Negotiation Management Strategies in Commercial Real Estate Brokerage

In commercial real estate brokerage, be that in sales or leasing, we come across plenty of different people and property situations.   Some commonalities will exist in prevailing market circumstances.  (NB – you can get our free commercial real estate brokerage course right here)

Great agents are top negotiators and will have had plenty of exposure to many situations.  They know how to position the property challenge for offer and acceptance under the pressures of the moment.

In your brokerage, there will be common property challenges that most agents and brokers are experiencing with sellers, tenants, landlords, and buyers.  I always see it as valuable and worthwhile for those issues to be shared across the team and for practice or role play sessions to occur.  ‘Practice makes perfect’ as they say.

You can never know too much about market situations and conditions.

In this audio program, John Highman, Commercial Real Estate Coach talks about the factors that you need to control in property negotations today.

6 Tips for Pricing Your Commercial Property Management Fees and Services

The services that you provide in commercial property management are quite special and should be costed accordingly. Care and consideration is required when you are considering establishing a new fee or quoting on a property management service. There are variables at play that could have an impact on your fees suitability and amount.

(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)

So what is the problem?

If you set the wrong fee in quoting on a property management service, you could position yourself for loss of income over time when compared to the time you are committing to the property and the client. Under resourcing is a big problem in our industry.

 

Don’t provide the client with a low fee quotation simply to win the new business opportunity as a property management appointment. Understand the property, the client, and the tenancy mix before you set and finalize the fees for service.  Look at the ‘big picture’.

 

So what do you do here?

You should understand all of the property issues that may put pressure on your management services. Many an agent has lost a property management client and property appointment simply because the agent has been unable to control the property efficiently and improve performance over time; under quoting the fee will very likely create that issue.

 

So what do you need?

You need the right people and the right processes to manage a complex office or retail building today. Don’t underestimate the required skills of the process and the demands of the property.  Match the people and the processes to the property.

 

Here is another error that is all too common.  As a general rule, don’t set your fees based on a percentage of passing income. Whilst that may percentage approach be an industry standard in your location, it is only an indicator and should be compared to many other factors and choices. There are other things to look at and consider before you finalize your fee structure and client services.

 

Assess all the factors

Consider the following factors as you work through this process of property management assessment and opportunity:

 

  1. Landlord requirements – some landlords are unique and special when it comes to property management requirements and services. The complexity of the property and the cash flow can very likely create pressures on reporting and financial controls. You could find yourself generating many variations of reporting to satisfy the challenges of the property and the clients requirements for information. Interview the client as the landlord before you quote on the final fees for service.
  2. Property complexity – inspect the property completely and thoroughly. There may be issues in the property to control and manage over time. Look specifically into the issues relating to maintenance, rentals, vacancies, lease management, tenant volatility, and property performance. Every property will have certain strengths to work with, and weaknesses to work through and resolve. The weaknesses are the ones that will challenge your task and time management. The weaknesses will also threaten the cash flow and property occupancy over time. Create a business plan for the property to address the known and upcoming weaknesses.
  3. Tenant mix – review the tenancy mix as you inspect the property. Understand the tenants that are trading well and those that are struggling. Identify the tenants that may be under some form of pressure and develop a base plan as to how you may manage that occupancy and improve the overall results. It is a good idea to incorporate a tenant retention plan into the property performance strategy.
  4. Time based comparisons and assessments – when you first take on the property under management, it is likely to be a busy period of time for the first few months as you work through leases, tenants, and maintenance issues. The question to consider here will be how you can get the property under control effectively and efficiently. Some properties can take months to reshape and control. If you are about to commence management of that type and intensity, be very careful as to how you set your fees for service.
  5. Lease review – look at all the lease documents for the property and the tenancy mix. To do that you will need to read the documents comprehensively and thoroughly before you make your choices on fees and management strategies. Look for the weaknesses in lease structure, property occupancy, and tenant performance. The leases will also show you the occupancy challenges in the property with fresh vacancies potentially coming up. You will need a strategy to work with those potential vacancies and optimize the result for the landlord client.
  6. Income and expenditure review – the history of the property can tell you something about financial management and cash flow. Understand how the income has been changing over time and if there are any weaknesses in market rental currently. Rental and income weaknesses need to be identified and addressed quickly and efficiently. Comparisons to the prevailing market conditions will be required, and negotiations will need to be commenced as soon as possible. Seek your landlord instructions and comments as part of an income review and opportunity assessment.  Know all the facts.  Also review the expenditure within the property and the history of net income. Has the property being improving through good financial management or are their hurdles to address? Are there issues or weaknesses of current and future income, and will there be expenditure volatility to be dealt with?

