The commercial real estate leasing process is quite special. You can work with tenants or landlords, but either way you will need some local area information and the tools to help you through any property inspection and negotiation.
Commercial real estate leasing is quite special in a number of ways. There are pressures to work through with tenants and landlords. In this audio program by John Highman, you can learn how to optimise the leasing process for better results. (NB – you can get plenty of leasing ideas in Commercial Snapshot right here – its free).
John talks about the property leasing market today and what needs to be done to convert better enquiries from tenants. There are some other ideas in the audio program about listing, marketing, and negotiating.
How involved are you with your database list currently?
How accurate is that list?
Are you building some pipeline of contact with all the people in your list?
The secret to finding and converting more commercial real estate tenants will always be in your canvassing and prospecting activities as a broker or an agent; those are the specific activities that you activate and deploy every day into the local business community and or the tenants in your location. Landlords and tenants will be critical to the growth requirements that you have in commercial real estate leasing. Grow your contact model, and grow your real estate business.
Consider these questions:
How many new tenants to contact each and every day?
Understanding your town or your city, and the local businesses to you connect with regularly each 90 days?
If you were to show the landlord your database to impress them as part of the property leasing presentation, how impressive with your database be, and would it attract the landlord to your services?
Ratios and Results
There is a ratio to know and respect here, particularly as part of this leasing and investment property process. The number of listings that you convert exclusively over time will be influenced greatly by the number of landlords that you know personally and connect with regularly. Focus on building trust and confidence with the landlords that you work for. Provide regular updates of the leasing market together with comments leading to market rentals, incentives, and lease strategies.
Audio Program about Tenant Attraction
In this audio program, john Highman shares some of the proven strategies and ideas that can help you find better quality tenants and better landlords to work for. Honing your prospecting activities with a bias towards quality and ongoing contact will always be a valuable strategy to deploy. Connect with the landlords and tenants using relevant local information and local market knowledge. Connect with landlords and tenants at least once every 90 days.
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:
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.
A vacant commercial property is a significant frustration for an investor. They are loosing out on rents and outgoings recovery. Over time that can all add up to a large amount of money and financial discomfort. Look at vacancies for the opportunities that they are for you in leasing brokerage.
Look for the vacant properties in your local area, you will find leverage in working for those landlords. They will be highly motivated to fill the vacancy and listen to you as you make recommendations about property market conditions.
In this audio I talk about how you can do more with vacancies and how your professional services should be positioned within that. One other special note here is that your database in leasing will give you massive momentum if you structure it and grow it over time. In the audio program I talk about how you can use that to build leasing leverage.
In commercial real estate brokerage most of the new business that you create will be through ongoing prospecting and appointment creation. If you are finding that the property market is a bit tough or slow, then take a serious look at your prospecting model and activities on a daily basis.
Can your processes be improved?
Can you spend more time on connecting with the right people in the right way?
How will you show them your relevance as an agent for the location and the property type?
They are interesting questions that all require specific answers.
The ideas will help you get back in to the key issues of the market and property opportunity existing. There will always be people looking for solutions and strategies surrounding office, industrial, and retail property. They need experts to help them move through the challenges and the stages of investment property improvement or occupation.
Why are you special?
The clients and the property prospects in the market today need to know who you are, why you are so special, and how you can help them specifically with property market trends and opportunities. The personal marketing process and requirement in today’s commercial real estate brokerage is very high and specific.
The skills required in selling, leasing, or property management activity today are quite specific and direct. Gone are the days of generic Property Marketing and openly listing properties. Exclusivity is the only way to dominate market share over time. Actively pursue the Appointments are Everything in Commercial Real Estate as part of your property presentation pitch and presentation.
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:
Understanding the intentions of sitting tenants when it comes to lease expiry
Monitoring the upcoming lease expiry dates approximately 18 months in advance
Negotiating any lease expiry’s early so you can deal with the vacancy in a timely way
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
Understanding the local business sentiment applies to rents, relocation, and property requirements
Keeping in close contact with all local businesses to attract new tenants to your property when required
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.
