In commercial real estate brokerage, you can work with property investors successfully and directly. They can give you plenty of work over time. That being said, those investors are looking for opportunities for investment and that’s where we can help.
Those opportunities will come through improvement in capital value, property cash flow, tenant selection, and tenancy mix. For that very reason, you really do need to understand the value of an investor purchasing a property with a lease, and how the leasing process works. How can the lease help the landlord with their investment targets?
So the lease can be the basis of the foundation for property improvement over time; a good lease document will attract more property investors in any marketing campaign. If the property is currently vacant, you will need to find a new tenant to match the investment requirements of the landlord. The quality of the lease created will help grow property performance.
Tenant selection and lease negotiation go hand-in-hand. Understand the ideal tenant to match the property type. Understand the investment requirements of the client as they own the property for a number of years. Build a lease negotiation around the requirements of investment for the client. Negotiate the tenant into the lease in a productive and realistic way.
Strategic Leasing Ideas
Here are some ideas to help you with servicing property investors as clients. You can add to the list based on your location and the type of property:
- Term of Lease – determine the ideal term of lease occupancy to match the investment cash flow needed by the client. The term of lease will be a number of years given the age of the property, the selection tenant, and any property development needs opportunities.
- Option to Renew – a lease option can be a significant hurdle in property investment if the owner wants to undertake a development or renovation plan across the site. Many tenants will ask for options to renew so that they can have continuity in property occupancy. It is worth remembering that the investors and owners of large properties today generally avoid giving lease options as part of the original lease negotiation.
- Rental Strategies – the rent that you choose will impact the cash flow. The rent should be structured with due regard for improving the net income for the client. Understand how outgoings will impact the property cash flow over time. In older properties, the impact of outgoings can be a challenge when it comes to rental optimization.
- Understanding Market Rental – within particular property types locally, you will see patterns and trends when it comes to market rental. It is useful to track the growth patterns and changes of market rental in any town or city. That will then help you target the appropriate properties for investment locally. Information of that nature will help your property investor clients.
- Security Deposits and Bankers Guarantees – in any commercial or retail lease today, it is wise to consider the alternatives of security and guarantee. Whilst a tenant may not default during the lease term, you should protect your client with an appropriate security deposit or bankers guarantee. When a lease default occurs, your client should have a documented strategy for income and lease remediation. The quality of the lease document will be critical to drawing down on the security deposit or the guarantee as the case may be.
So these are some of the larger issues involved in commercial real estate leasing, tenant selection, and property investment. You can add to the list based on location and property type. Help your clients directly and specifically through a comprehensive leasing and rental process. Determine the variables that will help the property improve as an investment over time. Understand the local market conditions that will allow the property improvement to occur.