In real estate brokerage, the industrial property market offers good levels of entry and activity. Why is that so? It is because the property type is ‘entry level’ for investors both in complexity and cost. It is not hard for an agent to know what is going on in the industrial market place and get the facts of what a property investor in that segment may be looking for.
The aspiring brokers and agents that are starting up in the industry will find it easier to understand industrial property first and foremost. From that point other property types can be incorporated into market activities and prospecting.
From a career perspective, and to help you get started in industrial property sales and leasing, here are some ideas:
The industrial property market is usually the first to respond in an upturn and a downturn. Watch the shifts in the economy to capture the market changes and listing opportunities.
Businesses centred on manufacturing and bulky goods usually need larger premises to operate from. They will chose locations that are relevant to regional raw materials, transport, customer demographics, occupancy costs, and business operations. This then says that a top agent in industrial property will spend substantial time getting to know the local businesses and what they are looking for in business operations, expansion needs, and locational change.
Some properties in this category can be tenant and business specific. If that is the case, any landlord should take care in structuring a longer lease with appropriate make good clauses at lease end. Also allow a reasonable lead time for a tenant making a decision on the exercise of an option. If the landlord needs to find a new replacement tenant for a highly specialised property, it can take some time to achieve the placement.
In this market segment, a top industrial property agent will work on both leasing and sales opportunities. One thing can very well lead to another.
With the predominance of industrial parks and the clustering of industrial tenants and businesses into the one location, there are special factors of knowledge that apply to the title types and the permitted uses under the leases. Get to know how these things work and can fit into the zoning and planning regulations for the local area.
Industrial properties will have configuration and improvement issues to understand. That will include hardstand, warehousing, office space, staff amenities, car parking, security, and loading areas. Use and configurations will change. Get to know what tenants and businesses are looking for locally in property choice and occupancy.
So this is a good market type to enter into as a commercial and industrial property agent. If you enjoy the market segment you can specialise for many years and achieve.
In today’s commercial and retail property market, you really do need to develop a leasing strategy for each and every quality property that contains vacancies. The abundance of vacancies available means that the limited pool tenants available has a lot of properties to choose from. Attracting enquiry from tenants and then converting the enquiry is a real ‘art form’ in this market. Here are some more tips from our Newsletter for Agents.
It should be said that the marketing of any lease or vacancy should be on an exclusive basis. You should be appointed as the agent of choice to market the property for a period of time. Controlled listings are the only way to attract enquiry in this market today.
Given that the landlord requires leasing results in their property, the controlled listing is the only way to achieve the necessary commitment on the part of the agent and the necessary market penetration into the tenancy base.
It should be said that the client’s commitment to an exclusive agency should also be reflected in the agent’s commitment to market and service the listing. There is no point in taking on an exclusive listing of a vacant tenancy unless you truly believe that you can market it comprehensively and intensely for the period of the agency. The real estate world is full of disgruntled clients who have been tied to an exclusive agency and a poorly performing agent for a long period of time.
To provide an excellent leasing service for your clients today, here are some tips and ideas to merge into your leasing strategies and solutions.
When you act exclusively for a particular landlord, the property portfolio that they own should be subjected to a tenant retention plan and business strategy. In that planning process you can set the key criteria that should apply to ongoing leasing activity and tenant mix changes. When the landlord can clearly see the leasing road ahead when it comes to rentals and vacancies, they are more likely to stick with you as the leasing expert that they require.
The market rental in your local area will change from time to time given the supply and demand for rentable space. New property developments will place pressure on market rentals through the introduction of lease incentives and enticements. Keep your client up to date with some form of market rental update on a monthly or quarterly basis.
The expenditure or outgoings costs for a given property asset will be based on both controlled and uncontrolled cost factors. The uncontrolled cost factors are those that relate to property rates and taxes. Like it or not they will have significant impact on property usage and will need to be paid. It is the controllable outgoings that have some ability to be shaped relative to occupancy and building usage. As a leasing strategist and specialist, you can keep the client appraised regards current levels of expenditure and outgoings that apply to the particular property type. The trends of outgoings costs will to a large degree influence your rental decisions regards amount and rental type.
To be a top leasing agent today, you simply need to bring relevant leasing skills and local property knowledge to the client. Provide the best leasing service possible to your clients, and keep in touch with the local business community for the tenancy needs that arise.
The customization of an industrial property is achieved through the integration of the real estate, its established and new property improvements owned by the landlord, and the machinery and inventory of the tenant. This relationship can occur as part of the lease negotiations between the tenant and the landlord.
If the customization of the plant and equipment is going to be extensive and elaborate, the terms of the lease will need to be suitably and carefully constructed. It is important to identify the different levels of plant and equipment that are owned by each party. The lease document is the place to do this.
