In commercial real estate brokerage you need plenty of clients to support your listing and commission activity. You also need new prospects and opportunities to fill the gaps when some of your clients move on or leave the industry.
Given that we are soon to be starting another calendar year, it is time to have a look at a new and fresh approach to prospecting and client networking. This should be a personal priority for all real estate agents and brokers. This is the best time of year to get your client activities and database directions set for the next 12 months.
Here are some facts that relate to the market today and the clients we work with:
The ‘market noise’ from competing agents will always be significant. Many of our top clients will be working with other real estate agencies or at least know of some other top agents locally. This is a continual threat to our market share that can only be addressed by relevant and constant contact with the clients that we know. That is why property specialization is such a critical process in building listing opportunity. When the time comes for the client to move on a property matter they will usually choose the best agent with a dominant market share within the location and the property type. That is why general real estate agents and brokers never really develop dominant levels of business.
Winning a listing today is not entirely about providing discounts or inflating the property price to attract the clients business. Winning a listing is all about packaging the property to attract the maximum interest and facilitate inspections. High prices and higher rentals will not do that. Understand the prevailing market conditions and how you can work with that to solve the property challenge for your clients and prospects. Show the client the true facts of the market as they apply to the property type and location. Tell some stories relating to both successes and failures within the property category.
If you have a property that has been on the market for a long time, it is time to seriously adjust and reduce the price and or the rental structure in line with market conditions. Clients are not fools when it comes to true market conditions; they want results. They will usually understand that an inflated price or rental will make the marketing process quite difficult, so your pitch or presentation needs to tell the right story and provide the right market evidence. Any property with an inflated price or rental will soon become stale on the market; stale listings are usually quoted by top agents as marketing weaknesses. It is easy to show clients how other overpriced listings have been poorly marketed and overlooked by buyers and tenants. If the client is still unrealistic on price or rental expectations, it may be time to walk away from the listing and let some other agency or brokerage waste their time.
Every quality listing should be exclusively marketed. As part of that process, you should be asking for and attracting vendor paid marketing funds. Structure your sales pitch and presentations accordingly. Marketing dollars spent will have a lot to do with your real estate profile locally.
Working within these very simple and yet important facts, it is time to look at the ways you can attract new clients and listing opportunities. As I said earlier, the change in the calendar year is upon us and certainly will give us the opportunity for a new business direction and a freshening of our client connection process.
Here are some tips to help you with reaching out to new clients and prospects:
Visit the people within your current database with the deliberate intention of asking for referral business and opportunities.
Identify the bankers and financiers within your town or city that have an interest in commercial industrial or retail property. Get to know those people at a personal level.
Contact all local accountants and lawyers locally that appear to be reasonably successful with their business activities. They are likely to have many clients active or interested in commercial property.
Identify the entire listings list active with your competitors. Use those listings as leverage to talk to other property owners nearby. Some of those property owners may like to compete with the current listing in the same location.
Identify the people that have purchased investment property within the last 3 to 5 years. They are likely to be active again within the next two or three years. They may wish to buy, sell, lease, or develop.
Check out the property development activity at the local council. Also check out the changes to zoning and property usage. All of these things could be solid foundations for project marketing, future sales and leasing activity.
In our industry there are many leads and opportunities available at any point in time. It is simply a matter of digging deep enough into the marketplace, the people, and the listings. Opportunities in commercial real estate are always available and it is simply a matter of asking the right questions to the right people.
When it comes to leasing commercial and retail property today, franchise tenants are a special opportunity for property agents. These franchise tenants already have a proven business model, established business brand, and good track record. On a regular basis those franchise tenants are going to be looking for new premises as part of the expansion of their network of operations.
Landlords and Commercial property agents should work closely with these tenant types. To get that process underway, visit surrounding suburbs and towns. Look at the established franchise brands in all property types. See if those brands are already located in your territory or if they would consider a move or an expansion in that way.
So we need to set some rules here:
Franchise tenants know what they want by way of premises given that they understand their customer profiles and ideal premises configuration and location.
The leases used in these circumstances are likely to be a variation of the standard lease used by the franchise tenant.
The lease term will need to match the duration of the franchise agreement.
The branding and signage of the tenancy will require consistency that suits the property but also attracts customers. Brand consistency is really important when it comes to premises choices and occupancy with franchise tenants
Commercial and retail real estate agents can do very well in working with this segment of the market. Get to know the franchise groups and what they are looking for in property type and location.
