Commercial Agents – How to Negotiate Leases in Commercial Property Today

When it comes to commercial property leasing and performance, the lease that you negotiate is really a key part of the process. Lease negotiation today can be protracted and lengthy. The landlord and or the property manager need to be aware of lease negotiation practices that apply to their property type and local area, and have a system to implement when they are leasing vacant premises.

At the outset, it should be said that a good property solicitor is highly valuable to the lease negotiation process. The commercial real estate agent is really only there to negotiate the lease and is not a lease preparation specialist. The agent brings the parties together through a comprehensive marketing campaign targeted to the right type of tenants. That is why they are paid the commission. The solicitor should then take over the lease documentation process to ensure that a correct and comprehensive lease document is created for the particular occupancy situation.

There are many types of landlords out there owning diverse and different properties. Regrettably the smaller property investors commonly tend to cut corners in legal costs or seek low cost lease documentation. The end result is a lease document that generically relates to the property.

It is best to get a solicitor involved in each and every lease document after the agent has negotiated the basic elements of the lease. A heads of agreement is appropriate for this process and that agreement can then be given to the solicitor to structure final documentation in legal form.

Here are some other main elements to consider in negotiating leases in commercial or retail property:

  1. Form a decision as to how long the premises should be leased in the initial term. This term should comply with the changes to the property that the landlord requires including any refurbishment strategies or relocation situations.
  2. Many landlords do not like options for a further term being given to tenants. Whilst you have to comply with property legislation relating to leasing, the issue of options really does need to be considered before the tenant asks for such. Options should only occur if the landlord can comfortably allow the tenant to remain in occupancy in the location. Due regard should also be given to the other adjacent tenants in occupancy and their needs for expansion.
  3. The type and amount of rental to be asked for should be clearly set before the marketing of any vacant tenancy occurs. Whilst it is permissible for a landlord to negotiate rental downwards, it is important that the asking rental is comparable to market rental; otherwise you won’t get any enquiry from the marketing of a vacancy.
  4. Understand the outgoings for the premises and how you are going to recover those costs for the landlord. The decision here will have impact on the net and gross rents that you may select.
  5. Prepare the premises for inspection and presentation. Whilst many landlords prefer to not spend any money until tenants are found, this process can be counterproductive and dissuade tenants from entering into negotiation for the vacancy. Essentially a vacant tenancy needs to look its best before tenants are taken through for the inspection. To achieve this you may need to paint the premises, reinstate the ceiling tiles, and replace the floor coverings.

The negotiation of a commercial or retail property lease is a planned process. By taking these and other steps early you can reduce the number of problems that you have in the lease negotiation process.

Commercial Agents – Strategies to Handle Clients With Overpriced Listings

When it comes to selling, and leasing commercial real estate you don’t want an overpriced listing unless there is some potential to adjust the price and attract enquiry. The fact of the matter is an overpriced listing wastes your time as the agent, but perhaps more importantly it also wastes the time of the seller.

Some clients and property owners think that the agent’s job is to sell or lease the property at the price that they are looking for. Nothing could be further from the truth. It is the agent’s job to convey the facts of the market to the client so they can understand how to resolve their property challenge at the best price or rental given the current market circumstances.

Many clients will not listen to the agents assessment of the current property market; or they will choose to selectively accept only some of the issues that they are told. If you believe that the client is reasonably motivated to sell or lease the property then an overpriced listing (within reason) can be acceptable.

So the message here is that you can accept an overpriced listing within reason and if you see a way through the challenge. That being the case here are some strategies to adopt as you move through the agency period.

  1. Always show the client clear market evidence regards comparable properties nearby. That should include the asking price, the asking rental, the achieved price, the achieved rental, and the time on market. You should also include details of property improvements as they apply to each particular property. There may be differences and enhancements which distinguish that property above those in the local area.
  2. If the client wants you to market their property at the inflated price, then seek vendor paid marketing funds to support the process. If they really believe in the price, they will or should believe in payment of funds to support the marketing campaign.
  3. Alert the client to the types of enquiry that’s out there at the moment. Explain to the client that the levels of enquiry today are limited and perhaps are just 1/3 of what they used to be. This then says that each enquiry has to be captured and converted. Waiting for the special person that will pay a top price or a top rental can be counterproductive and over saturate the market with the relative listing. A listing becomes stale within about six weeks; it simply dies as a listed property. If you cannot get genuine enquiry to the property during that time and undertake a few inspections then you have wasted the critical marketing window of time. The client has to adjust their price.
  4. After every property inspection give feedback to the client of the comments made by the inspecting party. This becomes third party evidence and is quite relevant to helping you convert the client to more realistic terms of sale or lease. When the opportunity presents itself, seek approval to reduce the asking price or rental. This should be done at least every two or three weeks. If the property is being offered for sale by auction, tender, or expressions of interest, then the pricing process is dictated by the market. In that case it is essential that you give feedback to the client from every inspection and every enquiry.
  5. The history of sales or rentals in the local area can be trended on a graphing display or process. It is best to focus on the pricing and rental activity over the last two years and most particularly the current 12 months. This is evidence that the client would find hard to refute.

As a general rule you should not always take overpriced listings into your books. That being said, you should not always walk away from them either. It is a matter of strategy and belief in the client’s ability to be flexible and realistic with their property challenges.

Commercial Agents – Tips for Qualifying Prospects Today

When a prospective tenant or buyer of commercial property comes to you as the property agent to ask about listed properties on your books, the qualification process today is really important to the end result.

To qualify a prospect you need to ask the right questions and drill down on the details of the person you are speaking to. Without doing this you can waste a lot of your time and effort.

Here are some key ideas that you can use in the qualification process before you take anyone to a listed property:

  1. Who are they and what are their contact details? Get this information up front before you give out property detail. If the person will not be open and honest with you regards their information, then you should not give out too much information about the property.
  2. How did they find you and get the details of the property? This information will help you understand just what type of enquiry and advertising works in this market today.
  3. You are likely to notice that the majority of property enquiry comes from certain sources and on certain days of the week. This information will help you drill down on optimising your adverts for every listing.
  4. Have they looked at other local property with other agents? Clearly this will have an impact on how you work with their enquiry. Make sure you notify the client of the prospect as a formal introduction before you take them to the property. There is nothing worse than finding later that another agent takes the same people to the owner and negotiates a deal.
  5. What do they need in a property today? Create a short list of factors that they want satisfied in a property purchase or rent. As part of the process, prioritise the list so you really know the things that must be satisfied.
  6. When do they need to find the property? Some areas are impacted by seasonal selling. The buyers of the property may be coming from another location and that move could be impacted by a cut-off date or time.
  7. Why do they want a property in your area? There must be a key reason for the prospect looking around for something to buy or rent. Find out what that is. Work around the point to get the real facts.
  8. Are they investors or are they owner occupiers? This will have impact on the properties that you show them.
  9. What do they know about the local area? They may already have a good idea about price or rent, and therefore any upcoming negotiation could be based on their information of the local area. It pays to know this before you go too far into the inspection and negotiation process.
  10. What improvements do they want in a property and why is that? As part of this process identify the ‘must haves’ that they need before they change property or make a purchase.
  11. If they are a business, what factors do the market and customers play in their property selection and decision?
  12. How many staff do they have in their business and what services and amenities will be needed to accommodate those staff in the selected property?

You can probably add to this list based on your local property market and experiences. One good strategy is to formulate a checklist that you can use in all situations and property types.