The Best ‘Openers’ in a Commercial or Retail Property Presentation

Every commercial real estate agent wants to win their sales pitch or presentation.  The fact of the matter is that they will be up against a few agents chasing the same property and with the same client when it comes to most presentations.  For this very reason, the sales pitch or the presentation needs to be of high quality and highly relevant.  The days of the generic sales pitch are well gone.  You really need to be correct the focused on the commercial or retail property, the client, and the market.

Every top agent will create a presentation that suits their style and property type.  That being said, they will usually have some ‘opener’ which gains the attention of the client, and then allows the presentation to proceed productively and correctly.  You can also achieve an opening statement or strategy that you can use in every property presentation.  In this way, you will capture the attention of the client and draw them towards your recommendations.

When it comes to marketing commercial and retail property today, discounts and other enticements are always offered by competing agents.  It is important as an alternative, that you offer real strategy and focus when it comes to your recommendations.  In this way, discounts and enticements are no longer or perhaps less relevant to the client.  They do not want to be an ‘experiment’ when it comes to property promotion.  They want results so show them how you are going to do that.

Here are some tips when it comes to an opening strategy in any property presentation.  All of these things can have some advantage depending on how you use them.

  1. Meet the client at the property before the sales presentation.  Tell the client that you would like to discuss the inspection process and their thoughts relative to that.  Most agents will not do this.  Tell the client that you want to show them how you see the property and how you will be recommending it as part of any property inspection to qualified prospects.
  2. Take plenty of digital photographs in and around the property.  For the typical property presentation, that would normally be approximately 40 to 60 photographs.  Those photographs should be structured into a single folder within your computer, and then used as part of a ‘scrolling’ photographic display on your laptop when the presentation is underway.  This strategy is highly effective and will gain the immediate attention of the client.  The fact of the matter is that the client will always show interest in their property and digital photographs will allow that to occur.  This process is much more effective than any other slides on your laptop.  Forget about using PowerPoint computer slides, but use well selected images of the property that roll through a progressive slide show continually.  As simple as it seems it will help win the attention of the client quickly and directly.
  3. As part of any earlier meeting with the client, you should have identified some issues and problems that are of concern to the client.  In most cases, you should be able to identify three or four factors of concern to the client.  As part of a question and answer process in your presentation, put those factors into your proposal document and also your presentation.  Give the client clear solutions to those concerns; show them the way through the problem and provide unique and relevant strategies to the process.  In this way, you will show them that you really understand their needs and challenges.  You are the agent to help them.
  4. The marketing of every commercial and retail property should provide real solutions based on the property type and the location.  Forget about generic advertising and marketing campaigns.  Be quite specific in what you tell the client about marketing the investment property and how you will approach it.  Give them three alternatives of marketing costing and strategy so that they have some choice in the matter of advertising and the strategy to be adopted.

There are other things that you can add to this list above.  The main point of the process is that strategy is everything and relevance will help your property presentation stand out as the best available.  Forget about providing discounts and incentives, tell the client exactly how you will improve their property challenge and resolve the problem as soon as possible.  Be relevant in every respect.

Selecting a Good Retail Leasing Expert

When you run a retail real estate agency specialising in retail leasing and property management, you really need a top agent that knows what retail property is all about.  The leasing of retail is very special; far more so than office or industrial property.  The selection of tenants will be made with due regard to the tenancy mix and the customer profiles that access the property.

It can take a leasing agent some years to fully understand the complexity of shopping centre performance and how tenants should be selected for a current or pending vacancy in the property.  The correct tenant selection will help boost the customer attraction of the property, and eventually the turnover or trade.