If you are leasing investment property and particularly office, industrial, or retail property, you will need to know lots of tenants. So many agents focus on winning a listing to lease, and then they take steps to advertise the property hoping that they will find a tenant. The reality of that process is that it is slow and uncontrollable. If you want to negotiate and secure lots of leases, the number of tenants that you know will correlate to the deals completed.
There are a number of ways to find tenants, and you will need a system to implement as part of your marketing process. There is however an easy way to find tenants that could want to move premises; in simple terms you make lots of cold calls using the business telephone book for your town or city.
Here are the advantages to the process:
Every city has a business telephone book. In using that telephone book and particularly the current phone book, you do not stumble into the ‘Do not call register’ problem that exists with private telephone numbers and individuals. You can telephone local businesses and that will lead you to market intelligence and opportunity in leasing activity.
The list of businesses in the telephone book will be online and in hard copy so make sure you have the latest list of local businesses. The ‘yellow pages’ will also be useful for a point of cross reference in the process and particularly the online version; in saying that many businesses are not overly concerned with a ‘yellow pages’ listing because search engines and websites are taking over as customer marketing tools in many industries.
Over time you can improve your tenant cold call process and dialogue through practice. Remember that you are not pushing for a sale or a meeting; the main reason for the call is to determine if the person you are speaking to has a potential property need now or in the future.
You can track and measure your call efforts and conversations with tenants. At different times of the year and at different times of the day you will find your results vary. Understand the best times to make your calls and start your processes around that.
From a call process you can build a tenant database that will support you significantly for the long term as a real estate agent; it’s a personal thing that can lead to lots of property opportunities and commissions. When you connect with a previously qualified person with property potential, keep the connection going with at least one call or meeting each 90 days. In that way you will create a marketing presence in the mind of the person that you are talking to.
So the process of finding tenants is quite easy. Don’t complicate the call process. Get out your business telephone book and progressively work through it. Improve the quality of your call contact by practicing every morning your dialogue and conversations. Soon you will find tenants that are looking to relocate because of rental pressures or a need to adjust, expand or contract as part of a business decision.
A vacant tenancy in a retail shopping centre can be massive drain on retail business and customer sales for all the tenants surrounding it. For this reason a vacant tenancy has to be resolved quickly and efficiently.
If you have too many vacant tenancies in the one property it can set the foundation for a decline in retail trade. Customers like to visit a property that is attractive, vibrant, convenient, and that has the required tenant mix. Vacancies can impact that profile.
Over time a decline in customer sentiment will have an impact on market rental for the landlord. Your primary focus in leasing and managing a retail property should be to maintain occupancy at a sensible market levels.
To lease a vacant tenancy some real strategies are required. In a ‘rising market’ the leasing process is not so much of a problem, but in a ‘slow or declining market’ the vacancy challenge can be significant. Here are some rules to help the process.
Stay very close to the existing tenant mix and the leases supporting that mix. Some tenants will from time to time have challenges and problems in business or occupation. Keep communicating with the tenants regularly to understand their challenges and help them through any occupancy issues. In a ‘down’ market, a vacancy can be very hard to lease. It can be a drain on rent and outgoings for a very long time.
Make sure that you are working well in advance when it comes to lease renewals or option negotiations. Most leases will have time provisions that apply to the renewal or the option process. That being said, there is nothing to stop you working earlier with the tenant to achieve a satisfactory renewal or option agreement.
Some existing tenants in the property may require expansion or relocation. Be open to their business needs, and identify alternative locations within the property that may suit or solve the expansion or relocation problem.
Review other properties in the local area that may be competing with you and your tenancy mix. Look for the challenges and the opportunities existing in their tenancy mix. Approach their more successful tenants to see if relocation is possible.
Given the sales performance of your current tenancy mix, look at the segments that are quite successful and the others that are not so. There will be reasons for a tenants result in sales. It could be the product or service offering, the tenancy location, the tenant themselves, or the marketing process. Some of these things can be solved through careful management procedures.
