Commercial Property Leasing – Strategies for Agents Today

When it comes to the leasing of commercial property, you as the commercial real estate agent really do need to understand the trends of the local area.  It really does not matter if you sell, lease, or manage property as the main part of your job; you still need to understand how to lease a property and how that lease can improve the sale or the property performance.

The clients that you work with will expect you to bring significant local market knowledge to their needs and opportunities.  That local knowledge will also need to be very apparent in your sales pitch and presentation; you want the client to listen to you.

It is a fact that many agents are far too general when it comes to the initial presentation to the client of the available services and solutions for their property.  Being specific to the property helps the clients really understand the relevance that you bring to the property requirement.

Key Discipline

Leasing is one of those disciplines that will eventually create a property sale or a property management opportunity.  That being said, a commercial or retail leasing specialist should be suitably versatile to talk about sales opportunity and property management strategies as well.  One commission opportunity will turn into several over time.

For a commercial real estate agent to be of any relevance to the client that they serve, they will need to have a toolbox of strategies to implement for any particular client or their particular property.  Those strategies should not be generic, because the client is likely to be seeing a few agents before they make a selection on what agent should get their listing.

Here are some factors for commercial and retail property agents to optimize as part of their services and solutions for clients:

  1. Get to know the rentals in the local area as they apply to the different property types.  There are differences between gross and net rental when it comes to different property locations and property types.  In some leasing circumstances you may use a net rental strategy, whilst in others you may use a gross rental strategy.  Either of these choices will have impact on the rent review process that you negotiate for the particular lease.
  2. In any particular property market is very common to have a variety of incentives available to new tenants.  The size and type of that incentive will change from time to time based on the supply and demand of premises locally.  When there is little vacant space available for new tenants to occupy, it is likely that the incentive will diminish or even disappear.  That will only remain the case when demand for premises exceeds supply.  Over time you will see new property come into the market through fresh new property developments; the leasing leverage that each landlord creates in those circumstances will be that of an incentive.  As the local property expert, you need to know the incentives that are both available and sensible for any particular property that you could be leasing.  Compare those incentives to other properties nearby and in the general property market.  Offer the landlord some alternatives when it comes to those incentives and how they match the needs of that tenant enquiry that you know exists currently.
  3. When it comes to establishing a new lease, it is best to have some regard for the existing tenants in the current property and their proximity to the current vacancy.  What you want to do here is spread the risk of any vacancies occurring in adjacent premises.  In other words, you want to minimize the chance of multiple vacancies occurring at the end of lease terms at about the same time.  The only reason you would have any adjacent vacancies occurring would be in the circumstances where a renovation or relocation strategy was required for property improvement.
  4. The operating costs for the property (the outgoings) that appear in any lease negotiation should be acceptably similar to those which apply in competing properties.  If your property outgoings levels are too high, then it is likely that the vacancy will remain difficult to lease.  On this basis it pays to understand the levels and types of outgoings that are available and charged in competing properties in your area.  There is a large difference between the outgoings or operating costs charged for a retail property, and industrial property, and an office property.  Generally speaking the outgoings for a retail property are far higher than those that would apply to office property.  Similarly, an industrial property is at the bottom end of the outgoings scale in occupancy cost structure.

Get to know your local property market comprehensively and thoroughly.  Properties will come and go in the area from time to time, and some rental or lease transactions will occur.

Get to know the actual rents that are achieved from the particular lease deals as they are the rents that are acceptable to the enquiring parties in today’s market.  As part of this process, stay abreast of the future new property developments that are coming into your region and that could have an impact on the supply and demand process.