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.
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.
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.
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.
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.
The success of your commercial real estate office and you individually as a commercial real estate salesperson will have a lot to do with your prospecting plan. The prospecting plan is a particular process that is developed by each salesperson relative to their property type and local area. If you want to be successful in this industry, it is very wise to establish your plan as early as possible in your career.
It is notable that most salespeople in the industry are of an ordinary performance level. This then leaves a significant opportunity wide open for those that can move to the top of their industry through established prospecting activities and professional skills.
So let’s look at some prospecting rules that will help you build your market share.
Clearly define the type of property that you are to specialize on. That property type should be comprehensively incorporated into all of your marketing efforts. When you work exclusively on a particular property type, it is easy to be seen as the local property expert. You will also achieve higher quality listings over time because of this relevant and comprehensive knowledge.
It should be said that your specialist property type should be in significant abundance throughout your territory. You need to know that the property type churn will produce necessary sales and leasing opportunity as the case may be.
Review the history of your area for property changeover and property leasing activity. How much commission has been generated by your territory over the last 12 months? How many sales have occurred in your area over the last 12 months? How much leasing activity has occurred in your area over the last 12 months? All of these questions should be answered so that you have a clear future in your property type and sales territory.
Get to know your competitors and the listings. You will soon understand the difference between top agents and everyone else. When you have identified the top agents, study their business activities and their points of difference. Is there sufficient room for you in the same market with similar points of difference? Should you develop alternative points of difference, or work on different property types?
Commercial real estate is an industry where personal branding is a significant part of your listing generation and commission opportunity. You will need to have a significant personal marketing plan implemented on a daily basis to encourage new clients towards you. That is the best way to attract property opportunity.
Whilst you may work for a prominent local or regional commercial real estate agency, you will be the reason for any listing to be converted to a transaction. The industry is based on people and the knowledge and skills behind those people. Whilst your agency may attract some enquiry to you, it is your personal skills and knowledge that will convert the listing and drive the enquiry. On that basis, you should optimize and grow your specialized skill at every opportunity.
Prospecting in commercial real estate is a personal process, as we have mentioned above. When you truly understand that fact and develop the prospecting systems around you, the property market will open up for you in opportunity. This opportunity is always available in any economy and in any location.
The top agents of the industry are always prospecting for new clients and new opportunity. Your existing database and client list will eventually become tired and restrictive when it comes to commission opportunity. Always be on the lookout for new people and new properties. That’s what prospecting is all about. Over time you can build a significant commercial real estate business with fresh people in your prospecting model.
When you lease a retail property or promote a vacancy to be leased, there is a fair bit of information to be sourced and set as part of the vacancy marketing effort. When you are fully informed and prepared, the retail leasing situation is much easier and more direct.
A retail tenant will ask lots of questions. They have a business to run and they need to know that the property can support their intended operations, marketing efforts, and trade.
The landlord that owns the retail property will have a lot to do with the overall success of the tenant mix and the levels of sales. Inexperienced retail landlords can destroy a tenant mix and retail property performance if they do not devote the correct focus on balancing key relationships.
Owning a retail property is a special process. The fine balance between the tenants, customers, property manager, and landlord should be protected and encouraged.
Some of the critical leasing factors in a retail property or shopping centre will include:
Levels of rental to be charged should be fair and reasonable in keeping with the existing and prevailing market rents. Far too many landlords set rent based on their need to finance the property or boost the property value. An aggressive rent can ‘kill’ the tenant mix faster than you would expect.
Types of rental will change from property to property but will include gross rent, net rent, and incentives. All of these rent issues require decisions based on existing market trends. Rental targets for the property should be set in the business plan for the property and be reviewed annually.
Tenancy space details will include area of the premises and configuration. Be careful in setting rent with narrow, long, and deep premises. When it comes to retail rental, it is the ‘frontage’ of the premises that sets the rent and sustains the customer interest.
Permitted use for the premises will be set based on the requirements of occupancy and the prevailing tenant mix. Decide what types of tenants you really want for the vacant premises. How will they balance the offering of adjacent and nearby tenants?
Existing tenant mix details should be reviewed. In doing that you can ascertain just what vacancies are coming up and how they will impact the zone of the property.
Supply and demand for retail space will change in the local area during the year. The impact of new property developments will also reflect in your market rental. Keep in contact with the local property development office to understand the new developments that may be coming up.
Car park information will include numbers of car parks and the access methods for customers and tenants. When it comes to retail property performance, the function of the car park will be important for the future levels of customer interaction and trade. In many respects, car parking today needs to be accessible, friendly, and secure. Customers will soon turn away from a property if car parking is too difficult.
