When you lease a commercial property as a real estate agent, there is a temptation to pass the transaction over to a solicitor to complete and finalise. The temptation is more relevant and real when you are very busy as an agent on a number of properties at the same time. The reality of the situation is that you must stay with the negotiated transaction to the very end after all the monies have been paid and a transaction has been completed.
It is very common for the property transaction to derail for a number of reasons. When solicitors get involved on the parts of their respective individual customers, the priorities and guidelines of the original deal can become the centre of a debate. As the real estate agent who did the deal, you need to stay with the transaction to the very end.
Here are some guidelines that can apply to the standard leasing transaction that you could negotiate. Develop a checklist for the process and modify the checklist for your local area taking into account special property conditions and the prevailing property market.
The lease that is created should be in keeping with the original terms of the negotiation. It is likely that the lease will be debated between the parties when the document has reached a final form. Ensure that all the parties sign the document correctly and in the right order.
In some circumstances there can be other documents and disclosures relevant to the original lease. They may be disclosures, licences, car parking agreements, naming rights, and other documents. A special note should be made regards retail property; this property type is quite unique and special when it comes to leasing. A retail property transaction will normally have extra disclosures and statements regards occupancy costs and lease arrangements. Check out the local legislation relative to property in this regard. You cannot negotiate something if you do not know how to document the final agreement.
When a lease document is signed, ensure that all the necessary monies are paid in keeping with the transaction. They will normally be rental in advance, deposit monies, bonds, and bank guarantees. Those monies should be cleared at bank prior to any occupancy being given and the keys handed over.
If the tenant has any special needs or requirements relative to the new lease fitout design, they will need to enter into some dialogue with the landlord and or building authority regards lodging plans and drawings, together with the approvals for the building or tenancy modification. The as built drawings within the premises will be of high value to these discussions. Get copies of the as built drawings from the property landlord.
When a tenant has been given access to the premises, it is quite important to remain in contact with them for a number of weeks in case the occupancy arrangements are a problem. The property manager or the landlord for the property will also have an involvement with the tenant to minimise difficulty.
So the message here is for the negotiating commercial leasing agent to remain in contact with the tenant and the landlord throughout the lease transaction, and even after its completion. In this way you will maintain the momentum for the transaction on behalf of your client. The end result will be a good commission.
A commercial real estate agency wants to dominate the market and create a solid market share. Whilst this is a worthwhile goal, it is also a challenge to achieve. There are many variables that will have a direct impact on the performance of the agency.
Some of the most frustrating aspects of managing and running a commercial real estate agency today relate to the skills of the salespeople. Finding salespeople to work within the business is one thing; finding great salespeople is really hard.
Some salespeople will seek to improve their business performance and drive better market share. Over time their income and listing profile will rise. Finding the right salespeople with this mindset can always be a challenge; the top agents of the commercial real estate world are diligent and driven. They know how to drive market share. They are prepared to call landlords, tenants, property owners, and business proprietors.
Here are some tips to help you build your market share as an agency or as a salesperson.
The traditional signboard placed on property listings for sale or for lease is perhaps one of the most important marketing tools that you can use. It is cheap and it is a very effective visual marketing tool seen by all of the property owners and business proprietors in the local area. Invariably, the top agents will have a strong signboard presence in the local area. As a priority, seek to get signboards on all of your listings as quickly as possible. When you place a signboard on a property, directly market their property into the local area personally. That means calling in on property owners and business proprietors to talk about the new listing. That simple activity will increase your market intelligence significantly.
The best listings to work on are exclusive listings. So often I hear agents say that they cannot achieve or attract exclusive listings. Top agents convert exclusive listings more than open listings; they do this because they are good at pitching and presenting their services. They are also well known through the local area as experts at what they do. Exclusive listings give you control of your market and the client; in this way you can achieve a better result over time. If you cannot easily convert exclusive listings, look to improving your knowledge and relevance to the clients that you act for. Seek to specialise, as this will help you build your exclusive listing profile. Practice your skills in presentations and pitching.
The Internet is well established as a critical component of commercial and retail property marketing. Most generic agents simply list a property and place it on the Internet hoping that the Internet profile and exposure will generate enquiry. There are many more things that you can do with the Internet to improve your listing performance, enquiry rate, and personal profile. Social media, article marketing, and blogging are very relevant and are highly effective tools when it comes to commercial real estate marketing.
The database that an agent utilizes will be the foundation of future business. Each agent or salesperson should be working with at least 600 prospects in the local area. The only way you can manage and work with such a large number of prospects is through an effective and up to date database. Managing the database should be a personal strategy and process that you undertake at the end of each day. Don’t to delegate the process to some administrative person in your office; failure to take ownership of your database will destroy your market share.
