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Commercial Real Estate Leasing – Rental Income Growth Strategies for Agents

City buildings on city skyline.

When you work in commercial real estate leasing, you will need a good degree of local market awareness to help you with the leasing and rental strategies of any property negotiation.

Note – You can get plenty of commercial real estate leasing tips and ideas through our regular coaching and training material right here.

As you work for different landlords with different property types locally, the market rents, and the occupancy costs vary from property to property. In this audio program, John Highman shares some ideas to help you improve your leasing market awareness and negotiation outcomes.

Of course you can work for either landlords and tenants in today’s property market. They can both be valuable clients to work for from different ends of the leasing equation. It doesn’t really matter whether you work for landlords or tenants, but it does matter as to how you optimize the rental position of your client as part of the leasing process.

As you strive to achieve better results in the leasing market today, consider the special factors of lease occupancy where you can add value to your client. Most particularly those factors should include the following:

– level of market rental
– lease duration
– lease documentation
– optimal use of leased space
– sensible balance of occupancy costs to area occupied
– vacancy minimization
– the budgeting of occupancy costs given current market rentals

In this audio program, John Highman shares some specific income growth strategies that you can use in commercial and retail property leasing today.

You can get the audio program below:

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Boost Rents and Leasing Strategies in Commercial Real Estate

Buildings and boat on Hong Kong harbour

There are many different rent strategies that you can implement in commercial real estate brokerage.  The facts of the rental matter hinges on just how long the property owner wants to own the property. (NB – you can get plenty of commercial property leasing tips in our Snapshot program right here)

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:

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Commercial Property Management Skills Start Here

City buildings on rivers edge

In commercial property management today there are plenty of things that you can do to differentiate yourself from your competitors. Make no mistake, managing a commercial or retail property can be quite a challenging process. (NB – you can get plenty of commercial property management skills and ideas in our Snapshot program right here – its free)

Real skills are required and special people should be dedicated to the process of providing specialised services to investors and company owners.

In this audio program, John Highman talks about the special and unique skills required to manage a commercial or retail property today. Learn how to grow your brokerage business from a base of management activity and property management clients.

 

Property Facts and Controls

 

When you completely understand the strategies behind property management, you can develop special services across asset performance including the following:

– tenant retention
– income enhancement
– lease negotiation
– expenditure management
– net income generation and cash flow control
– lease administration
– maintenance management
– risk minimization
– renovation and refurbishment activities
– vacancy minimization

So there are many concepts and strategies within this list. If you take each individual concept, there are many specialised services that can be provided to your clients and customers.

In this audio program, John Highman talks about the importance of commercial and retail property management in brokerage performance today. Learn how to improve your brokerage business and the future commission opportunities available in your town or city.

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Why Attention to Detail is So Important in Commercial Property Management Today

high rise buildings

In commercial property management today, there are many pressures and activities to consider on a daily basis across the tenancy mix, existing landlord requirements and targets, the property, and the investment requirements of the various stakeholders.  (NB – you can get our commercial property management tips right here)

 

Given those critical facts, property managers are typically very busy on a daily basis, and as a consequence they can easily be distracted into the events of the moment.  An ‘out of control’ property manager is a ‘disaster waiting to happen’ both for the client and the brokerage.  That is why attention to detail is so important in the role and for  each individual property manager.

 

Control all the Facts

 

Attention to detail in all of the property management disciplines is hard to maintain but will help control the issues and the events.

 

So what can you do here? When it comes to ‘attention to detail’, some things are more important than others for property managers and landlords. 

 

What Should You Monitor?

 

So what are the property performance issues that should be optimized and controlled in this detailed way? Try some of these for starters:

 

  1. Lease documentation – the leases that you have now in the property will support and direct the rental cash flow in different ways. Those leases have to be tracked so that all the elements of occupancy are correct and actioned.  Most of those leases will be different in some respects, so do a full and comprehensive lease review by reading the documents ‘end to end’. Take notes of critical issues as you do that.
  2. Tenant negotiations – understand the existing and upcoming tenant lease negotiations. Gather your required information well in advance so that you can start the negotiations in a timely and relevant way.
  3. Tenant placement – don’t just put a tenant into a vacant shop. Make sure that it is the right retail tenant that offers the right merchandise for the location.  Match the tenant into the tenant mix.
  4. Rental cash flow – understand the rental types that match the landlords lease strategies and the current market conditions. Be ready to negotiate those rents as market conditions allow.
  5. Arrears management – watch your arrears in a regular way. Don’t let them get out of control.  Develop arrears strategies for any tenants that are worth keeping in the property for the longer term.
  6. Maintenance management – establish a property maintenance plan and budget for the property so that most of the associated costs are kept within the cash flow capabilities of the property.
  7. Budget performance – this involves both income and expenditure. Set the budget with due regard to incomes, leases, tenants, and local area supply and demand.
  8. Vacancy factors – you will have vacancies to contend with, so allow for that fact in your property budget. Local area supply and demand will impact your leasing and vacancy alternatives.  Watch the trends in the local area.
  9. Property investment targets – the client will have targets and those targets should be at the center of your lease negotiations, tenant choices, market rental considerations, and expenditure planning.
  10. Critical dates – watch the dates in your leases, and the relationships that those leases have to each other in a ‘timing perspective’. You don’t want too much volatility in lease dates and expiry dates in the one property.
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How to Prepare for a Commercial Property Lease Negotiation

Staircase with marble landing and balconies
Prepare comprehensively for your commercial property lease negotiation

If you have had a bit to do with tenants in leasing any commercial or retail property you will know that they can really delay things for their own reasons, thereby impacting the landlord in negotiation and slowing the agent as to finalizing the deal.  As the leasing professional your job is to work with that challenge and encourage agreement to the benefit of the client.

(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)

Understanding the tenant’s situation now and applying that requirement to the current property market will help you with activating and progressing the lease deal.  That then means a better negotiation.

The tenants focus?

Good questions and research will usually help you to get to the tenant facts and motivators.  As you move through that, don’t forget just who your client is in the process and how you are representing them through the process of leasing.

Here is an interesting leasing based question for you. Can you believe what at tenant tells you about the property lease requirements that they have?  Perhaps not totally, however you can ‘read between the lines’ of what the tenant is saying and doing, and get to some of the real facts of what is happening in their business world.

A good outcome?

A good lease negotiation is generally a result of the leasing broker informing the parties to the deal, then discussing, listening, and seeing through the challenges.  Though all stages of the inquiry, inspection, and meeting process you can find out more of the tenant’s requirements and priorities.

So what really goes on in a lease negotiation?

The balance of any lease negotiation will shift and change based on just how much available space may be in the property market at any point in time; you have to prepare for that variation.  It directly follows that you should be prepared for any and all of these tenant ‘delay’ tactics:

  • Looking around at other properties
  • Comparing rents across the market and between vacant premises
  • Comparing properties and the improvements
  • Incentives to sweeten the deal
  • Slowing discussion to make a decision
  • Wanting to change lease conditions
  • Asking the landlord to do some internal fit-out works
  • Seeking early access to the premises before documents are signed
  • Fit Out approvals slowing
  • Plans of the fit-out not available

There are many variations as to what a tenant will be looking to do with a lease negotiation.  As the professional, you are to guide the process and negotiate through these barriers and many more.  Control and research are the keys to any successful commercial property lease negotiation.