Conditioning Landlords in Commercial Real Estate Leasing

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In commercial real estate today we know that things have changed in many ways when it comes to leasing and tenant enquiry.  Sometimes it is the case that the landlords that we work with fail to understand or accept the facts of the rental and tenant market.  The result can then be too many vacancies staying on the market for a very long time.

I don’t know about you but I dislike ‘stale’ listings and slow enquiry rates.  The start of any marketing campaign to lease vacant premises has to be optimised for the first 6 weeks; after that point things will slow on inbound enquiry.

I like to tell landlords that the starting rent is only a starting rent, and should be looked at in that way.  If the landlord is holding the property for a number of years, the starting rent should be of less concern and on that basis the lease can be packaged now for rental improvement over the next few years.  If the property is in a good location and is regarded as a ‘quality property’, the market rents will take care of themselves through good rent review structures.

A low rent start is a way to get tenant interest; the same can be said for an incentive.  If the property is not being re-valued or refinanced in the coming 12 months, the low rent start or generous incentive will help move the vacant tenancy.

Here are some ideas to help you ‘condition’ the landlord of a property as part of leasing vacant premises:

  1. Provide a resume of market rentals that apply in the region and to the property type.  Provide information on the rental differences between existing ‘sitting’ tenants and ‘new’ tenants.
  2. Understand the alternatives of gross and net rent so you can advise the property owner as to the rent type that will be better for them in the initial lease term.
  3. Currently you will have levels of enquiry coming to your office on leasing vacant premises.  Track those trends and graph them on a monthly basis.  A line or bar chart can provide you with valuable leverage with your client in setting the market rent.
  4. Watch the trends that apply to supply and demand when it comes to the local market.  Any new developments could be a ‘magnet’ to attract tenants away from existing properties.
  5. Every landlord should have a ‘standard lease’ that works for them and their plans for the property.  Given that many property owners have a typical investment ‘lifecycle’ that they work to, the ‘standard lease’ can be matched to that.  The terms of lease should be set for rent types, lease terms, options, make-good, outgoings recovery, and fit out or cash incentives.  Help the landlord make the right choices.

How do you improve your leasing results and deal numbers?  You work closer with your clients to provide them with the right information on the local property market.   A genuine client will not want to be an ‘experiment’ in vacancy management; they really do want a tenant and they need rent.  Remember those focus points, condition the client and your leasing results will improve.

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