Here are some questions to ask and issues to work with that can help you with this type of tenant:
What type of property best suits their operations now and in the future? Pay particular attention to expansion and contraction needs. The tenancy may have specific challenges when it comes to ongoing occupancy within their franchise agreement.
What locations are best suited to growth of trade and business? In can be that main roads or highways have something to do with property choice. Property and business exposure can help the franchise group within its branding.
Where will their customer be coming from and why? You will need some local population and business demographics to help you here.
Check out the competitors for the franchise tenant. Whilst the tenant you are working with will already have a good idea about their competitors, you also should seek to understand those market factors.
The rental structure for the tenancy will be a balance between the requirements of the landlord and the cash flow structures of the franchise group. The franchise fee will be an added cost in the viability considerations of the business in occupancy. The landlord will still want a market rental for the premises based on prevailing market conditions. Most franchise groups will take between 5% and 10% from the gross trading figures of the tenant. It is wise to ask the tenant for their cash flow projections based on occupancy costs, expected levels of trade, and local business conditions.
You can do very well as a commercial or retail property agent when it comes to working with these tenancy types. It is simply a matter of understanding and specializing with franchise brands. You can then identify the right properties that suit their business activities and projections.
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.
When it comes to selling and leasing commercial property, the direct marketing approach has distinct advantages. That being said, the direct marketing approach does have more requirements of time and effort on the part of the commercial agent.
Every property that is listed for sale or for lease should be exposed to a variety of marketing campaigns and initiatives using the following categories as a guideline:
The local property business proprietors that may need to relocate will always be opportunity. Keep in close contact with this business segment.
Property investors requiring alternative properties with a different tenancy mix and cash flows will always seize opportunity where they can afford it.
Identify the property investors that seek to diversify their portfolio in different locations and in different property types. Even in difficult times, these investors had do exist and are waiting for the right circumstances or bargains come along.
Contact all the local tenants that may seek to relocate through expansion, contraction, rental, or property acquisition.
Businesses located in the immediate proximity of the actual listing may be requiring further premises close to their existing operations.
Within your database you will have people who were previously qualified from other earlier campaigns and listings. They should be contacted again.
All of your current property listings should be cross promoted to the suitable qualified prospects that you take to inspections.
So these categories are all direct marketing tools. They require specific effort and a systemized process on the part of the agent. When the property market slows or becomes tougher, these issues above become more important than ever before. They can be used in addition to any ordinary generic marketing that you usually implement. That being said, you should only do these things based on the quality of the listing, the quality of the client, and an exclusive listing.
The intelligence-gathering efforts that will help you build opportunity in the market should include analysing your commercial real estate marketplace. The property sales and leasing market is always changing. Seeing those changes early and adjusting your efforts or focus will always be the best strategy:You can then make choices on which you will focus:
What are my market segments? How do the segments differ?
Does local property needs differ in sales and leasing?
Are some property segments destined for obsolescence because of changes in the market?
Which segments within my niche are prosperous and under growth? Are any of them recession-proof? Recession-sensitive? Which are doing poorly? Why? You should always be in tune with financial and business publications, their data, information and value.
Which segments of my niche are most price-sensitive and competitive? In this case you should identify the other agents that you are up against and how they impact your activities and listings.
Which are most profitable property types for you to list and work on?
What trade journals or publications in my market niche are the best for marketing, the most comprehensive, and the most objective for commercial sales and leasing?
Subscribe to every relevant publication and read the papers daily. It is remarkable how much local property information you will get from the local paper.
What can I learn from our own competitors and peers that can help me serve the needs of my niche? Your prospects may have uses for commercial real estate sales and leasing that you never previously thought of.
Are any of my real estate competitors exhibiting any behaviour in the property market that seems strange or unusual? If so, what are the true reasons behind it?
What must I do to become a recognized expert within my commercial real estate niche? What should an expert cover and offer to the local property owners and investors
Do you understand the differences between sales, leasing, and property management? Can you cross sell your services in each discipline?
Are there any certification mechanisms or awards for which I can qualify? Associations I need to join? Groups in which I might need to assume a leadership role?
Having this intelligence information on your commercial real estate market can be likened to knowing the rules of the game. When you know the basics, you are ready to gather scouting reports on other teams in the “ big league”.
We need the truth when gathering market intelligence. Whenever we have accurate intelligence on our competitors, we can leverage our own strengths and weaknesses against theirs and apply the most concentrated, effective pressure we can muster.