So what would you expect a retail leasing specialist to know or bring to you and your agency?  Here are some tips to help you:

  • Rents will vary from property to property.  This change requires knowledge and experience when it comes to gross and net rents, together with the incentives that are available to lease premises to new retail tenants in your local area.
  • Lease types together with the terms and conditions for a particular tenant will require negotiation based on the local leasing laws relating to retail property.  In many respects, retail leasing is more complex and the documentation behind the process is more rigid and
  • Tenant enquiry will change from location to location, however in retail property it is very much the case that the leasing agent has to get out into the business community and the other local shopping centres to talk to the existing tenants.  In this way they will find tenants that want to relocate, expand, or contract.  It is important to choose tenants that are at the top of their product or service offering.
  • New shopping centre projects and development timing will have impact on your current shopping centre and its future performance.  Always watch the supply and demand for retail space locally.  Any new leasing specialist should track these changes and the availability of retail space coming into the property market over the coming 2 years.
  • Property owners and new tenants that are looking for retail property are a unique breed unto themselves.  They require understanding and a leasing expert that can talk ‘retail’ from many different angles.
  • Franchise groups will require retail space to locate new businesses into.  That being said, franchises are a business model that has particular requirements of location and customer base.  It pays to have a leasing expert that understands how the franchises think and what they are looking for.
  • Outgoings costs will have a major impact on rental (gross and net) as well as a tenants occupancy costs.  Every retail property will have outgoings of a level that allows the property to operate efficiently and safely.  The important factor here is that the outgoings for a particular property should be of a level that is comparable to other properties locally of similar size and type.
  • Tenant mix and clustering are knowledge skills needed by a retail leasing expert.  When the tenant mix is correctly structured it builds a better market rental for the landlord and helps reduce the vacancy factor in the property.
  • Document knowledge and negotiation skills in retail property are quite unique when it comes to handling and working with small businesses.  A leasing expert should understand what variables can be used in a good lease negotiation for a shopping centre or retail property.

So, all of these things would indicate that a retail leasing expert is a special type of person.  Over time these skills can be learned; importantly the person chosen for the role has the right skill mix to take the role to the top of the industry locally.

Shopping Centre Managers – Retail Property Leasing Specialisation

woman shopping for pears in supermarket
Retail shop leasing requires special knowledge and experience.

When you work in commercial real estate, you will see those ‘retail specialists’ in the local area that focus within the retail property market.  Those retail people are very specialized given that their property type is quite specific and heavily geared to the local demographic.

In simple terms, a retail leasing specialist or property manager should help retail tenants improve their business and on that basis improve property occupation.  When all of this occurs correctly, the prevailing market rental for the property will be underpinned and potentially grow.  Over time this will also help the landlord for the property achieve a better price if and when the property comes up for sale.

So there is a significant link between tenant selection, retail trade, property leasing, and property performance.  For this very reason those of us in the industry that understand retail property do so at a very high level and can talk across a large variety of strategies that relate to retail sales, leasing, and shopping centre management.  The clients that we work for and especially those that own any complex retail property will only work use the best retail property people in the industry.

There are many things that should be considered and consolidated into your retail experience and knowledge base.

  1. Market rentals will change from property type to property type.  They will also change by location within the property.  The positioning of a tenancy inside a retail premises will dictate the levels of rental, as will the size of the premises.  There is no fixed and firm equation that can be provided to help you here, except the process of gaining market awareness and information from comparable properties.  Over time you will understand what makes a property location different than others.  You will also understand the priorities of tenancy location that will boost the rental in one particular spot or one particular property.
  2. Different businesses can pay and absorb different levels of rental as part of property occupation.  As a case in point, you will find that one tenancy type can pay more rental than another tenancy type.  For example you could compare a shoe repair type tenancy to a food type tenancy.  The levels of rental from each will be completely different for the same shop location, given that they will have separate levels of turnover relative to their business type.  If the rent is too high for the business type, they will simply disappear as a tenant.
  3. Different retail leases and different lease strategies will occur all the time.  You become a strategist when it comes to utilising rental incentives, gross rent, net rent, lease terms, rent reviews, and option strategies.  All of these are negotiated with due regard to the plans of the property owner, the age of the property, the tenant, and the demographics of the shopper.
  4. When it comes to retail property, the success of the tenancy mix will largely be driven by the demographics of the area.  Stay on top of the changes to the local property demographics and ensure that the property matches the current and future needs of the local community.  That being said, you really do need to know exactly who your shopper is and why they visit the property.  You also need to know what they require and when they need it.
  5. Tenant enquiry for new premises will change from time to time based on the regional and local business sentiment.  For this very reason, you should be staying very close to the retail businesses and franchise groups.  All of those people in your database should be contacted regularly to identify any changes in leasing needs or opportunities.
  6. Watch the activities of any competing retail properties in your area.  That will include the tenancy mix, expansion and contraction factors, refurbishment, and relocation challenges.  These trends and activities will give you some leverage in leasing and property performance.