Cold call prospecting should be first on your agenda each working day. Contacting at least 20 to 25 new people at the start of every working day will help you improve market share radically and quickly. The other half of your prospecting process can be with people that you have made contact with previously. Balance your prospecting equally between new people and established prospects.
The secret to building market share as a good commercial real estate agent is in the systems and the consistency that you establish. Random actions produce random results. Develop your system including some of these critical items above.
If you want to get some more tips on how to find tenants to fill your vacancies in your properties, you can get them in our Newsletter.
With commercial premises, the leasing process should involve ‘Agreements to Lease’ or ‘Letters of Offer’ between the tenant and the landlord. This enables you to negotiate the final terms and conditions of the lease quite effectively.
When the final ‘Agreement to Lease’ has been achieved between the parties, then that document can be sent to the landlord’s solicitor to prepare the final and original lease documentation. The whole process is clean and straightforward.
It is always desirable to let the landlord solicitor prepare the lease and arrange for the signature of both parties. Invariably solicitors come across smaller matters of dispute which still need to be resolved between the landlord and the tenant. The solicitors are the best ones to do that for the landlord.
Whilst all premises are unique and special, the following is a checklist around which the ‘Agreement to Lease’ could be structured. Simply then add other elements special to the property as appropriate.
The name of the landlord together with contact detail
The name of the tenant together with contact detail
Description of the premises including the reference to any plans or drawings
The area of the premises
The term of lease
The lease commencement date and the end date
Option for a further term if applicable and how that option should be exercised with due regard to timeframes prior to lease expiry
Details of contributions to outgoings expected from the tenant
Details of recoverable outgoings that are normally considered as every day consumables in the premises and how they are to be recovered from the tenant. This would be cleaning, electricity, communications, and energy.
Permitted use of the premises
Details of any incentive to be provided by the landlord
Details of the make good expected from the tenant at the end of the lease term
Car parking detail
Signage detail and approvals
Air-conditioning supply and hours of operation
Access details to the premises including a statement of how the tenant will access the premises at different times
Details of works to be undertaken by the landlord prior to occupancy by the tenant
Details of approval processes that need to be observed by the tenant in any fit-out works
Rent review structure and frequency
Details of the initial starting rental
Details of the guarantees expected to be provided by the tenant as part of the agreement to occupancy
Insurance obligations of the tenant
Confidentiality agreement between the parties
Any other obligations of the tenant to be undertaken during the lease term
Any other obligations of the landlord to be undertaken during the lease term
Special terms and conditions that need to be incorporated into the lease document by the solicitor prior to the signature an agreement of the parties
Obligations of the lease with regard to legislation current in your location or the property type.
This list should not be regarded as finite given that every property is unique and special when it comes to lease negotiations. The list will however give you the main things to look for in the first instance of lease negotiation, and to which you can add the other special terms and conditions of the negotiation in the ‘Agreement to Lease’.
Any lease or tenancy negotiation should include evidence of the condition of the current premises before they are handed to the tenant. At the end of the lease term, you will then know to what condition you expect the premises to be returned to. ‘Agreements to Lease’ are standard procedures used by experienced landlords and real estate brokers.
When you have structured a document that works well for you in your location with your property types, it pays to create a number of templates which simplify the task of leasing and negotiating. Generally speaking, the ‘Agreement to Lease’ is not legally binding but it will facilitate the negotiation and move you towards the creation of a real lease where the solicitor takes over.
In retail real estate and investment property your leads for new business come from a number of sources. The more leads that you can generate and optimise, the more successful you will be in getting the best listings.
In this market, the quality of the listings and tenants is so important given that the shopping centre and shopping mall buyers and the tenants can be so selective.
When the market is saturated with owners and businesses that are struggling to keep afloat, it is the quality retail properties that you want to market. These are the ones that will generate the momentum even in difficult times. The banks are also not as reluctant to lend on the higher quality asset with established cash flow.
Does this mean that you turn your back on poor and unattractive retail real estate listings? Perhaps you should for this time given that you want results to your marketing. It’s your choice, but at the very least, be selective as to what you list and how you do it. Your time is your only resource and how you use your time is essential to generating fresh and marketable listings.
What are the Sources of Leads?
We cannot cover all the sources of commercial real estate tenant and property leads here as they are unique to your market in many respects; however it is worthwhile raising the main common ones so that you can have them covered. Importantly you must know what a lead or source of new retail real estate business looks like in its early stages, and then you must know how to convert it to fresh momentum and a deal.
There is one main rule on the topic of leads; when you see a lead, you must react to it in a professional and timely fashion before someone else does.
Leads in retail real estate are not just for the things that happen today; they can be for things that are potential deals in months or even years. The more clearly you see this, the further business you will generate for yourself.
