A Simple Formula for Commercial Real Estate Leasing Success

The commercial real estate leasing market is the easiest segment of the industry to enter into as a new agent, and to understand. The people that you know as part of that process and the transactions that you create in each case will help you move towards future sales and property management activity.

The message here is that any agent can get traction in the property market and create commission opportunity through commercial real estate leasing. There are different segments of the market to focus on as well as locations that can be more or less ‘leasing active’. It is a matter of understanding where the future of the market may be heading when it comes to office property, industrial property, and retail shopping centres.

In focusing within commercial real estate leasing, err on the side of quality listings in prime locations. Also understand the commissions that equate to the larger listings in the higher quality properties. Soon you will understand the lease listings that you should avoid, versus those that you should convert to new business. There is just as much work if not more in a small lease negotiation versus a large one.

Know the Business Community

Look for the segments of the business community in your town or city that are active and successful. Those businesses will require property relocation, expansion, and contraction over time. Approach those businesses directly to identify current leasing requirements and any expected changes to their current property occupancy. In asking questions, you will find plenty of leads and opportunities to work on over time.

To help you get started in this leasing segment of the property market, here are some factors to study and understand.

  1. Know Market Rentals – Market rentals will shift throughout the year. Those rentals will also be specific to the property type and the location. On that basis you should study the movement of market rentals in your local area so that you can predict and estimate rental trends as part of the pitch for lease listings.
  2. Track Leasing Incentives – Incentives are a common part of property leasing. Incentives will vary based on the supply and the demand for vacant space locally. Track and measure the types of incentives used in different property types and with different deals. An incentive should never be free as such, given that it is a cost to the landlord over time. The actual cost of the incentive plus interest over the lease term should be amortized into the rental level negotiated in the lease deal.
  3. Rental Structures and Reviews – Understand what is happening when it comes to rent reviews and lease options in today’s property market. Rent reviews can be based on percentage increases, as well as fixed increases. They can also be based on market rental levels with the property type in the location. Choose the right rent review strategies in any lease negotiation that can suit the landlord’s requirements and the property type. Options for a further lease term can be quite restricting if the property is entering a phase of renovation or redevelopment. In many high quality properties, options for further lease terms at are declined or refused when negotiating the lease. Those options thereby become a strategy relevant to the property type, landlord investment plans, and the location.
  4. Vacancy Rates – Monitor the vacancy factors for your location and property type. As mentioned earlier, the issues of supply and demand from a leasing perspective will have a level of impact on market rentals locally. On that basis you should monitor the upcoming new property developments and construction projects that could inject a large amount of new vacant space into the leasing market. That vacant space in any new property development is likely to be incentivised to attract volumes of inquiry. That can then have a negative impact on the current levels of market rent in any existing property.
  5. Local Businesses and Tenants – Get to know plenty of tenants in the local area. The business community should be a continual focus of your prospecting efforts. You can use the business telephone book as a basis of information and research to make plenty of cold calls. In talking to those business owners and business proprietors, you can identify occupancy changes and new leasing needs. Ask plenty of questions regards business expansion, relocation, and contraction.
  6. Occupancy and outgoings costsUnderstand the factors of occupancy costs in the structures of market rental. It is the case that occupancy costs form a part of the gross and the net rental structure for investment property. Within each property type, there are averages that apply to the levels of occupancy cost or outgoings. There are also differences in outgoings when it comes to a new property versus an established and older property; the older property potentially having the higher level of outgoings based on a greater level of repairs and maintenance. Taking those differences into account the agent controlling the leasing of any listing should make appropriate recommendations to the landlord to cover occupancy costs in an appropriate way within the lease rental structure.

 

So there are plenty of things that can be done here to attract leasing momentum, and to help you achieve real market share as a leasing specialist. Over time your successes as a leasing specialist will help you become more versatile and skillful as a commercial real estate agent; that can mean more sales and property management activity.

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