If costs are to be incurred by the landlord in modifying the plant and equipment and to help the tenant in establishing occupation, then the initial property modification costs should be amortized across the lease term. Any money outlay by the landlord should be built back into the income recovery.
You can calculate the cost recovery alternatives through a discounted cash flow with appropriate rental recovery assumptions across the initial lease term. The rent reviews and the market rentals to be charged during the initial lease term can be modified for recovery of amortized costs.
Distinguishing the Differences
It is often difficult to distinguish between the plant and equipment owned by the tenant, and that which is owned by the landlord. For this very reason, any new lease should clearly detail the ownership factors and the maintenance factors that apply to the existing plant and equipment within the property.
The landlord may own some of that plant and equipment; however the maintenance may be passed across to the tenant as part of ongoing occupancy. The lease document is the way to detail this factor. It is then up to the property manager to ensure that the appropriate levels of maintenance occur during the lease term.
Clear definitions and relationships need to be set when it comes to leasing a complex industrial property with complex cross ownership structures of the plant and equipment.
Generally speaking, the costs incurred in establishing new plant and equipment within an industrial property will have some advantage in depreciation when it comes to taxation. Clear relationships need to be set between the tenant and the landlord as to the initial cost outlay and the application of depreciation.
Any property landlord should consult with their financial adviser before they make the final decisions on capital costs incurred in a new or established industrial property.
Industrial property needs to be well-positioned with due regard for transport routes and transport access. Look at the road configuration and proximity with due regard to heavy transport access and deliveries to and from the property.
Some industrial tenants and properties require access to raw materials and the labour market. This could involve public transport or ports, rail heads, and airports. Look at the access issues here.
Power supply with industrial tenants is particularly important as they usually have a high load demands and extended hours of electrical load. Can your tenants access the power they require easily? It may be necessary for you to talk to the power grid authorities and the tenants in this regard.
Can the tenants dispatch their product easily into the transport corridors and transport facilities within the state? This is particularly the main roads, airports, ports, and shipping facilities.
Is the property located in a recognised industrial area surrounded by good and busy industrial tenants? Talk to some of the other local businesses to see what they think about the local area.
Are there any unsold properties or an abundance of vacancies in the industrial precinct and are tenants and properties in high demand? Look at those vacancies and get details of the asking rent.
Does the precinct feature an abundance of investment type property or is there a balance of Owner Occupation in existence? Could other tenants in the area be looking for properties to purchase and get away from the rental or lease issue?
What is the ratio of floor area between the office areas to the warehouse? Is that ratio too high or too low given the trends of occupancy in the local area? This will be relevant to the type of property and the customers that they service.
What is the height of the warehouse between the slab and the underside of the steel frame supporting the ceiling or roof area? That dimension can oppose or restrict certain types of storage and/or access by transport vehicles.
What is the access to the warehouse area from the main road fronting the property, and how many roller doors service that access? Are those roller doors motorised, do they allow the entry of modern semitrailer vehicles? Is there a need for other access doors in the future and can they be easily installed?
Is there an abundance of good lighting, or natural lighting in the warehouse area providing good visibility?
What is the load tolerance of the warehouse floor for heavy vehicles, what are the dimensions of the floor surface slab and does it provide ease of access for loading vehicles and trolleys?
What are the dimensions between the supporting roof columns of the building? This will dictate the types of storage and pelleting load area which may affect any future tenant occupancy.
What fire prevention systems and security systems exist in the premises that will be relevant to occupancy?
Is the building fully compliant with health, safety, and fire regulations? It may be necessary for you to visit the local building authority to check this.
What is the external fabric of the building? Is it easily maintained, does it provide a quality appearance?
Is the internal warehouse suitably lined and insulated given the property usage that is expected?
Is the property flat and suitable for trucks and or loading? • Does the office area provide good quality presentation, services, amenities, and business environment which will support the tenant in their future occupancy?
Is there any asbestos in the building, and if so, is it documented and maintained within regulatory and legislative management practices?
Ask about environmental risks and threats from the property or from the occupancy.
Look at the local maps to see how the property fits into the location and the geography. Look for things that can impact property usage such as rivers and creeks that could flood. Look for slippage potential if the block is sloping or near steep areas.
What does the zoning of the property allow it to be used for? Check out the local development plans.
Has the block been filled or re-levelled? Get details of this. It may be necessary for a soil report to satisfy buyers or tenants as to property suitability for their operations.
So you can add to this list based on your local area and the types of industrial tenants that you deal with. Formulate a checklist from this and the other things that you can add. As part of the inspection process, take lots of photographs of the improvements and the property itself. Loading areas and turning areas for trucks will be of real importance to many property owners, as will hardstand space in the property.