So here is the most obvious leads generation list that you must have covered in one form or another. See how you score on these items and make sure that these foundational matters are under control.
Business Acquaintances locally – these are most particularly those people that you have known for some time and who are likely to cooperate as an extra set of eyes in the market place. Choose of these people with care and remain in contact with them constantly.
Professional Business People – in your marketplace, there are a number of categories of business people to whom you must remain connected. The highest on the list are solicitors, accountants, town planners, financiers, architects, local politicians, and engineers. All of these people have significant involvement with the retail property industry and the property owners. They will likely hear about a retail property or lease transaction before you do. In many cases these people need the assistance of a good retail real estate broker to help their clients in a variety of ways.
Local businesses – local businesses produce change and flux in the marketplace. As time progresses, you should constantly encourage ongoing contact with all the major businesses in your precinct. They are the ones that regularly need to buy, sell, and lease retail premises; this means all the local managers and business proprietors who are involved in property decisions and creating commerce generally in the community. Recognise that they do not normally know much about commercial real estate. You can bring them updates on rental and property prices regularly to assist them with a future property need.
Colleagues within your office – many real estate offices are cooperative business environments with salespeople working productively with each other. This means that they share retail property leads and opportunities in sales and leasing. Sharing part of your commission with other colleagues in your office is far better than giving the commission to another outside competitor an agent in the same region.
Building tenancy schedules – from time to time, you will see or obtain tenancy schedules or inventories that relate to major retail buildings and shopping centers in your area. Whilst they should be regarded as confidential documents, they will give you a wealth of opportunity if used correctly. Any lease that is to expire inside the next three years is a target for future contact. The relative tenant will need to do something to preserve the function and occupation of their business. It is surprising how many tenants leave such matters to the last minute. The ongoing contact with retail tenants of this type is highly productive. Your main focus with these people is to establish trust so that they come to you when they need you.
Competition agents and brokers – normally speaking, the competitor agencies in your area will cooperate on conjunction transactions with their exclusives. The retail real estate industry is relatively specialised and such cooperation is common in sales and leasing of retail property. Importantly, any conjunction arrangement involving other agent’s listings must have a completely signed and documented conjunction agreement before you proceed. Cooperate with other agents, but do so with care and professionalism.
Satisfied clients – your agency business, if it’s been operating for a number of years, will have a significant list of established happy clients from previous retail property and lease transactions. It pays to keep in contact with these people given that most transactions in commercial real estate happen every 4 to 10 years. The satisfied clients are going to need your services again.
Old campaigns – any retail real estate campaign and marketing event will have created leads and people that ‘changed their mind’. All of these people should be on your constant contact register or data base. Feeding them regular market updates is essential.
Other Agents old deals – as a further extension of this item above, you can also monitor the transactions of other competing agents in your area. Any transactions that occurred through other agencies over the last 4 to 10 years should be monitored for future re-activity. It is interesting to note that many real estate agents and brokers are lax when it comes to keeping in contact with others.
Industry publications – any newspaper or retail industry publication in your area should be reviewed daily for information involving businesses relocating, expanding, contracting, or merging. It is surprising how so many agents overlook this obvious source of listing. These publications will also frequently name the key people in a business such as the CEO, President, or CFO. In all cases these business leaders go on your contact list and get a letter on a regular basis. Note that I said a ‘letter’ and not an ‘email’. In this high tech world you want your correspondence to be seen and read; an email will not achieve this in most circumstances.
Other agent’s signboards –when another agent puts a signboard on a retail property, it is imperative that you contact the other adjacent and nearby owners of commercial property in that street. These people are likely to have an interest in competing with the retail property that’s just come on the market. They are also more likely to use you as a competing agent whilst the other agent’s property moves through its promotional period.
Financiers and bank managers – these people need property transactions for their business to survive. They are also receptive to working with professional real estate agents who understand retail real estate and act professionally. If you can supply them with the source of a new large mortgage or retail property development, they are likely to offer you the opportunity for a retail listing or a sale with their clients in the future.
Planning approvals – keep close to the local council or office of the planning committee in your region, as they constantly consider new planning matters. Some of these offices have minutes of planning approvals that are available for public scrutiny. Check out these minutes and follow through on the opportunities that you can see. The historic planning approvals over the last few years are also great sources of retail leads and listings.
The inventory above comprises the most obvious categories of leads and opportunities in retail shopping centre sales and leasing. You will be able to add to this as time progresses in your marketplace. Importantly make sure that you have these items well under control as the essential foundations of your business.
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:
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.
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.
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.
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.
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.
If the local area is serviced by public transport, get some marketing material and posters into the transport systems and drop off points.
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.
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.