In commercial real estate agency, the property management division is a key part of the agency performance. In real terms the successful division can bring in significant and stable income to the agency on a regular monthly basis. That being said, a good commercial or retail property manager is highly skilled and should be selected for the property management role based on key performance criteria and hands on experience.
Far too many real estate agencies have average or poor performing property managers. In real terms this is a real threat to the stability of the division income, and the quality of the service provided to the landlords. Unskilled property managers do not last in commercial or retail property; it’s that simple.
Cadets and Training Processes
There is a place for ‘cadets’ that learn the roles and the skills of complex property management. The process itself takes a couple of years during which time the person should be exposed to all property types and situations under the guidance of an experienced manager.
So what does a good commercial or retail property manager look like and what skills will they have? To a large degree they will need to bring to you as agency principal, the skills needed for the managed property type and local area.
If the property manager does not know much about managing the required property type, then do not let them manage it; the errors made can destroy your relationship with the landlord and ultimately the management appointment.
Different Skill Sets
There is a large difference in management style and skill required between retail, office, and industrial property; industrial property being the easiest to manage and retail being the most intense and difficult. The skills required in a retail property manager is diverse and deep; they are the best in the industry.
Generally speaking, retail shopping centre managers today are also the busiest in the industry. The role is very hands on and unrelenting in intensity. Here are some core skills of a well skilled and placed property manager:
- The ability to read and understand leases and occupancy documentation for all property types.
- The marketing of the property to the local community and customers will be a factor that is critical to retail property. It this way sales are encouraged for the tenants; this underpins the rental for the landlord.
- Sound skills in financial analysis and reconciliation so a property performance tracking process can be set up for all managed properties.
- Good communication skills are essential. Property managers must be accurate, confident, and decisive, in keeping with laws, legislation, and the instructions of the clients that they act for.
- Attention to detail is required in all property negotiations and tenancy matters. Without good records and accurate information, the ‘wheels fall off’ the division and its services. Landlords soon see through mistakes and inaccuracy.
- Marketing of vacancies happens all the time in larger properties; importantly the frequency of vacant space is minimised and the times without a tenant are lessened.
- Income optimisation and expenditure controls are at the centre of property financial performance. The manager must know what is happening and why in all managed properties, when it comes to the cash flow and reporting to the landlord.
- All reporting processes and communications to the landlords we act for today must be detailed and accurate. Property compliance and maintenance, energy consumption, lease and vacancy matters, tenant and landlord lease covenants, outgoings performance, and environmental matters are just some of the factors that are controlled and reported on each month.
- Computer technology needs are increasing in the available property performance and management systems today. The property manager must be familiar with, and comfortable learning more about all the software and computer based technology that is used in the industry.
- Work hard and with focus each and every day. The hours that a manager will put in the job are long and intense; however they are the experts and should recognise the value that they bring to the job.
- Maintenance decisions and controls are made daily and should encompass the instructions of the client and the laws of property ownership and function. The manager needs to know what is required and should competently handle the decisions and communications with contractors, tenants, landlords, and fellow employees.
So how do you find one of these highly skilled people? They are out there and should be carefully sourced. They will be an asset to your agency function and performance.
When you work as a commercial real estate agent or broker, it is essential that you develop and implement a prospecting program to generate new business leads. It is a personal process and it is not something that you can or should delegate.
I am amused sometimes when I hear that an agent has paid considerable money to a marketing company to ‘cold call’ their entire sales territory or market segment looking for leads and prospects to serve. Delegating the prospecting process to a marketing company or another ‘unskilled person’ is a waste of time and money. Commercial real estate is an industry built around personal relationships and trust; a marketing company or employed canvasser cannot offer that level of communication or service.
So why would a real estate agent employ such a ‘marketing firm’ to make prospecting calls? The answer in most cases is glaringly obvious; the agent doesn’t have the skill or the discipline for the prospecting process to be successful.
If you want to win the new business, then you will need to do it yourself. Yes, it takes time to get results and you will need to develop some new skills, but discipline will help you get to the results that you are seeking.
One thing should be said here; commercial real estate brokerage is tremendously rewarding for the sales people that can work hard and to a system or plan. Looking for leads and opportunities is part of the process or game. It’s a personal thing and it can’t be delegated.
Here are some way’s to find new business, better property listings, and good clients:
- Redundant Properties – Some properties will move to a level of redundancy due to age, deterioration, change of zoning, or lack of tenants. When this happens it is time to move to the next phase of the property ‘lifecycle’. A good real estate agent can see the signs early and work closely with a property owner as they start to deal with the issue of investment change.
- Vacant Land – As a city expands or suburbs change, vacant land will be rezoned for new development. Keep ahead of this opportunity by monitoring the planning and development applications at your local planning approvals office. Get copies of the public minutes of the planning committee meetings.
- Old Listings – Some listings don’t sell or lease at the first attempt. What you can do here is withdraw the property from the market today and then revisit the property marketing effort a few months later in another and perhaps different marketing approach. Refreshing a listing is a valuable business process.
- Open Listings – The best way to sell or lease a property is through an exclusive listing process. Open listings are very much a process of luck; most open listings stay on the market for a very long time and on average are far less successful when compared to the dedicated marketing efforts of an exclusive listing. Revisit old open listings to see if they can be optimised for a fresh marketing effort.
