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)

How to Prepare for a Commercial Property Lease Negotiation

Staircase with marble landing and balconies
Prepare comprehensively for your commercial property lease negotiation

If you have had a bit to do with tenants in leasing any commercial or retail property you will know that they can really delay things for their own reasons, thereby impacting the landlord in negotiation and slowing the agent as to finalizing the deal.  As the leasing professional your job is to work with that challenge and encourage agreement to the benefit of the client.

(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)

Understanding the tenant’s situation now and applying that requirement to the current property market will help you with activating and progressing the lease deal.  That then means a better negotiation.

The tenants focus?

Good questions and research will usually help you to get to the tenant facts and motivators.  As you move through that, don’t forget just who your client is in the process and how you are representing them through the process of leasing.

Here is an interesting leasing based question for you. Can you believe what at tenant tells you about the property lease requirements that they have?  Perhaps not totally, however you can ‘read between the lines’ of what the tenant is saying and doing, and get to some of the real facts of what is happening in their business world.

A good outcome?

A good lease negotiation is generally a result of the leasing broker informing the parties to the deal, then discussing, listening, and seeing through the challenges.  Though all stages of the inquiry, inspection, and meeting process you can find out more of the tenant’s requirements and priorities.

So what really goes on in a lease negotiation?

The balance of any lease negotiation will shift and change based on just how much available space may be in the property market at any point in time; you have to prepare for that variation.  It directly follows that you should be prepared for any and all of these tenant ‘delay’ tactics:

  • Looking around at other properties
  • Comparing rents across the market and between vacant premises
  • Comparing properties and the improvements
  • Incentives to sweeten the deal
  • Slowing discussion to make a decision
  • Wanting to change lease conditions
  • Asking the landlord to do some internal fit-out works
  • Seeking early access to the premises before documents are signed
  • Fit Out approvals slowing
  • Plans of the fit-out not available

There are many variations as to what a tenant will be looking to do with a lease negotiation.  As the professional, you are to guide the process and negotiate through these barriers and many more.  Control and research are the keys to any successful commercial property lease negotiation.

Tenant Management Tips for Commercial Property

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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

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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)

All Important Questions to Ask Office Leasing Tenants Today

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Vacant office space requires real strategy

 

As a leasing agent you are frequently looking to lease vacant premises in an office building and CBD location.  Many enquiries and calls today will or should come to you from the marketing campaigns you create; the rates of enquiry for every high quality leasing opportunity should be tracked.

Having trouble with tenants?  Here are some comments and ideas below that I sent to our ‘Commercial Snapshot’ Online Community this week.

What’s Important with Tenants?

The important issues in capturing enquiry are in qualifying the enquiry, in understanding what tenants are looking for and when they require it.  Successful leasing agents will have a large database of well qualified tenants and business owners that they can approach when the right property comes to market.

That being  said, I have heard many leasing agents complain over the years about the problems of chasing after the specific leasing requirements of tenants only to find that the tenant has found something or will not move on an ideal property or location.  The fact of the matter is that you should only go so far in helping tenants because they are not fully committed to you; they can waste a lot of your time asking about certain properties, and at the same time be talking with many other agents.  Set the limits on just how much time you should spend on any tenant lease enquiry.

The message here is if you control the quality buildings to lease, the enquiries will very likely come to you in abundance.  Good buildings for lease will drive better rates of property enquiry.  That then makes it a lot easier for you to fill your database with the right tenants and business owners.

The tenant qualification process is quite special and direct.  Here are some of the main facts and questions to explore in finding out what the tenant needs, and to identify how genuine they are in looking for a new property to occupy:

  1. Decision Maker – Understand who you are talking to and their role in looking for a new property to lease. With business type tenants it is common to see some person in middle management tasked with the process of finding properties to ‘short list’.  Ideally you want to be talking to the key person in the property decision process.
  2. Essential location – Some businesses must be located in particular precincts and zones of a city. There will be reasons for those choices and points of focus.  I like to ask about ‘primary’ and ‘secondary’ locations so I can create a short list of properties in each case.
  3. Rental budget – The rent for a property is not just a single amount of money; added to that figure will be the outgoings and sundry charges geared to occupancy. The type of lease will dictate how the rents and outgoings will be charged and paid.
  4. Improvements – The office fitout will have desirable design factors to suit the way the tenant undertakes their business, interacts with staff, and serves customers. Car parking will also have a factor of priority in final property choice.  How many car parks do they need?
  5. Timing – Understand when they are looking to make the move. You can then integrate the issues of fitout construction, and the moving of the business.

Given all of these things I like to ask the tenant directly about what other properties they have already seen; it is likely that they have approached a few leasing agents already and on that basis I don’t want to waste my time in quoting things that will not suit or they have already seen.   Protect your time and focus on key questions to get directly to the tenants leasing requirements.

Commercial Real Estate Brokers – How to Solve Commercial Real Estate Vacancy Problems

office cubicles
Vacant office space requires real strategy

 

Most commercial investment properties will have vacancy pressures to deal with from time to time. The larger the property, the greater the potential for vacancy issues to frustrate rental cash flow. If you are involved in the management or lease of any large investment properties, it is essential that you understand the intentions of sitting tenants when it comes to future occupancy.  The concept is called tenant retention.

Tenant Retention Plans

In an ideal world, vacancies should be resolved quickly and effectively for any landlords that you act for. The only way to achieve that level of control will be through a mix and match of the following strategies:

  1. Understanding the intentions of sitting tenants when it comes to lease expiry
  2. Monitoring the upcoming lease expiry dates approximately 18 months in advance
  3. Do a lease audit for all existing tenants
  4. Negotiating any lease expiry’s early so you can deal with the vacancy in a timely way
  5. Keeping in close contact with all of your sitting tenants within the tenancy mix so you know what they are thinking when it comes to occupancy
  6. Understanding the local business sentiment applies to rents, relocation, and property requirements
  7. Keeping in close contact with all local businesses to attract new tenants to your property when required
  8. Understanding the requirements of the landlord when it comes to market rental, cash flow, outgoings recovery’s, and lease documentation

 

Any leasing agent providing a specialised leasing service locally should satisfy and engage in all of these mentioned issues. All of these issues can be merged into a tenancy mix plan and a tenant retention plan for a major investment property. Large office buildings, and large retail shopping centres would be suitable for those control processes and plans.

To provide a top-quality leasing service, any vacancies currently or into the future should be controlled and filled. A top leasing agent will stay in contact with the landlord and all the tenants to ensure that vacancy downtime is minimised.

Any vacancy in an investment property can be a significant drain on cash flow over time. Not only is there a loss of rent, but the outgoings for the vacancy will become a landlord cost and therefore not recovered. Any property with a high vacancy factor will find it difficult to negotiate rent reviews and options with sitting tenants. Market rentals will also be hard to establish and maintain because of the high vacancy factor.

If you are involved in the management and leasing of any complex property with multiple tenants, it is essential that you track and control vacancies as they apply to the tenancy mix. Work well in advance to negotiate existing lease options, minimise vacancies, and attract new tenants that could be thinking about coming to the property.  Why is your property more attractive than others in the area to tenants?  When you know the answer, you have the basis of your lease marketing campaign.