The commercial real estate leasing process is quite special. To be successful as an agent in that segment of the industry, you really do need to develop a high level of trust with both tenants and landlords. They need to remember you at the right time as the property expert to solve the leasing challenge. As the leasing expert understand who is moving and for what reasons.
It should always be remembered that a successful lease today can lead to a successful sale opportunity in the future. Lease documents and rental strategies form the backbone of investment property performance. Over time and in working in this leasing segment of the industry, you will soon understand the strategies behind rental income improvement and tenant mix enhancement. An investment property that is strategically leased, will generally be more attractive and marketable when it comes to the time of sale.
Developing a Trusted Reputation as a Leasing Specialist
Here are some ideas to help you develop a trusted relationship in the property market with some of the best tenants and landlords:
- Vacancy knowledge – understand where the next vacancies will occur in your local area. Also understand the vacancy rates that apply to the property type in the location. Any new property developments are likely to have an impact on market rentals and also vacancy rates.
- Property classifications – there are differences when it comes to the types of properties in your town or city. The classifications will apply to office, retail, and industrial property. Rental rates will also apply to each category. Understand the property classifications and the prevailing rates of vacancy apply in each property segment.
- Rental structures – some rentals will be better than others when it comes to helping your landlord achieve the best results from any lease. Understand the rental structures and the differences across gross rental, net rental, and incentives. You can also consider the strategies behind the rent review process in each case.
- Lease incentives – throughout the year you will see changes in lease incentives based on the supply and demand factors in each property type. Those lease incentives will impact the face rental achieved by the landlord and ultimately the valuation for property. It should be remembered that any lease incentive as a cost to the landlord should be recovered from the lease structure over the term of lease. In general terms, the lease incentive should be amortised into the lease deal through creative rent reviews in the initial lease term. You can analyse the differences achieved with different rental review structures in a single lease through undertaking a lease cash flow and an NPV analysis.
- Lease documentation alternatives – as mentioned earlier, rental structures are very important when it comes to the actual lease deal. Same can be said for lease documentation. The leasing arrangements between a tenant and the landlord should be documented accurately and comprehensively for the property type and the premises. The quality of the lease document created between the two parties will have an impact on the performance of the investment and ultimately the sale of the investment if and when that time comes. Take the time to ensure that a high quality lease document is prepared for the clients that you act for.
- Tenant contact – keep in contact with all tenants within your marketplace and your properties. The tenants invariably know what’s happening when it comes to the local market and other tenants nearby. On that basis they can be valuable sources of information. Many tenants will also be considering expansion, contraction, or change to other premises in the future.
- Net income results – in any leased property, the net income will be the major driving factor influencing capital values. Most landlords will require a reasonable income return over a fixed period of time. The age of the asset will have something to do with the net income results. To assess the net income you can review and analyse property outgoings and expenditure. Soon you will see income standards that apply to the property type and the location.
- Find more tenants – in any town or city there will always be tenants looking to move property or change location. To be successful as a leasing agent and expert in tenancy activity, take the time to connect with all tenants and businesses locally. The best way to do that is through a dedicated and direct prospecting program incorporating cold calling and door knocking. Use your business card as part of the prospecting process, leaving it with many business owners every day.
- Landlord contact – identify the high quality buildings in your town or city. From that process connect with the landlords in each case. Understand what the landlords are looking for when it comes to tenancy mix, rental returns, and vacancy factors. Most high quality buildings will have challenges throughout the year when it comes to all or any of those three factors.
So there are plenty of things that you can do here to develop a trusted relationship as a commercial property leasing expert in your town or city. Build many relationships with tenants and landlords as part of that process. Provide regular market updates relating to the supply and demand quality leasing stock.