From time to time you will get difficult listings to lease. When you have that problem, invite others from your team to look at the property and the leasing challenge. Extra people can help you see through the issues for a better leasing resolve. Extra ideas can always help, and that’s what they did in this case. Now I know that some property clients can be difficult.
A Story from the Market
Yesterday I was invited to look at an industrial property with a broker friend. It had not leased for over 12 months and the outgoings were ‘eating the head’ off the property in many ways. The property was in the landlords ‘superannuation fund’ so the property was a long term holding; albeit it a difficult one. The landlord was desperate.
So here are the facts of the property:
- Part of the property was leased in one shed of 2,500 m2 (27,000 ft2) – includes small office component.
- The other part of the property was vacant 4,000 m2 (43,000 ft2) – also includes small office component.
- The vacancy of 4,000 m2 (43,000 ft2) had existed for over 12 months with very limited enquiry.
- It was known that the leased part of the property was likely to become vacant in 18 months due to the tenant changing their business model – when that occurs the whole property would be vacant.
- There was little interest in the property currently from any tenant.
- The property was older and the improvements were useful but not ‘modern’.
- Location was very good for an industrial site, close to airports, transport, ports.
- Land around the warehouse is flat.
- Zoning was ‘general industrial’ so there was plenty of potential property uses that could be applied to the warehouse.
- An access road into the property splits the two sets of sheds (common access).
- The landlord is desperate to get a tenant.
Given all of these things, potential tenants had struggled with the fact of the joint access driveway into the premises. The abundance and placement of warehouse sheds meant that truck turning points within the property were limited and the same with onsite parking, and loading and unloading.
So what can you do with all of this? Invite others from your team to the property to give you some more ideas. Invite the property owner to the onsite meeting, and then open up the discussion for the client to hear and participate. Yes, the landlord is likely to get some ‘hard facts’ about their property, but it is valuable feedback that helps to condition them to accept change. You can also look at the property marketing package and change it.
A ‘changed’ listing can be repackaged and promoted again in a fresh way. Getting the landlord to accept change is how we attract inspections and results.
This is what was decided with the owner onsite using the input from others in the team. The team helped to determine a fresh marketing approach, and the owner agreed. Here are the facts:
- Clutter from the site had to be removed. Given the age and current use of the property, there were too many things visible that cluttered the site unnecessarily.
- Line marking on the driveway and signage was needed to control traffic and access.
- There were parts of the property that remained underutilized and yet they could have been ‘selling points’ in any lease campaign. Greater marketing focus was required here.
- The current tenant in one part of the property needed to be controlled more effectively so they didn’t spill out into other property areas.
- Signage on the frontage to the property would be enhanced to give a stronger ‘corporate branding’ to passing traffic.
- The rent had to change from a gross to a net rent to shift the tenant’s perception of ‘value’.
- The net rent had to be lowered to make it the best ‘value’ in the market today. The first year rent had to be very attractive and include an incentive.
- Recoverable outgoings needed to be ‘tuned’ to help property performance.
- The rent package and lease rent reviews could be revisited to escalate the low start rental over the longer term hence achieving a reasonable return on investment (there was no intention to sell the property).
- An incentive fit out package was redesigned to attract tenants. The cost of the incentive was amortised into the lease structure and cash flow over the expected lease package.
So the message here is clear. There are solutions to difficult property listings. You can improve your fees and commissions when you deal with it laterally.
Look at the bigger picture; get others in your team involved in helping with ideas for difficult property situations. Some of those challenging older property listings can be ‘freshened’ for a different marketing approach. Don’t let your old listings ‘fester’ without some shift in marketing and targeting. Get your team involved to help with ideas. Help your property owner make the change to repackage the listing.