In commercial or retail real estate today you will find that project leasing can be very lucrative from a commission and client perspective over the long term. The project leasing approach would normally apply to an investment property newly constructed, or recently refurbished. In both cases you will have a number of vacant tenancies to take to the market in a staged and managed way; that means multiple commissions over time.
Here are some ideas to help you maximize the approach to project leasing. You can add to or vary from these points based on your property type and location:
- Market rentals – Assess the market rentals that apply in your town or city to the property type and the location. Recognizing that you may be working with the newer property development or one that has moved through refurbishment, compare ‘like with like’, that is the prevailing comparable market rentals with the potential rentals you can achieve in the project. The decisions you make here with rental will be critical to the outcomes you achieve from the marketing campaign and the inspection processes. Do not take a new project to the market where the rentals are unrealistically structured and far beyond prevailing market conditions.
- Target market – In the early stages of structuring a marketing campaign for the leasing project, you will need to define and research the target market. Where will the tenants come from? What will they be looking for? Can they afford your property? These questions need to be carefully addressed with the property developer and the property owner as part of considering project and development costs. The viability of the project should be tested against current market conditions and expectations. The levels of rental, the costs of construction, and leasing timeline should be well researched given local market leasing conditions.
- Competing properties – There will be other properties in your location that will compete with your project. Look at the supply and demand factors that impact the property type locally. How will your project stand out as a real and relevant to the target market? How can you attract the enquiries and inspections to your property? How competitive can you be when it comes to available vacant space, and asking rentals?
- Leasing incentives – Most new projects involve the setting of rental ranges and leasing incentives. The different parts of the property should be considered for separate rental ranges understanding the differences in permitted use and property location. Premiums will be set when it comes to tenancies in high traffic areas or the locations that are highly visible from a marketing perspective. Premiums will also be set when it comes to the upper levels of the building where corporate offices would be ideal for ‘A’ grade tenants.
- Plans and drawings – With any new project it is essential that you have access to all the plans and drawings. Those plans and drawings will include electrical, hydraulic, plumbing, lighting, air conditioning, and structural. A set of plans and drawings should be supplied to every tenant as part of preparing for fit out design and construction.
- Staged release – With larger properties it is useful to stage the release of vacant tenancies. In that way you can bring small groups of vacant areas into the market and into your marketing campaign. That then allows you to optimise enquiry and improve lease negotiations individually.
- Tenant quality – With many major leasing projects you will find the selection of quality tenants very helpful to the leasing momentum. If you can get some high profile or heavily branded tenants into the building, it will help the campaign leasing momentum.
- Tenant mix – From the previous point you can see the importance of defining and establishing a tenant mix for the property. This is even more so the case when it comes to Retail Property leasing. Set the rules applying to the tenant mix, where you will place the tenants, and how you will negotiate rentals for the different size tenancies.
- Improvements – The improvements within the property and the details of services and amenities will be critical to lease negotiation. Ensure that you have a full set of specifications of building design, services and amenities, and improvements. That list of specifications will be also be required as part of the lease enquiry and inspection process.
So there are plenty of things to do here when it comes to project leasing. A well-managed investment property will be greatly enhanced by solid strategy and tenant selection in the leasing process. Over the long term that can only mean one thing; that is an improved cash flow for the landlord.