 

So there are many things to look at when it comes to pricing your commercial property management services. Understand the client, the property, and the tenancy mix before you set the final fees and commence your professional services.  Build your brokerage portfolio with care.

Simple Ways to Capture More Commercial Property Management Appointments

Commercial property management remains an important part of the professional property services that brokers and agents offer.

Property managers can offer alternative strategies to improve property performance, net income, and occupancy.  Their job is complex, specialized and valuable to investor clients.  You can understand why the service is so valuable to a successful brokerage over time.

Subscribe to our audio programs right here.

In this audio program, John Highman talks about some simple ways to grow portfolio business, hence allowing the netting better fees and clients.

 

The Many Different Ways to Build Your Commercial Real Estate Network Faster

man holding globe of earth

There are significant differences between commercial property and residential property. One of the biggest differences will be the types of people that you will be or are working with. You will find that the people transacting commercial real estate today are largely from the business sectors or the investment community locally.  They have different motivators and decision facilities.

(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)

So what is the message?

The emphasis here is local. Get to know your local property market and the people that occupy or transact property within it. There will be plenty of people in your town or city to connect with over time ‘commercially’ if you have a good look into the businesses and the investors locally.  You can build long-term relationships in the right way, hence providing the right services.

What are your services and how do you sell into them?

You may provide investment sales services, leasing services, or property management solutions. That being said there are some very special services that you can implement within each of the three disciplines mentioned.  Here are some ideas to help across property management and also leasing.

Example of property management services

Take for example commercial property management as a business process and professional service. Here are some very specialized sub-activities within the asset and property management business:

  • income analysis and optimization
  • expenditure controls and budgeting
  • maintenance planning and routines for asset performance
  • tenancy mix planning and optimization
  • lease controls and administration
  • arrears minimization
  • vacancy marketing and property leasing
  • tenant selection and placement
  • the performance of an investment property within a larger portfolio
  • make good controls and lease compliance at lease end

So there are a number of things that you can do here when it comes to professional property management services. Given the types of buildings that you work with, there are some unique and valuable skills that can be applied across the disciplines mentioned.

Look at how you can provide some very special sub-set skills to the top clients and the active clients in your location. Always choose your best clients and properties with a bias towards quality and size. In that way any listing activity or property challenge will have a reasonable chance of fast resolve and marketing momentum.

What about leasing services?

So let’s look at leasing services as well.   If you are recognized as a leasing expert for a location, then you should have a number of specific solutions to locate and provide tenants to any vacancy problems that local landlords will be experiencing.

The place to start here is with your database. The size of your database in commercial real estate leasing will be indirect co-relation to the opportunities that you can create from the property leasing market. You simply have to know a lot of tenants within business segments and property precincts. That will then give you the ‘edge’ when it comes to working with landlords and vacancy challenges.

As a specialist in local property leasing, you should be able to provide a variety of services similar to the following:

  • an opinion of market rental relative to the location
  • tenant advocacy services for larger businesses
  • a selection of ideas to market any vacant property at any time
  • a clearer understanding of how property incentives should be shaped for the particular vacancy
  • marketing solutions to connect the vacant property to the right target audience
  • a solid awareness of leasing documentation that applies to commercial real estate leasing today
  • some real strategies behind rental establishment an escalation over time
  • ways to improve the property investment and the net income from a base of leasing activity

So there are some good things that you can do here as a specialist in commercial real estate leasing. Understand what is happening in your local market today when it comes to vacancies, tenant activity, and landlord pressures.  Take action with the market evidence you are seeing.

Match your professional skills into the momentum of the market and the trends of the time. You can choose to work with landlords, tenants, or business owners. Note that you can also work for property developers at the right time if the prevailing market conditions are right.

The take home message?

So the message here is that you should make the right choices when it comes to your property market and the specialist services that you provide. Look deeply into the needs of your clients as they address their property challenges. Look at the ways that you can provide specialist high-end real estate services to the right people in the right way.

Get to know your clients at each and every opportunity. Be prepared to take a property solution or option to your clients before they even know that they have a potential need or issue on the horizon. Be pro-active as a property specialist; that’s what top agents do.

How to Rehabilitate a Commercial Office Tower Property Performance

city office buildings
Older office buildings present property performance challenges.

Some office investment properties struggle from time to time both financially and physically.  If you can predict and adjust to that change, then you can build a good average property performance over time.

So why does this change happen?

Many local property issues can be driving change and placing pressures on the property performance thereby impacting the investment.

You can adjust to the changes.

So to improve a commercial property, you should assess where things are now.

