Do It Yourself Retail and Commercial Property Management Tips

Managing a commercial or retail property is not easy and we should not presume that it is.  Commercial real estate agents specialise in it and bring many skills to the process.  There are however some people and property owners that prefer to manage their own property.

It should be said that the commercial property management process is both time consuming and demanding.  It requires knowledge and commitment on the part of the property manager or the building owner.  Any mistakes made in the management process can be severe and impact the performance of the property for many years.

Given all of these facts, some landlords still prefer to manage their own property.  That being the case, here are some tips and ideas that can apply to the process.

  1. Lease documentation will always be a key component of the commercial property management process.  It is the lease documentation that underpins the income from each and every tenant and improves the performance of the property for the landlord.  A commercial property or commercial tenancy without a good lease document can be a real struggle to manage.  In many such cases you will find that the control of the tenant and the recovery of income become much harder.  It is notable that some property owners prefer to avoid high documentation and legal costs when it comes to the establishment of a new lease.  You would think that the reverse would be true given that a good lease will underpin the performance of the property.  A cheaply prepared generic lease will invariably miss out on the important parts of property performance and tenant control.
  2. Income establishment and growth will be a part of the commercial property management process.  There are many different types of rents to consider when it comes to establishing lease occupancy from any lease negotiation.  In many respects, some landlords do not understand the differences between gross and net rental, and how those rental types can be optimized in leasing strategies.  That is why the commercial real estate agents specialise in this part of the industry and act for the landlords of quality properties.  A good commercial real estate agent can add significant value to a commercial or retail property over time.
  3. Vacancy factors will change throughout the year when it comes to a property of multiple tenants and variable occupancy.  That being said, the vacancy factors of a property really do need to be pro-actively managed.  That will usually involve some type of business plan that sets the targets when it comes to property income, expenditure, and redevelopment.  The vacancy strategy will form part of the business plan for the property and will also feature as a component of the tenant retention plan.
  4. Expenditure management is not simply a matter of paying the bills.  Expenditure should be budgeted at the beginning of any financial year.  The landlord for the property should approve the budget and timing of the major items of expenditure.  Municipal rates and taxes will form a large part of the property expenditure process.  Those rates and taxes will be a critical timing factor to consider in the property cash flow.  Setting aside sufficient funds for those larger expenditures is really important.
  5. Tenant relations should be maintained throughout the property management process.  Good tenant relations will always help future lease negotiations and rent reviews.  This is highly important when it comes to any retail property given that the tenant in such circumstances is relying on the business and the tenancy to provide regular income.
  6. Code compliance applies to building structure and building occupancy.  The codes in particular relate to occupancy standards, occupational health and safety, building usage, and plant and equipment.  As part of the commercial property management process, the compliance to codes should always be respected by the property manager and the landlord.  Any building that is found to be lacking in this respect may very well be shut down until the matter is rectified.
  7. Maintenance of the plant and equipment within the property should be established to a plan given the requirements of occupancy, the age of the property, and the recommendations of the maintenance contractors.  Cutting corners and delaying maintenance will invariably lead to property failure and the breakdown of plant and equipment.  Each year it is preferable to establish a maintenance plan relating to the essential elements of plant and equipment in the property.  That plan can be merged into the business plan for the property.
  8. Laws and legislation relating to commercial and investment properties will change from time to time.  For this very reason, it pays to have a very good property solicitor representing the landlord and checking for any changes in property legislation that can have an impact on the property performance and operation.

So these are some of the critical components of commercial property management today.  It should be said that every property will usually have other factors to add that are unique to location and occupancy.  For this very reason, the property manager undertaking the management of the property should be well chosen and highly experienced.

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.

Leasing Factors in Retail Property Today

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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?
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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?
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.

Tenant Management Tips – Lease File and Record Keeping in Commercial Property Management

womand walking in shopping centre supermarket aisle
Understand all of your tenants leases totally, so you can stay on top of all critical dates and triggers.

When you manage or lease a commercial property it pays to have a good filing system when it comes to the tenancy mix in every property.  Every tenant should have a series of files that allow you to get to information fast and effectively.  When things are happening in a tenant matter, you want to go the right file and get what you need to respond in a timely and effective way.

In properties with a lot of tenants, the filing system is highly important.  That then brings me to another issue of just who looks after the files and places records and activities in the ‘right file’.  If you do not file the right information, then the property management activities get difficult.  When something goes wrong you simply do not know where to go, or you need a lot of time to get to an answer for the landlord or the tenant.

The trick to all of this is that you build a good property management and tenant filing system from the very start of the property management appointment.

Some may argue that you have the ability to scan documents and store them on some ‘hard drive’, and that is just fine, but the reality of the industry is that you do need some paper files to review and work with.

