Friday, September 26, 2014

Commercial Real Estate Agents - How to Lease Commercial Office Space Effectively and Efficiently

office premises foyer with table and chairs
Understand the complexity of commercial property office leasing.

Commercial office leasing can be a specific process when you understand the complexities of building occupancy. A successful commercial office building will be structured through the correct balance or mix of the following items:

  • lease documentation
  • rental strategies
  • tenant mix
  • market rental
  • tenant selection
  • occupancy costs
  • property improvements
  • landlord investment
  • financing solutions
  • tenant management
  • successful property management

Taking all of these issues to the correct levels of involvement, you will need certain resources to help you control the leasing process and the lease strategy. 

Here are some resources to help you consolidate your professional leasing services and skills:

  1. TRENDS TO TRACK: Track the trends and the activities of market rentals in your local area with a focus on both location and property type. Market rentals will change and on that basis there will be an impact on the net income for the landlord. Incentives will also change based on the current levels of enquiry and vacancies locally. Track and measure the vacancy activity in your town or city; look for factors of oversupply and vacancy saturation. When that occurs, incentives will rise to attract the best tenants to the vacancies that you have.  Incentives are a lease cost and should be factored into any lease negotiation.  Recover the cost of a lease incentive through creative rent review structures over the initial lease term.
  2. LOCAL BUSINESS: Understand the levels of business sentiment that apply to property occupancy and business efficiency in your town or city. Some properties will be more attractive than others.  Where do businesses like to move to?  Why do they want to move?  When will they be moving?  When you know the answers you have some real advantages as a leasing agent.
  3. MODERN PROPERTY SERVICES: Many properties today can bring you advantages when it comes to technology, energy, and communications. Modern businesses require the communications portals to the clients and the market segments that they serve. Energy efficiencies are also required to reduce occupancy costs and maintain appropriate levels of expenditure. A highly efficient and modern building will be easier to lease than any older building in the same location.  Choose your listings carefully.
  4. TENANT MIX: There are differences between tenancy mix strategies in office buildings versus retail buildings. In any office building you are looking to accommodate the appropriate tenants in the best location to underpin market rental and to support the correct synergy with other tenants. Some office type tenants will impact others in the same location, so be careful when it comes to choosing a tenant for any building, floor, or premises.  In a retail property the tenant mix choices that you make will be largely driven by customers, sales, and clustering.
  5. STANDARD LEASES: Consult with the client (property landlord) and their legal advisors to ensure that you have created appropriate standard lease documentation to support the asset as an investment. The lease documentation should address investment requirements, occupancy rules and regulations, outgoings recoveries, and rental standards. Over time the rental for the premises should consolidate and strengthen with each tenant and within the tenant mix. On that basis rent reviews and options should be carefully negotiated and implemented.
  6. CRITICAL DATES: Lease expiry dates and option dates are critical in a property where you have a number of tenants.  Don’t have a lot of vacancies coming up at the same time.  Stagger your lease expiry dates in the asset so you remove pressure from the cash flows and any vacancies that could have an impact on those vacancies.
  7. BUILDING AGE AND QUALITY: The age of the building will have something to do with the levels and types of outgoings that will be recovered each year. In any older the building, the greater will be the escalation in outgoings over time. Conversely, the efficiencies of a modern building can save money when it comes to energy, lighting, access, and occupancy.  If your office building is heading to redundancy or high occupancy costs, something has to be done with building running costs, or perhaps a refurbishment.

So there are some good things to do here with property efficiency and leasing strategies.  Ensure that your lease process handles the occupancy costs directly and correctly for the landlord income targets that you are working to.

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