Here are some of the bigger things to help you get started:

  1. Before you get too far into things, define ‘Property Performance’ and what it means to you and or your client – You can’t improve something unless you define it and assess it. Then you can compare the property to others locally and regionally.  It should be said that some properties are so special that you could be making comparisons and assessments with other buildings far afield.
  2. Look at the property from different aspects – In understanding a property there are a few key indicators or categories of activity to review. Here are some of the bigger ones to help you get started – Financial, Physical, Lease Documentation, Tenant Mix, Vacancy factors, Occupancy costs, Net Income, and Maintenance.  There will be strengths and weaknesses in each category.  When you drill down into the separate categories you can see what you have to work with and any problems that may need resolving.  Some adjustments take months if not years to resolve.  The larger the property, the greater the variations of things to look into.
  3. Do a SWOT assessment – There will be unique issues in any property that could be impacting property performance. It is valuable to do a SWOT test for the property.
  4. Implementing a tenant plan – Some tenants will be better than others when you consider property performance over time. Understand how you can keep your good tenants and what you should do in preparation of any pending lease termination. Rents and incentives should be set as a target point for any priority tenants.
  5. Implementing a budget – A budget of income and expenditure will help you stay on task during the financial year for the asset. A budget also makes you look at the variables of property performance that you can see coming up.
  6. Review lease documentation – Some leases will be better than others from a landlord perspective. A standard lease for the asset can be set for targeted rent strategies, lease occupancy, incentive offerings, and fit out standards.
  7. Capital works programs – There will be big issues in property maintenance that fall outside of normal repairs and maintenance. For example you may have to purchase a large piece of plant and machinery.  That high cost component could be structured into the timed expenditure budget for the property.
  8. Regular property maintenance – Stagger the preventative maintenance routines into the property performance budget. The contractors will have plenty to say about what they believe should be done and when those works should occur.
  9. Rates and taxes – One of the biggest drains on property expenditure will be rates and taxes. At certain times of the year these big accounts will need to be paid.  A budget will help you plan how you can the payment of those larger accounts.
  10. Better quality leases – Generic leases are a big waste of time for a landlord when it comes to any high quality property. Remember that the leases in a property reflect the cash flow and the investment strength of the asset.  Get special leases prepared that reflect the investment targets of the client (Landlord).  Every tenant will want to lease premises on their terms and conditions, but the landlord owns the property and deserves a reasonable lease document to support the investment.
  11. Renovation plans – Understand how factors of ‘wear and tear’ impact the property. As the property ages, you will need to establish renovation plans of the common areas including car parks, entrances, foyers, and building surrounds.  It is hard to drive a reasonable level of rent in the property if the presentation issues are not kept up to scratch.
  12. Better tenants – There will always be some good tenants locally that you can influence in entering your property on a long term lease. Create a lease of targeted tenants that you will call on when vacancies are seen to be occurring.  Track lease expiry dates with those special tenants that could move into your property.  Offer the right deals at the right time.
  13. Improved market rent – Are the local rents going up or are they stable? Rents can be escalated if the lease document supports the defined landlord investment targets.  Be careful with market rents that are too aggressive; you want your tenants to run viable businesses for the long term.
  14. Outgoings costs review – Compare your outgoings costs to similar buildings in the same location. Rates and taxes will always be a variable given that they are structured on property values, however you can look at the averages and determine where your property sits by comparison.
  15. Third income streams – Look for extra income from extra occupancy strategies such as storage, signage, and change of premises, licenced areas, antennas, and increasing of lettable space.

So there are some good things that you can do here when you want to boost property performance and income potential.  Are you ready to make some positive changes?

You can get more tips on commercial property management from our eCourse Snapshot right here.

Commercial Real Estate Snapshot Podcast 225 – A Focus on Commercial Real Estate Leasing

audio headset
Commercial real estate training MP3

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:

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

How to Build Better Business Relationships in Commercial Real Estate Brokerage

better business relationships in commercial real estate sml

In commercial real estate brokerage I frequently get asked about how new agents can find the right people and clients to serve in their town or city.  The question is so common that I just wonder why those salespeople do not know the obvious or take so long to understand it.  The industry is similar to many others; diligent focus and work is required at a personal level to find new business, and when that happens, results occur.

The new business is always out there to attract and convert across sales, leasing, and property management.  Yes, I know it takes time, but the diligence and actions of ‘top agents’ always shines through when it comes to finding the best clients, properties, and commissions.

It is my firm belief that you cannot be a top agent without some personal plan of prospecting action that you implement every day and refine over time.  Regular actions create habits, and habits in our business change listing conversions and commissions.

I have put together some notes here in pdf for building new client relationships in commercial real estate brokerage.