Here are some ideas to help you get your property management filing system up and running:

  1. Each tenancy should have a correspondence file of current and past issues.  This is where you go to look at letters and notes relating to current tenant matters.  This file is also important from an historic perspective; you can go back and see what happened and how issues were agreed.  This is really important where some tenants are not following the lease terms and conditions.
  2. At the front of the tenant file, place a summary sheet of lease terms and conditions that you can quickly refer to in the case of a question or problem.  This sheet should be inserted in the file at the start of any property management appointment and leasing negotiation.  This information sheet should be updated as the terms of tenant occupancy change.
  3. Any income matters of rent review, option, renewal, alterations, and rent splits should be entered into the property computer records using a standard template form of record.  When this entry has been done, the form can be placed in the tenant file for future reference.
  4. A copy of the lease and any other lease papers or licences should be held on file.  Notice I said ‘copy’ and not ‘original’.  It is not a good practice to keep original lease documentation in your office; if you have a fire, or if you lose the file the ramifications are not good especially if you have a lot of properties and tenants.
  5. Any lease alterations and special billings for the tenant should be recorded on the tenants file for reference.

Good property records and tenant records will help your property management process.  As your property management processes change, you can improve your systems and records.

Leasing Handover of Premises to a New Tenant Today

shops in a shopping mall
Create a system of handover for moving a tenant into a new premises.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Retail and Commercial Property Leasing Agents – Finding Tenants for Your Property Listings

man shopping in a fruit shop in a shopping centre
The right tenants will boost your tenancy mix and lease profile for the property. Choose the right tenants in your business plan for the property.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Retail Tenant Leasing Needs in Shopping Centres

woman shopping in fruit stall
Retail leasing is a key part of your tenant mix strategy.

When you lease a retail property or shopping centre, understanding the retail tenant’s needs will help you significantly when you try to close a deal or lease.  Retail tenants are quite special when it comes to occupancy; you need to know a lot more about them that the average office or industrial tenant.

Here are some ideas to help you work with retail tenants and fill vacant tenancies in your property:

  1. They will have an ideal shopper demographic for their goods and services.  What or who is that shopper and do you have plenty of them in your local area?  Is that demographic changing in any way?
  2. You may find that the retail tenancy is part of a franchise group structure.  That can be a good thing because the tenant coming into the premises will have an established business plan and retail support.
  3. What shop size will the retailer require?  Will that shop need to be on a corner point, internal to the shopping centre, or on a higher foot traffic zone?  Some retailers have to be in particular areas to make their expected sales.  That being said, a successful retailer will bring other shoppers to the area and help boost sales for tenancies nearby.
  4. What improvements will the tenant require in the shop?  Some of those improvements could be a landlord expense to get the tenant to commit to a lease.
  5. Visit some other shopping centres in the local area so you can understand just how successful some tenants and brands are in trading and in established tenancy mixes.  Look for the synergies between tenant types and locations.
  6. Each established and experienced retailer is likely to have a series of lease requirements that they will negotiate with the landlord for each property. Some of those terms and conditions will be non-negotiable as they have an impact on the way the tenant does its business.  Get a copy of the standard lease conditions that the retailer believes are critical to their business.
  7. The common areas within a retail property may add to the sale potential for some tenants.  A food court is a good example of this synergy and need.  Visit some other food courts or similar areas and understand what works and why.  If a customer can spend more enjoyable time in a property, they will likely spend more money.
  8. Presentational factors in a retail property are more important than in any other property type.  Retailers know when the landlord is cutting corners on maintenance to save some money. Eventually the poor property presentation will impact the customers and shoppers coming to the property.
  9. Transport corridors and roadways will have an impact on the way people get to a retail property.  If the process of access is too hard, the shopping centre can lose trade fast.
  10. Public transport to or near your property will be a great advantage.  How do people get to your property now and is it efficient?  Be aware of intended changes to roadways and highways; one small roadway change can impact your property in a big way.
  11. Car parking is always important to retail trade and shopping centre success.  In some locations that car parking should be under cover and convenient.  How big is your car park and is it convenient for users or shoppers to the property?

As mentioned earlier, and as you can see from the information above, the retail property and shopping centre is a really special property in function and operation.  Lease the property carefully and get to know all the retail tenants very well.

Tenant Types in a Retail Property

teenager shopping for CD's
Some shopping centre tenants are going out of business. Choose your tenants with a view to the future of retailing.

When it comes to leasing a Retail Property or Shopping Centre, the tenancy mix is critical to the generation of income. When you have multiple tenancies, it is absolutely essential to make sure they all balance with each other.

One important fact of tenancy mix design is that like tenancies can complement each other in the same general location and encourage the spending of the shopper. Further to that, it is quite likely that complementary tenancies selling associated products to the same type of shopper will also work well together.

This means that you can put tenants together that all serve the same type of customer. For example this could be men as it target shopper, and in that case you could put together a series of tenancies within the tenancy mix including:

  • Men’s fashion shirts
  • Men’s shoes
  • Men’s suits
  • Men’s golfing accessories
  • Sportswear
  • Men’s casual wear and jeans

This concept creates a cluster of shopping. Importantly it should also be softened with specific specialty shops of general interest to the broader family and not just men. For example you could place a number of coffee shops or sports drinks amongst the mix.

Tenancy mix is not difficult. It is just a matter of the type of tenancy mix and strategy that will serve the customer that typically visits the shopping centre on a regular basis. When the customer feels that they are well served in visiting the shopping centre, the number of return visits will escalate and the number of dollars spent in shopping will increase.

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.