- Larger Businesses – Local businesses are involved in property either as tenants or as owner occupiers. Business owners will need help with property from time to time. The best way to tap into that opportunity is through direct and ongoing contact. Cold call every business in your town or city and speak to them regularly about property needs and changes.
- Surrounding Other Listings – When a competing agent puts a property on the market, you can use that listing as a reason to talk to all adjacent and nearby business and property owners. One property listing can be the catalyst to talk to others to see if they would like to compete or do something themselves.
- Street Canvass – On a street by street basis, systematically move through your sales territory and research all property owners. Eventually you will create a good list of owners for your database. Ongoing contact will allow you to build valuable client relationships and the levels of trust that help grow commissions and listings.
- Cold Calling – The telephone remains the most effective business tool that we have. Direct calls handled in a professional way will help you reach out to new people. Selectively researching the property owners and business people in your area will support the cold calling process.
A simple list like this will give you an abundance of property leads and opportunities. The secret to making things work for you is in doing it yourself.
The tenancy schedule is the tool of choice for a property manager or leasing manager in a commercial or retail property investment. It is the tenancy schedule that will keep the property manager up to task on forthcoming events and dates.
Often you find that the tenancy schedule is not up to date, so if anyone gives you such a document, treat it with the caution it deserves, and check it out completely before you act on the information contained therein.
So let’s say that you have a great tenancy schedule that you know is totally accurate. I get many questions about what I would want to see in a tenancy schedule. Here are my main priorities:
- Details of the tenant name, lease, and full contact detail for emergencies
- Tenancy identifier or suite reference that comes from the plan for the property
- The area of the tenancy in m2 or ft2 (depending on your unit of measurement)
- The % of the tenant area to the building net lettable area
- The rent $’s per annum, per month, and per unit of measurement (m2 or ft2)
- Lease start date
- Rent start date
- Lease end date
- Term of lease
- Option term of lease
- Anniversary dates and reminders for rent reviews, options, expires, renewals, renovations, and make good obligations
- Outgoings charges for each tenant on the basis of area and monthly charge
- Outgoings budget for the building
- Total outgoings recoveries for the property on a currency and % basis
- Types of outgoings to be charged to the tenants
- Insurance obligations of the tenant
- Rental guarantee details or bonds held
- Provision for critical dates relating to any important lease term or condition
- Maintenance obligation details of the tenants
This list is not finite and you can add your own extra priorities, I would however make sure that it is totally correct and maintain it to the highest level of accuracy. When you do this you can stay on top of important upcoming events that will impact the occupancy or rental of the property.
Whilst you can buy ‘off the shelf’ software programs that display this above information, that can be quite expensive for those commercial and retail property managers that are first entering this type of property. The alternative is to create some simple spread sheet that contains the data; in saying that, it is essential that great care is taken to maintain the spread sheet that you create. Any errors in the tenancy schedule can destroy your landlord, your business, your tenant, your reputation, and the property. Accuracy is paramount.
In commercial and retail real estate today the leasing process is critical to the income achieved by landlords and property investors. It is wise for a commercial real estate agent or broker to offer a comprehensive leasing service as part of specializing in Investment Property. There are plenty of lease deals to be done; it is just a matter of finding them.
Many times you will see market pressures on vacancy, lease occupancy, and rental levels entering into the lease negotiation between the tenant and a landlord. Make sure that you as the leasing agent have a total and comprehensive awareness of the prevailing market conditions and that you share that information directly with your client as the landlord. Prepare them for the real facts of a rental negotiation.
The landlord must be thoroughly briefed about the property market conditions prior to any negotiation with a tenant. Realistic rental levels together with appropriate lease terms and critical dates should apply to any lease negotiation in today’s business environment. Every lease negotiation becomes a strategy taking into account the conditions of the property and its improvements, the current vacancy levels, market rentals, and the requirements of investment performance.
Here are some tips to help you with understanding the property market today and the prevailing lease conditions:
- The levels of vacancy relating to your town or city and the property type will have an impact on incentives and market rents. Look at the potential for oversupply and understand how it may impact the future rentals and investment performance. New property developments coming into the market will shift the balance when it comes to vacant space and the quality of buildings offered for occupancy.
- Review the market rentals that apply within the property type and your location. Those rentals will need to be tracked and monitored for future lease negotiations and the conditioning of your clients when it comes to lease is under negotiation. Understand the impact and the relationships between market rentals, outgoings, and incentives.
- There are different rental strategies when it comes to outgoings recovery. In any new lease, there will be decisions to consider relating to outgoings recovery and therefore the setting of gross or net rental. Levels of market rental will apply in each case so you will need to understand the averages that apply to outgoings within the property type given your location, your town or your city.
- Talk to business owners and tenants regularly. Ask questions about lease occupancy and lease termination. You will soon find tenants considering property change due to the pressures of expansion or contraction within their business today. You can track all the tenants locally through specific processes of direct contact, database, cold calling, and door knocking. Every leasing agent should have a comprehensive awareness of the leasing intentions of every business within their territory. In understanding the leasing intentions of tenants locally, your professional leasing services become more valuable to the landlords of the area. That will then help you in closing more leasing opportunities and listings.
So these are some important factors to understand when it comes to leasing property locally. Take the time to connect with tenants in your market today and review the prevailing market conditions when it comes to rental, incentives, lease documentation, and property improvements. Track the enquiry rates coming to your office regularly so that you can profile tenant leasing requirements for today’s market.