It is no secret that the commercial property market is under some pressure when it comes to leasing and finding tenants for vacant premises. On that basis the potential tenants that make an enquiry regards a particular property should be optimized for conversion, negotiation, and best achievable rental outcomes.
Here are some tips from our Newsletter for Commercial Real Estate Leasing Agents.
Market knowledge will always help you with any lease negotiation. On that basis you should study the market with regards to the following information:
· The location of comparable properties nearby that will have an impact on the marketing of your vacancy space
· The rents that are currently available for similar properties in the local area
· The incentives that are being offered to other tenants looking to lease property locally
· The supply of new lettable space to come into the market over the next two years from other new property developments
· The volume of enquiry currently coming in regards other properties and vacant space to lease and the types of tenants making the enquiry
So this information is foundational for the preparation of marketing of vacant space to lease. You must have all of these facts readily available to understand the pressures and alternatives available to the landlord and the tenant.
Here are some stages to the leasing process that can be merged into the conditions that apply in leasing property locally in your area:
1. Take comprehensive photographs of the property prior to any tenancy inspection. These photographs will be a record of current conditions within the tenancy space. They will also be useful when it comes to discussing tenancy modifications and fitout.
2. Walk around the premises yourself as the leasing agent or landlord to understand how you may take a potential tenant through the property. Preparation is the key to a successful property inspection. When you take potential tenants through the premises you need to know the direction of the tour and the features that you will highlight as part of the process. Have a list of services and amenities for the property prepared.
3. Any tenant making enquiry regards the premises should be qualified first with due regard for property size, property type, rental, and business stability. There is no point taking an inspection until such time as you know the tenant has the stability and relevance for the premises.
4. If the tenant shows any interest in making an offer for the lease of the premises, get that offer on paper so that you have something to show the landlord and negotiate. Invariably you will find that ‘letters of offer’ and ‘heads of agreement’ that can apply to the leasing process are generally not enforceable, given that they do not attach or contain the final lease document and associated forms and disclosures. When in doubt see a good property solicitor to get your lease documentation ready for use.
5. The acceptances of the ‘letter of offer’ or ‘heads of agreement’, will action the landlord’s solicitor to prepare correct final documentation. This in itself removes control of the transaction away from the real estate agent that did the negotiating. That being said, the agent still needs to push the transaction as best possible together with the compliance of all the parties to the terms and conditions of the offer. You should not expect that the solicitors will move things to finality in any particular fast manner. They do not have the same priority with the transaction that you would have as agent or landlord.
6. The tenant should not get access or keys to the premises until all lease documentation has been correctly signed and fully supported by rental payments and bonds.
Any lease transaction today should be supported by appropriate guarantees and or financial bonds. That will give the landlord some security in the case of potential lease default. The size and type of guarantee or bond needs to be clarified with the landlord in conjunction with advice from their solicitor. The requirements can be merged into the lease documentation completion and signature process.