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Commercial Real Estate Leasing Vacancy Solutions and Strategies

Large entryway with tiles and plants
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)

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4 Proven Strategies in Commercial Real Estate Brokerage Leasing

office building and desks
Understand the complete commercial property leasing requirement.  Specialize in all the facts and the property details.

When you lease a commercial or retail property today, it pays to set some rules to the process so you can correctly match the tenant to the property for the fullest of available advantages.

Investment property leasing is where all the important decisions are made to find the best tenants for the investment performance. Each tenant is different, each landlord can be quite special, and between both of those stakeholders you have a property and its occupancy opportunities.

Establish Your Commercial Property Leasing System

Are you ready to specialize in leasing and investment property performance?

What are the rules you can set for leasing buildings and premises?  Try some of these for starters:

  1. Know who you are talking to and always get their contact details first – When an inquiry comes in from a tenant, ensure that you are talking to the right person who you believe is in control of the business. Before you disclose too much about the property, write down the important contact details of the person and the role that they play in property selections and choices.  Don’t be too eager to talk about the property without the fullest of contact details from the person you are engaged with in conversation.
  2. What do they really want in leasing new premises? – There will be a main motivator(s) behind a tenant in changing properties. Questions will always get you to a few important points to understand.  Of the few factors of importance in finding new premises to lease, a couple of factors will be high on the tenant’s agenda.  Get to those facts fast and directly.  Delve into location issues, and then improvement requirements in any property to be leased.
  3. What can they afford? – Is it a tenant’s market or a landlord’s market in your location currently? There are differences to watch for, and those differences will impact your negotiations with rents and lease terms.  Some tenants have little understanding of the current property market conditions, and the same can be said for the landlords that you serve.  Be prepared to quote real market evidence from recent lease deals to occupancy arrangements, lease negotiations and market rentals.  Tell the tenants and landlords that you work for how they are positioned in the current property market and how realistic their expectations may be in changing property today.
  4. What property improvements do they need? – Every business will have challenges of placement when it comes to fitting into a new property. Your job is to bring ends to meet together across the void of a leasing negotiation.  Your client is the priority above everything else.  What are the targets of your client in the lease negotiation?
  5. Factors of supply and demand will impact your negotiation – Always track the vacancy factors in your location. Those vacancy factors will be impacted by supply and demand for the location and the property type.  Higher vacancy factors push up lease incentives.  A volatile leasing market will drive greater elements of risk for landlords, and that is where a tenant retention plan will help you with the overall income stability for your clients.  Become a specialist in tenant retention, lease negotiation, tenant sourcing, and lease marketing.  There are plenty of leasing advantages to be had from an active property market with tenants and landlords.

So you can do some good things here with your tenant and landlord interactions.  As the leasing specialist get to fully appreciate market trends and changes and pull those factors into your leasing arrangements.  Position yourself for helping your clients in the best way with all your leasing deals.

(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)

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Commercial Real Estate Brokerage – How to Help Your Clients with Leases and Tenants

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Help your clients with their leased investments and tenants.

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:

  1. 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?
  2. 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.
  3. 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.
  4. 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.

(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)