Retail property people are specialists in their property craft.  Their knowledge and expertise will be sought after when it comes to the larger shopping centers and the bigger retail leasing needs.  Franchise groups and anchor tenants will also seek the assistance of retail property specialists.

Finding More Retail Tenants for Your Tenant Mix

girl shopping for CDs and music
Choose the best tenants for your tenant mix by checking out the competing properties and tenants.

When you manage or lease retail property or premises within a shopping centre, it can always be a challenge to find the right type of tenants for the vacancies as they arise.  It is important to stay ahead of your vacancy problems and challenges within the tenancy mix.

If a tenant is nearing the end of their lease, it is simply a matter of them vacating the premises or a new lease being created.  If you work 12 months out from the event, you can plan whatever steps are necessary to resolve the vacancy quickly and effectively.

Here are some tips to help you with finding tenants to lease retail property:

  • Monitor the activities of other shopping centres nearby.  They will have some tenants looking to move or change premises for a variety of reasons.
  • Keep in contact with all the franchise groups through the region and nationally.  They may be looking for new premises for another franchise tenant location.  That being said, you will need to understand the lease requirements and lease documentation standards that apply to each franchise group.  It is likely that the lease documentation will be different to that which the landlord would normally use.
  • Create a retail leasing property update newsletter.  This newsletter can be circulated through the retail business community in your local area.  In the newsletter you can provide tips and ideas regards leasing new premises.  Given that most businesses have Email contact, a newsletter can be based on the use of an auto responder and an Email System.
  • Maintain regular contact with all the businesses through the local area.  Have particular focus on the successful businesses with strong branding.  Give them regular property updates so they can understand the changes in rental and incentives as they apply to retail property.
  • The anchor tenant in your retail property will have a significant impact on customer visits to the property and the trade for the specialty retail tenants.  A good anchor tenant will also attract new tenants to your property.  Encourage the anchor tenant to interact with all the specialty tenants in the shopping centre.
  • A shopping centre that is well maintained and marketed to the community, will be of attraction to new tenancies.  Ensure that your property satisfies both of these issues.  Establishing a productive marketing campaign to attract more shoppers to the property through all of the trading seasons.

When it comes to leasing and managing retail premises, early lease negotiations and preparation for any new tenant vacancy, marketing, and occupancy are key strategies to adopt.  A retail property is a vibrant and yet challenging type of property investment.  Work with your tenants at the earliest possible time, and you will find good results for all concerned.

Vacancy Rates in Retail Property Today

woman walking in shopping centre supermarket
Get your vacancy rates down. Monitor all leases and tenant changes. Find new tenants fast.

The most important step in keeping your shopping centre or mall occupied is realising the total economic impact of having to re-lease the space.

Consider the effect should one of your tenants go out of business:

  • Can you find a replacement tenant?
  • If so, how long will it take?
  • Will you be able to achieve anywhere close to similar rental from a new tenant?
  • What will legal fees cost you, if you choose to go after the old tenant for leasehold performance?
  • What will leasing commissions for a new tenant cost you?
  • What will tenant improvements cost, plus an inevitable period of free rent?

Unless you have awfully deep pockets, you can’t afford substantial vacancy in your centre – so you can’t afford to ignore your tenants’ concerns.

  • Be willing to listen to their concerns. Tenant feedback can be most helpful.
  • Work on a new promotional campaign – with tenant input.
  • Does the centre need repairs? Paint or landscaping, for example? Consider the costs of repairs versus the cost of re-leasing should several tenants decide to leave.
  • Always search for ways to improve your centre. Strive to achieve the most dynamic tenant mix. If a tenant vacates, work hard to improve that space with a promotional tenant who will help the rest of the centre.
  • Finally, know your competition. If your centre is not competitive with those in the surrounding area and your centre management responds with complacency, the centre is doomed to failure.

