Real Estate Leasing Guide

Beware of Tenants That Don’t Tell the Whole Truth

Posted on November 24, 2011

In commercial real estate leasing or property management, you will come across tenants inquiring about vacant space just about every day. Whilst it is nice to have the enquiry, qualification is the key before you move on the matter.

To get the space leased as soon as possible, it is essential to understand the history of the tenant and their relative strength that they can bring to the building. Tenants will not always tell you the whole truth when they first enquire regards the property vacancy.

Here are a couple of issues which are very common in commercial property management and leasing when you take the enquiry from tenants.

Are they looking at other property as well? It is very common for tenants to look at a number of properties in the local area. They sometimes use the negotiation of one property against the other as a point of negotiation on reducing rental. Other agents may also claim the introduction of the tenant to attract commission in a lease deal.

The time that you spend with a tenant may very well be a waste of time if they have a number of other properties on the inspection or negotiation agenda. They can also be working with a few agents.

To deal with this issue, it pays to question the tenant deeply regards their awareness of the local area and what they have been looking at. Here are some key questions:

  • What do they know about the local area regards transport, regional demographics, community infrastructure, services and amenities, and business activity?
  • What properties have they looked at recently?
  • When do they need to move?
  • What is the absolute 'must have' that will impact their leasing decision?
  • Are they working with any other real estate agents locally? If so who?
  • What do they know about rentals in the local area?
  • Are they currently leasing premises elsewhere which will impact their decision on relocation?

Have they got the financial capability? There is no point inspecting a property with a tenant if they do not have the financial capability to pay the rental. The qualification of tenants should occur over the telephone initially and then in a meeting before any property inspections are arranged.

Here are some questions to assist with the tenant qualification process:

  • Are they paying rental on other property and if so what are the details?
  • What is the size of their current premises?
  • What rental guarantee or bond can they contribute to the new lease that they negotiate?
  • What requirements do they have of the new property in fitout design, incentives, and services and amenities?
  • Get details of their previous landlords and seek approval from the tenant to contact and verify the facts from the other landlord the occupancy detail.
  • How long has the tenant been in business in the local area or elsewhere?
  • Get some business history and evidence of business performance from the tenant and their accountants and or financiers. Seek agreement from the tenant to talk to their accountant's regards business performance.

Whilst it is great to have an enquiry for a new lease in your vacant property, always qualify the tenant before you start giving away a property detail and arranging inspections. The landlord that you act for would expect such simple levels of business qualification.

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Beware of Landlords That Think They Know Everything About Leasing

Posted on November 12, 2011

If you work in commercial real estate agency, you will come across a variety of landlords that think they know everything when it comes to leasing. Some landlords are just plain slow when it comes to accepting your recommendations on vacancy marketing and rental alternatives.

Landlords can have very fixed opinions regards the property market, the rentals, and the performance of their property. Importantly you as the real estate agent have the market knowledge which they lack. You also have experience of other comparable lease deals that have happened on other properties recently. Real hard evidence of recent leases will always help your negotiation with the landlord of the lease.

Here are two of the most common problems that you get with landlords in commercial property leasing.

Beware of Landlords that are Inflexible on Asking Rental

A fixed attitude on rental makes it difficult to find new tenants. In leasing property, is not necessarily the beginning rent that really matters; it is where the rental matures to over the years or before the time of property sale if that is relevant. The rent review profile of the lease document can take care of that, providing you have a well-structured lease to start with.

Landlords that are inflexible on rental generally fail to accept the trends of the property market. It is important to give them details regards the comparable properties and lettable space they compete with. It is also essential to give them details of the supply and demand for space in the local property market. An empty property achieves nothing.

When vacancy factors are high in the market, it is common to drop the start rent and lift the incentives. Any landlord that fails to accept these facts will suffer an extended vacancy.

Beware of Landlords that will not spend on advertising the vacant space

To lease vacant space in commercial property, it is essential to advertise in a variety of ways. That will include the Internet, local newspaper media, and circulation of flyers to comparable properties and businesses, and direct call marketing to tenants in the local area.

In only this way can the real estate agent can connect with all the potential businesses that may have an interest to relocate. In this property market, you cannot wait for the enquiry to come in the door. It is essential to comprehensively market the property; this requires landlord funded advertising.

Without a comprehensive marketing package, the property can remain empty for some considerable time and drain the landlord's cash flow. The outgoings for the property do not disappear, and the longer the vacancy remains, the greater financial pain it is to the landlord.

If the landlord is reluctant to spend money on advertising the vacant space, give them some alternatives in the marketing campaign. This is easily done through offering the landlord a selection of gold, silver, and bronze advertising packages. At the basic minimum, the bronze advertising package will at least get the property advertised on the Internet and will allow you to put a signboard on the property.

The silver and gold packages for marketing will be more comprehensive and obviously more expensive. When you give the landlord alternatives in marketing is much easier to get a decision and some landlord paid advertising. In this way you can lease the premises faster.

Conclusion

In this property market, it is essential to advise landlords of the key issues that will impact the vacancy. When you shorten the vacancy time, the property cash flow improves, and the lease occupancy can strengthen the property value through well designed rent review structures.

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Setting Goals to Help Your Agency Success

Posted on November 7, 2011

In commercial real estate agency it is essential to have personal goals and targets for each salesperson. It is important that those targets and goals are aligned to the property market and the economic climate. In this way the agent or salesperson can move forward and achieve benchmarks and results.

In every property market there are pressures and changes that impact the lease listings and commissions that you can achieve as a property agent. Look at some of these variations:

  • Number of properties sold and rented
  • Type of properties sold and rented
  • Changes in property zoning in the local area
  • Changes in business sentiment
  • Comparable prices achieved that impact yields for investors
  • Comparable rents in your area
  • Size and types of the incentives offered for new leases
  • Time on market to lease vacant premises
  • Fees and commissions charged for leasing property
  • The number of agents in your market servicing leased properties
  • Vacant properties currently on the market
  • New property developments coming up that have an impact on supply and demand

All of these will have impact on the goals you set. There is no point putting your goals together on leasing a property type that has little future or no solid enquiry.

So many salespeople set goals because it seems like a good idea, and then they do nothing about them. Rarely will they get the goals out and refresh them or revisit them. Goals without action do nothing for your career.

To set realistic goals in the commercial leasing market it pays to use these rules for setting a basic goals model:

  • Know the property type that is likely to generate the most leasing enquiry
  • Find out what tenants need to expand or shift in the local market
  • Get figures on the levels of supply and demand for space in the next 18 months
  • Understand the local business sentiment and where growth is likely to occur

Setting goals in your career is an annual event that is tracked monthly. In that way can you identify any changes that have to happen to shift course. The goals you set will be centred on measurable quantities. They are:

  1. The number of listings you create each week (open, sole, and exclusive)
  2. The number of leased properties per month
  3. The number of tenant enquiries in your database
  4. The growth or size of your database
  5. The size of the commissions you create from the leases closed
  6. The number of new landlords you serve
  7. The number of new property management appointments you work with

When you set the right goals in property leasing the business becomes easier because you can see where you are headed. All you then need is a work plan to help the process. The people that struggle in the industry are those that operate off plan or with no plan.

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