The client or the owner of a commercial office building
wants to know that you have a definite plan and a ‘toolbox’ of strategies that
you can apply to their leasing challenge.
The ‘generic’ approach to office leasing
doesn’t work anymore. You are the
Be more specific with your
leasing engagements with properties and clients. Put the client’s
property leasing requirement firmly into the property market in your location
and build your leasing stories and tactics around that.
Asking the Right Leasing Questions
There is no ‘one fits
all’ approach to finding tenants and filling any vacancies in office leasing. Be specific when you try to help your
landlord clients with their leasing challenge; put some ‘purpose’ into your
leasing plan and provide ‘clear strategies’.
Here are some ways you can do that:
Know the major buildings locally – As part of any leasing project, be aware of the other buildings in the location that could have an impact on your client’s property and the known or upcoming vacancies. There will need to be a ‘point of difference’ to help your property with its leasing requirements stand out as relevant and valuable to tenants and local businesses. How can you do that?
Target tenants and businesses – Certain tenant types will match your vacancies in your listed property. The marketing of the vacancies then becomes more direct and specific. Build a plan of specific marketing to reach out into the best tenants and businesses that you think would be good candidates to occupy your listed property.
Vacancy reduction is normally achieved through tenant attraction and retention – Every exclusive leasing appointment should have a tenant attraction and retention plan. That will involve some specific rents and lease offerings with existing tenants. Each year those plans can be modified as part of the
Incentives and benchmark rentals should be set – The property market will change, and with that change will come variations with supply and demand impacting your lease listings. The enquiry that you want or get with your property listing will be reflected from the rents you are asking for, and incentives that you are providing. Understand what other tenants are being offered currently in the local property market, and then package your property and its vacancies to have some advantage in rental and or incentive offerings. Make your property the ‘best value’ in office leasing locally. It doesn’t matter too much where you start with rentals, but it does matter where things finish. Your rent review strategies will be a useful way of improving things from the starting rent.
What are the improvements and fit-outs possiblities to apply? – Prepare your vacancies for leasing by considering the improvements, the services and amenities, and the fitout configurations. The size of the floor plates will also have an impact on fitout design.
These office leasing strategies will help you build some
purpose and momentum into your professional leasing services for your
clients. Be comprehensive in how you
build a lease strategy for your clients
and their property vacancies. Be
all-inclusive in how you look at attracting potential tenants to the asset and
its vacancies. These are the qualities
of a professional leasing agent in office property today.
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.
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:
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.
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.
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.
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?
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.
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.
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.
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.
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:
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?
Competing properties – other properties locally are likely to be competing for your tenants so watch the problem and intervene where necessary.
Occupancy costs – rent and outgoings all add to the cost of occupancy; a tenant has to be able to afford the total occupancy package.
Tenant mix problems – some tenants have issues with being close to others and other business types; look for those problems.
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).
New properties being developed – any new property will shift the balance of supply and demand, thereby pushing businesses out into the leasing market.
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.
Quality of services, amenities and improvements – buildings age as do the services and improvements.
It is one thing for your client to purchase a property with the tenant in occupation. It is another for them to purchase a high quality investment with an excellent lease covenant and a high quality tenant.
The fact of the matter is that lease documentation will support the investment and on that basis the lease documentation should be analyzed for opportunity together with the tenant(s) before your client purchases the property.
What do they want?
Most clients looking to purchase a property will focus on a property and its location first and foremost. They may look into the basic facts of the lease structure and strategy across the tenancy mix, but rarely will they read the lease document itself as it applies to each and every tenant. That is where you can add value and provide commentary relating to the investment over time as that investment may be supported from and through the lease documentation. In a complex property with plenty of tenants in occupancy, that is then a real service and something that should be provided to your best clients.
So the message here is that you can find the right property for your clients in your local area taking into account the complexity of the tenancy mix and the lease documentation. You can determine and understand the investment benefits that the lease documentation in any property will provide to your clients over time.
Lease Facts to Know
Here are some ideas to help you do exactly that:
RENTS: Understand the rental structures and strategies that apply to the lease document. Compare those rental structures to the prevailing market conditions. The type of rental will also have an impact on the outgoings recovery be that as a net rent or as a gross rent. Exactly how can the landlord recover the outgoings from the property given the prevailing market conditions and the existing lease documents? Should any of the existing leases be replaced with better documents when the next lease negotiations arise?
RISKS: Are there any risk exposures within the tenancy mix? Risk will usually be created through a future threat of vacancy, or an existing vacancy exposure. You can deal with these problems through planning tenancy placement and negotiating leases well in advance prior to expiry.
COSTS: Assess the levels of outgoings as they apply to the particular property under consideration by your client. How do those outgoings compare to the industry averages for the property type in the location? Look at the history of outgoings expenditure within the property over the last few years. Look for patterns of expenditure and make sure that the costs to run the building are genuine and real.
MAJOR CAPITAL COSTS: Whilst ordinary running costs will likely be recoverable through the various types of lease rental and documentation, major capital expenditure items will not be recoverable in that way; they are a property owner cost. On that basis you can review the property for upcoming items of major capital cost outlay. Will your client have sufficient funds to cover such a capital expenditure in the timeframe required for renovation or rectification?
So there are some good things that you can do here when it comes to helping your clients with lease documentation and property selection. You could help them understand the way each and every lease document will work as part of their overall investment performance and result.
Look for the strengths and weaknesses in lease documentation as it applies to investment property today. Show your client exactly how they can benefit from a well negotiated lease and a high quality tenant.
In this podcast I thought I should spend some time focusing on Commercial Real Estate Leasing. That is for a number of reasons, the most important of which is that property leasing introduces you to the landlords and property owners who will eventually need more help in the future with things like sales and property management. In other words a simple lease transaction can lead to other things.
I have split the audio program up into a number of segments. The summaries of the program are below:
Why you should not let your tenants get out of control – in any property containing a group of tenants, the communication and control process is very important. Tenants talk to other tenants and that can be a problem if issues exist in the building. So this is all about those buildings with multiple occupants and how to connect with them.
How you can be a commercial real estate leasing expert – you can do so much with your leasing knowledge. You can establish tenant advocacy services, landlord leasing services, tenant mix advice, and basis brokerage leasing. What sections of the leasing market can you see reasonable leverage and commission activity evolving from? This part of the audio program will help you with ideas.
How to work with franchise tenants and why that is a good idea – the franchise section of the commercial property market today is forever evolving and growing. If you connect regularly with local franchise groups you can help them with property selection choices and any required relocation’s. Get to know a few franchise tenants locally and come to understand what they need by way of property and when that is likely to occur.
Some simple ideas for qualifying industrial property tenants – the industrial part of the property market is generally the first to respond in an upturn and also a downturn. That being said it is a reasonably uncomplicated part of the industry. Get to know a number of industrial tenants and businesses locally; see if you can help them with current and future property needs.
These are parts of the audio podcast by John Highman. You can listen to the audio below.
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