Customer demographics and levels of trade will change throughout the year. Ensure that you understand the typical customer that comes to the property and the reasons why they do so. Those factors are likely to change throughout the year.
Signage rules and regulations will apply to particular tenancies. Any new tenant to a property should be suitably briefed on the signage policies that apply to shop presentation.
Landlord works and property improvements will be important issues to the incoming tenant. Exactly what will be provided to the tenant as part of the new tenancy lease? Will the lease for the tenant require special modification and allowances for unique tenancy improvements? What should happen at the end of the lease term with regard to premises make good?
Services and amenities to the property and to the tenancies will be important. All the expected facilities services and amenities should be well maintained and up to date. A property that is neglected when it comes to the maintenance of these issues will soon become redundant from the tenancy perspective.
Guarantors and the security deposit requirements will be parts of the negotiation process for the new lease. Decisions will need to be made regards the types of guarantees required and the amount of security deposit. These factors may vary depending on the tenant that you secure for the premises.
Fit out design and specifications will be important when a tenant is identified for the premises. Certain rules and regulations will be required to control the tenant during the fitout construction phase.
Outgoings and occupancy charges will have an impact on the tenant’s ability to trade. Review competing properties in the surrounding area to understand exactly the types of outgoings that are acceptable in the prevailing market conditions. Your property should be competitively positioned and not exceeding those charges in other properties.
Standard lease terms and conditions will vary from property to property and landlord to landlord. Those lease terms and conditions should be set prior to the premises being marketed. The landlord should consult with their solicitor to ensure that a good standard document is ready and available for use when the tenant is located. In most cases, the standard lease document will be modified for the existing tenancy and the requirements of occupancy. If you locate the franchise tenant for the property, it is likely that they will bring their standard lease to the negotiation. If that is the case, the landlord for the property will require legal assistance to shape the franchise tenant lease into something that works for the landlord and the property investment.
Property as built drawings will be very handy when it comes to tenancy negotiation and tenancy design. The as built drawings would normally be available through the property management office and or the landlord. The drawings will be required to help the tenant to understand tenancy design and the availability of mechanical plant and hydraulic services.
So the leasing of a retail property or premises within in a retail shopping centre will be quite a specific task requiring detailed information. When you prepare for the process of retail property leasing, negotiations can run more effectively and positively.
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.
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.
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.
The idea of lowering rents in a tenant mix strategy may not be a popular topic among shopping centre or shopping mall owners, but cash flow is still cash flow.
There is great value in communicating with your tenants and understanding their reality, as well as your own. Again, deal with each rental renegotiation on the specific circumstances of that lease. Know too, however, that a rental reduction, if necessary, may be recaptured in the following ways:
Percentage rent increase. If the tenant’s sales are off during a bad economy, presumably they will go up when times get better. The landlord can then recapture from a lower base rent via increased overage rent.
Deferred rent. If the tenant is having trouble, consider lowering the rent, with a deferred lump-sum payment at a specified date or on a stair-stepped basis to ultimately bring the rent back up to an acceptable level.
Term extension. As a trade-off for a reduced rent for a quality tenant, ask for a lease extension with gradual escalations. This will help assure long-term occupancy and profitability.
Advertising. Require that the tenant agree to spend a substantial percentage of any rental reduction toward advertising and promotion, in an attempt to increase sales.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
It is incumbent on any landlord to know his tenant’s business and how it will balance within the overall tenant mix profile. The landlord can then have a sense of how a lease deal can be made to ensure a long-term tenancy. The soundest economic lease agreement most probably will not be the highest rent agreement. Take the following steps when evaluating a prospective tenant:
Rent Capability: Question the tenant’s ability to pay the rent being negotiated. Be willing to move the tenant into a smaller or less expensive space if doing so is in both parties’ long-term interest.
Profit and Loss history: Ask for the tenant’s other stores’ profit and loss statements for comparative analysis.
Sales projections: Ask the tenant for the projected sales at your location. Do the numbers seem high or low in comparison with the per square foot sales of other categories like this in the centre or trade area?
Communicate: Establish a trusting rapport going into the tenancy. Handle relationships one to one so you hear of problems before it’s too late to resolve them.
Management strategy: Ask about the tenant’s management plan. Is he going to be an absentee owner, or a hands-on operator? Will his management team be able to weather a downturn in the economy or a direct competitor across the street?
Likewise, shopping centre management should continually evaluate existing tenants. Check their sales trends – are they up or down? If they are down, a meeting may be in order to address any existing problems. If your existing tenant has established a strong track record over a number of years, don’t lose him. Communicate. Again, understanding each another’s position will effectively maintain long-term tenancy.
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.