Financial Assessment of a Retail Property

Financial calculator
Check the income and expenditure for your retail shopping centre.

When assessing retail property tenancy mix, it is necessary to understand the financial factors that the property creates. In doing this, it is not only the financial factors today that you need to look at, but also those that have formulated the history of the property over recent time.  In this case, the definition of ‘recent time’ is the last three or five years.

It is surprising how property owners try to manipulate the building income and expenditure at the time of sale; they cannot however easily change the property history and this is where you can uncover many property secrets. Once the history and current performance of the property is fully understood, you can then relate to the accuracy of the current operating costs budget. 

All investment property should operate to a budget which is administered monthly and monitored quarterly.  The quarterly monitoring process allows for adjustments to the budget when unusual items of income and expenditure are evident. There is no point continuing with the property budget which is increasingly out of balance to the actual property performance.

Fund managers in complex properties would normally undertake budget adjustment on a quarterly basis. The same principle can and should apply to private investors.

So let’s now look at the main issues of financial analysis on which you can focus in your property tenancy mix evaluation:

  1. A tenancy schedule should be sourced for the property and checked totally. What you are looking for here is an accurate summary of the current lease occupancy and rentals paid. It is interesting to note that tenancy schedules are notoriously incorrect and not up to date in many instances. This is a common industry problem stemming from the lack of diligence on the part of the property owner or the property manager to maintain the tenancy schedule records. For this very reason, the accuracy of the tenancy schedule at time of property sale needs to be carefully checked against the original documentation.
  2. Property documentation reflecting on all types of occupancy should be sourced. This documentation is typically leases, occupancy licences, and side agreements with the tenants. You should expect that some of this documentation will not be registered on the property title. Solicitors are quite familiar with the chasing down all property documentation and will know the correct questions to ask of the previous property owner. When in doubt, do an extensive due diligence process with your solicitor prior to any settlement being completed.
  3. The rental guarantees and bonds of all lease documentation should be sourced and documented. These matters protect the landlord at the time of default on the part of the tenant. They should pass through to the new property owner at the time of property settlement. How this is achieved will be subject to the type of rental guarantee or bond and it may even mean that the guarantee needs to be reissued at the time of sale and settlement to a new property owner. Solicitors for the new property owner(s) will normally check this and offer methods of solution at the time of sale. Importantly, rental guarantee and bonds must be legally collectable by the new property owner under the terms of any existing lease documentation.
  4. Understanding the type of rental charged across the property is essential to property performance. In a single property with multiple tenants it is common for a variety of rentals to be charged across the different leases. This means that net and gross leases can be evident in the same property and have different impact on the outgoings position for the landlord. The only way to fully appreciate and analyse the complete rental situation is to read all leases in detail.
  5. Looking for outstanding charges over the property should be the next part of your analysis. These charges would normally stem from the local council and their rating processes. It could be that special charges have been raised on the property as a Special Levy for the precinct.
  6. Understanding the outgoings charges for the properties in the local area is critical to your own property analysis. What you should do here is compare the outgoings averages for similar properties locally to the subject property in which you are involved. There needs to be parity or similarity between the particular properties in the same category. If any property has significantly higher outgoings for any reason, then that reason has to be identified before any sale process or a property adjustment is considered. Property buyers do not want to purchase something that is a financial burden above the industry outgoings averages.
  7. The depreciation schedule for the property should be maintained annually so that its advantage can be integrated into any property sales strategy when the time comes. The depreciation that is available for the property allows the income to be reduced and hence less tax paid by the landlord. It is normal for the accountant for the property owner to compile the depreciation schedule annually at tax time.
  8. The rates and taxes paid on the property need to be identified and understood. They are closely geared to the property valuation undertaken by the local council. The timing of the council valuation is usually every two or three years and will have significant impact on the rates and taxes that are paid in that valuation year. Property owners should expect reasonable rating escalations in the years where a property valuation is to be undertaken. It pays to check when the next property valuation in the region is to be undertaken by the local council.
  9. The survey assessment of the site and tenancy areas in the property should be checked or undertaken. It is common for discrepancies to be found in this process. You should also be looking for surplus space in the building common area which can be reverted to tenancy space in any new tenancy initiative. This surplus space becomes a strategic advantage when you refurbish or expand the property.
  10. In analysing the historic cash flow, you should look for any impact that arises from rental reduction incentives, and vacancies. It is quite common for rental reduction to occur at the start of the tenancy lease as a rental incentive. When you find this, the documentation that supports the incentive should be sourced and reviewed for accuracy and ongoing impact to the cash flow. You do not want to purchase a property only to find your cash flow reduces annually due to an existing incentive agreement. If these incentive agreements exist, it is desirable to get the existing property owner to discharge or adjust the impact of the incentive at the time of property settlement. In other words, existing property owner should compensate the new property owner for the discomfort that the incentive creates in the future of the property.
  11. The current rentals in the property should be compared to the market rentals in the area. It can be that the property rent is out of balance to the market rentals in the region. If this is the case it pays to understand what impact this will create in leasing any new vacant areas that arise, and also in negotiating new leases with existing tenants.
  12. The threat of market rental falling at time of rent review can be a real problem in this slower market. If the property has upcoming market rent review provisions, then the leases need to be checked to identify if the rental can fall at that market review time. Sometimes the lease has special terms that can prevent the rent going down even if the surrounding rent has done that. We call these clauses ‘ratchet clauses’, inferring that the ‘ratchet’ process stops lower market rents happening. Be careful here though in that some retail and other property legislation can prevent the use or implementation of the ‘ratchet clause’. If in doubt see a good property solicitor.