Monitor the clustering affect within your property where some tenants seem to be feeding sales off each other. The mix can be improved through improving the clustering process. Identify the tenants that can work with each other with the same customer type. For example, a coffee type tenant could be placed alongside a ladies fashion tenant and a ladies shoes tenant. A coffee tenant would be extending the customers time in the general area and potentially the sales potential.
Consider the placement of the anchor tenants in the property and how they interact with specialty tenants nearby. Proximity to the anchor tenant will be a leasing advantage for some tenancy types.
Create a tenant retention plan that encourages ongoing occupancy for those priority tenants in the mix. The retention plan will also help you when it comes to replacement strategies and removing poor performers from the mix.
Leasing decision should be based on available occupied space, the prevailing market conditions, market rental, lease incentives, and occupancy costs. Stay ahead of these industry trends and challenges. Look for any new or upcoming property developments that could interfere with or change these factors.
If you do have a vacancy in the property, and a long term lease seems to be difficult to achieve, look at all short term occupancy opportunities with some of your other tenants, or casual tenants from elsewhere. Short term occupancy at a lower rental will still help you achieve the vibrancy in the property and maintain the customer’s interest.
The leasing segment of the commercial real estate market is particularly specialized. Many agents choose only to work on leasing opportunities within their property specialty. That being said, if property leasing is your primary source of real estate income, then you need to consider the quality of property that you work on and the clients that you serve. Low quality listings can be huge amount of work for very little personal outcome or commission. Choose your listings well. Don’t let low quality listings drain your resources and time.
Vacancies in good properties will always attract enquiry. Poor quality properties and vacancies achieve lesser enquiry; that will drag down the inbound enquiry and the achieved rental rate. The net result will be lower commissions. So you need to be selective on the properties and the premises that you work with from a leasing perspective.
So the first priority here is that you should focus on the servicing of good clients and good properties in the market. Research the local area to understand exactly where these clients and properties are located. Put them at the center of your prospecting processes.
It can take time to build the necessary relationships with the appropriate and the best landlords. To make the matter a little bit easier, build an extensive database of business tenants through the region. In that way you improve your value to the landlords that you serve. Soon they will know that you have the necessary tenant contacts and leasing opportunities that they need.
Here are some essential things to do every day as part of specializing in property leasing services:
As a general priority, focus on achieving exclusive listing appointments with the landlords and the vacancies that you service. In this way you can control your market. An openly listed vacancy will give you little opportunity to grow market share, and if you achieve a leasing result it will be by luck more than process.
The first thing that you should do every day would be in telephone prospecting and cold calling. Given that you work with business type tenants, most of your prospecting can occur between 8.00 AM and 10.00 AM. Most of the businesses in your local area will be operational in that time. Your focus should be to talk to the business proprietors and to understand their leasing and occupancy needs. So the prospecting call is a questioning process a rather than a sales pitch. Seek to understand the tenant’s needs and upcoming leasing issues.
Build a significant database as a result of your prospecting activity. That database should be split into tenants of different business types and locations. The tenant database should be separate to the landlord database; it should also be a lot larger. One of the factors of attraction when it comes to pitching your services to a landlord will be that of your database size and its relevance to the property type. For this reason, ensure that your database is comprehensive, large, and totally up to date. It is difficult for a landlord to ignore an agent that has total control and awareness over tenant movement in the local property market.
Stay in contact with all of your clients and most particularly those with an exclusive listing. Keep them advised of the changes to the local property market when it comes to supply and demand for leased space. Watch out for the new property developments that could impact market rentals, lease incentives, and occupancy rates.
Check out the listings that are still on the market and those that are new to your property segment. Wherever possible, identify the resultant lease terms and conditions relating to any finalize lease deal. There will always be a difference between an asking rent and an achieved market rental.
Make sure that your current lease deals are progressing based on the terms of the lease agreement and or current negotiations. Every lease transaction should be supported by valid market rental, guarantees, accurate and legal documentation, and suitable deposits. Stay on top of your current agreements and the parties to the negotiations. Make sure that your lease negotiations are not stalling for any reason.
A leasing agent is always closely watching the activities of tenants and landlords in the local area. You can add to this list above by understanding the greater property opportunity locally and the good clients that you are targeting. Set some rules and start prospecting.