropriate.  The resultant checklist becomes very powerful in finding the right tenants for the right property when circumstances require it.

  1. When it comes to a particular listing that has remained vacant, check out all other adjacent properties in the local area.  There will be successful businesses nearby that may need to expand premises for a particular business reason or business unit change.  Use your current vacancy as a reason to talk to other local business proprietors nearby.
  2. The local accountants and solicitors are a good source of business intelligence and leasing change.  They work with the successful business proprietors needing property assistance and property adjustment.  They are more likely to know those local businesses that need leasing help over the coming 12 months.  If you can establish your reasonable level of trust with these professionals, you will find leads and opportunities being fed back to you.  The way to open the door here is to provide local market information relative to commercial and retail property.  Regular contact will see the levels of trust being established.
  3. The business franchise groups in your city may have a need for another business location.  Check out all the franchise groups and understand who their property decision makers are.  Speak with them regards the typical property needs that apply when they lease new premises.  Also ask them for a summary of the standard terms and conditions that apply in any new lease negotiation.  These facts will help you with positioning and negotiation with your landlord clients and their properties.
  4. Some tenants need to consider expansion or contraction of the business operation.  On that basis you can be contacting the business proprietors throughout the local region.  When they get to the last 18 months of their current lease, they are quite likely to be receptive to discussions on the current property market and lease or rental issues.  Providing them with a monthly update on the property market is a sensible strategy.
  5. Check out the decision makers in all the large local businesses.  They are likely to be looking for property change, expansion, contraction, or investment from time to time.  They may also purchase a property for future expected business needs.
  6. Understand the lease renewals and lease cycles that apply to all the major properties in your local area.  Tenants will seek local property information before they make choices regards moving or relocating.  Constant contact is part of the process to open the door on a potential new lease.
  7. Look for sale and lease back opportunities with those businesses that own their premises but want to release some capital from their property ownerships.

It is quite possible to find new tenants even in the toughest of property markets.  The process requires strategy and system on the part of the leasing specialist.

When the property market appears slow and sluggish, you really should look at it in reverse understanding that you have an abundance of quality listings to put to the potential tenants looking to change location.  Lease opportunity is always out there and will be a great source of commission when sales slow.

Need some more tips on how to do leasing of commercial or retail property?  Try our regular bulletin right here.

Traps in Leasing Commercial Property and How to Avoid Them

Office property lift foyer
Leasing commercial property needs strategy and control.

When you lease commercial property you want things to run smoothly so you can get the tenant into the premises as soon as possible and have the rental and income flowing.  Now all that is just fine, but the leasing process is quite complex and a few unexpected problems usually arise as you proceed through the leasing stages.   Here are some tips from our bulletin for Commercial Real Estate Agents.

It is best for the property manager or landlord to develop a checklist to help lease negotiations and keep matters under control.  In a complex property the lease matters are numerous and can slow down the final agreements and access to the premises.  That being said, there are no short cuts when it comes to leasing, and the best lease agreement is one that has been well controlled from the start.  Never let a tenant have access to the premises until they have fully complied with the terms of the lease agreement and lease.

To help your checklist creation and process for the leasing of the premises here are some things to consider.

  1. Get the lease document created as quickly as possible.  The lease should reflect the essential main terms of agreement between the parties that arose in the negotiations.  The landlord’s solicitor should prepare the lease in accordance with the factors of the property and the instructions of the landlord when it comes to standard leases for the property.  Some solicitors can take an unacceptable length of time to create a lease document to be signed by the parties.  A lease document should be created and presented to the parties for signature within 48 hours of the initial lease agreement.  From that point onwards the discussions and debate between the parties can slow things down, so stay on top of all issues and pressure the parties to keep things moving.
  2. The lease document should always be signed, deposit paid, rent paid, and guarantees lodged, before any premises access is given to the tenant.  Everything from the initial lease agreement should have been satisfied and signed off before keys are given to the tenant.
  3. Fit out plans, drawings, and approvals are required before any tenant fit out works commence.  The approvals for such works should have been correctly obtained from the landlord and the local building regulatory authority.
  4. The finishes and types of materials to be used in the fit out should be approved by the landlord so that the building maintains a level of consistency in presentation.
  5. Security systems and locks on the premises should be maintained to the building master key system.  In this way the landlord and the property manager can access the premises in times of emergency or when and if a lease default occurs.
  6. The permitted use of the premises should be in accordance with the planning regulations and the lease as signed by all parties.

The process of putting a tenant into a property is complex, and every step of the process should be carefully managed.  Keep notes on any discussions and actions taken by all parties.

If you need some more tips on leasing for commercial and retail real estate agents you can get our bulletin here.

How to Do a Market Rent Review in Commercial Property

office space commercial building
Get all the facts when doing a Market Rent Review

In commercial and retail property, the market rent review can be quite challenging.  There are many variables that can apply to the review process.  As a property manager or leasing manager, it is important that you gather all the correct facts in preparation for the market rent review process.

So, exactly what is a market review?  It is the establishment of a rental taking into consideration similar rentals with similar properties in the same general location.  Unfortunately, this process can be difficult and slow given that many other properties are not directly comparable.  In some cases, your particular property may be so unique that you will need to look well beyond the local area for comparisons and market rental evidence.

As part of the process of gathering information, keep your notes regards findings and assumptions.  When it comes to a rental dispute, these notes and findings will be supportive of your rental choices.

So here are some ideas to incorporate into the market rental review process:

  1. Review the lease document fully before you start the process.  Understand all the terms and conditions of the lease document with particular care in identifying critical dates connected to the review.  Some of these critical dates will need to be satisfied and adhered to as you negotiate between the landlord and the tenant.  Time can be of the essence when it comes to responses and notices in the review process.
  2. After you have reviewed the lease document, visit the property and inspect the premises internally and externally.  Take many photographs as evidence of the existing conditions of occupancy.  As you move through the review process, these photographs will help you identify and match the tenancy to other relevant properties.
  3. When you look through the tenancy, understand the premises as supplied to the tenant by the landlord.  You cannot take into account any factors or improvements of occupancy provided by the tenant within their own fitout.  The rent review applies to the premises as supplied to the tenant by the landlord at the commencement of lease.  Go back to the lease negotiation file for information in this regard.
  4. If the tenant occupies space within a large building, it is possible that you will have other market rental evidence within the single property.  This will be of great assistance if that is the case.
  5. Any rental evidence that you are given or find in and from other properties, should be qualified to understand that the rental is truly on the basis of market evidence.  There is no point in using rental information that was generated from review methods other than the market process.
  6. Other situations of market rental evidence may be biased or skewed due to the impact of lease incentives negotiated between of the landlord and the tenant in particular buildings.  If any lease incentives were provided in those comparable transactions, the value of the incentive should be removed from the calculation so you can truly understand the effective rental in each particular case.
  7. Inspect the premises located in other properties that you believe are comparable.  Take into account the factors of occupancy, services and amenities, property access, lease terms and conditions, permitted use, and length of lease in each case.  Property managers will usually share information to assist you in your market rent review.  A reciprocal process of information should apply at a later stage when they need help with their property.

This list can be expanded subject to the factors of property type, lease terms and conditions, property age, and market evidence.  Expect that the process of review will take time so start the activity early.

Need more ideas with rent reviews and leasing in Commercial or Retail real estate?  Join our Newsletter here.