So these are some of the critical financial elements to look at when assessing a tenancy mix. Take time to analyse both the income and expenditure in the property before you making any final choices regards tenant strategy.

Location Based Retail Anchor Tenants

woman shopping for fruit in a shopping centre
Choose the best tenants to improve your tenant mix.

In larger retail properties today, you need a quality anchor tenant that is location based.  In saying that, they should be closely aligned to the local community and the demographics of the area.  For this reason, leasing managers and property managers should select anchor tenants well and ensure that the anchor tenants will build a customer base into the local area without difficulty.

A strong anchor tenant will encourage more shoppers to a retail property and consequently help the specialty tenants in the property with their trade and sales.  The link between the anchor tenant and the property is therefore high.

To help the anchor tenant with this close alliance with the property, consider the following factors:

  1. The anchor tenant should be encouraged to market their business into the local area.  It is wise to have some guidelines established for that process to occur.  The anchor tenant’s lease can set out some guidelines for that.
  2. The specialty tenants should join with the anchor tenant in a regular marketing effort to promote the property.  The specialty tenants can have a clause in their lease that requires them to pay a percentage of their rent to the marketing fund of the property.  The property manager should administer the marketing effort on behalf of the tenants and the landlord.
  3. The lease for the anchor tenant will need to be a lengthy period of time to give the property some stability over the long term.
  4. Look at how the access to the anchor tenancy is obtained by customers and how that access can incorporate involvement or profiling of the speciality tenants in the property.  Follow the ‘foot traffic’ to see what marketing effort can be established in the ‘corridor’ or pathway to the anchor tenant entry.
  5. The pylon sign on the property will be critical to the image and exposure for all tenants.  The anchor tenant will feature in the signage and then all specialty tenants should be on the same pylon sign.  Look at the pylon sign placement to passing vehicle traffic and pedestrians.
  6. If the local area is serviced by public transport, get some marketing material and posters into the transport systems and drop off points.
  7. Understand just how tenants access the property and how long they stay in the property.  What do they buy when they visit?  These questions will help you understand what the tenant mix requires to strengthen trade for the anchor tenant and the specialty tenants.
  8. Get marketing brochures into the local community and give special attention to seasonal sales or celebrations.  The community will get involved with your property if you create the right atmosphere.

There is a fine balance between the tenants in the property, the community, and the landlord.  The property manager or leasing manager for the property has to bring all of that together.