Tag Archives: Commercial

Commercial Real Estate Agent Prospecting Facts and Strategies

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.

Commercial Real Estate Valuation 2

The approaches used to value real estate from an appraisal perspective determines the possible sale price a property would yield on the open market with adequate time for marketing by a knowledgeable seller who is not under duress, fully informed of market conditions and a knowledgeable buyer agreeable to consummate the purchase also without undue duress to act. The range of values derived from the methodologies used and the final conclusion after implementing adjustments for different variables represents processes used to determine the market value of subject property under specific conditions and at a specific time. Changes in the variables e.g. vacancy factor, comparable sales, depreciation for economic or functional obsolescence, etc invariable alters the values derived from the processes and the obtained conclusion. The three methods used for finding a range of property values from which the final conclusive worth is attained are the: – Income Approach, Cost Approach and Comparable Sales Approach. Each has its own process for calculating a property’s value and is given varying worth or relevancy in the final value attributed to the realty.

Income Approach – establishes the value of real estate as a derivative of its net operating income in relationship to the prevailing capitalization rate associated with the asset class in its submarket. The Net Operating Income (NOI) representing the amount after gross income drilled down through effective income added miscellaneous income, etc minus expenses associated with operating the property. The value calculated from this approach is deemed more indicative of the true worth of the property by some practitioners in comparison to the other two approaches below from an investment perspective.

Cost Approach – establishes the value of real estate calculating the current worth to recreate improvements at cost minus depreciation for functional and economical obsolescence; the underlying land is not depreciable. Technological advancements, procedural changes, more adaptable efficient materials, user friendly space layout plus industry changes and the desires of the end user, etc can diminish the appeal of once highly sought buildings or leasable space in relation to newer inventory. This results in a lesser market value being assigned to the property factoring its reduced appeal to a broad base market.

Comparable Sales Approach – establishes the value of real estate from the historic sales of similar properties in the submarket with adjustments for dissimilar characteristics with these properties; assigning values for these features or lack thereof and adding or subtracting dollar amounts reflective of the increase or decrease in value attributed. This process draws its data from the sales activity in the market place and the historical purchases/sales of properties of the same CRE type, e.g. multifamily, retail, industrial, etc that have sold under arms’ length transactions including financing structure which does not suppress the sale price.

The collective information obtained from each approach is analyzed with weight given to respective methods depending on the nature of the subject property, the quality of the data available for the approach and the purpose of assigning value. The nature of the subject property influences the method which is considered most applicable to determining value, e.g., is the property vacant land, stalled mixed use development, operational hotel, etc. However, from an investor’s perspective the income approach is usually given more consideration than the other two in relationship to commercial real estate income producing or potentially income producing properties. Even land’s value is tied to its use or potential use mobilized through zoning and entitlement and the income stream that can be attained from the improvements added. The final value given to the property factors all the variables applicable to the realty and the experience of the individual drawing the conclusion of property value.

How to Do a Sales Pitch in Commercial Real Estate

In commercial real estate, you will undertake a variety of presentations, in a variety of circumstances. Most of them are business-like in nature, focusing on the needs of the tenant, the property buyer, or the property seller.

Get to the core issues

Each of these groups has unique property requirements and points of focus. It is their needs which must be identified and clearly addressed in the sales pitch or presentation. Many successful commercial real estate agents will have a preliminary meeting with the client or customer so that they can identify key issues and concerns. This allows the commercial agent to return to the client or customer in a few days with a well structured proposal that addresses the needs of the customer or client.

It’s all about THEM, not YOU!

When you design an investment or commercial property proposal for presentation, the document should be 90% regards the property and the client. Frequently you see this rule disregarded or broken with the proposal document being largely regards the agency and the personnel.

Rarely is the property transaction a simple matter of the property rental, the property price, or the physical elements of the property. In most situations, it is the combination of these things which must satisfy a fundamental equation of need that the customer or client has. In getting them to this fundamental need, you will identify an element of pain that the customer or client is experiencing. This is what you focus on.

They are Experienced

It is interesting to note that many clients and customers in commercial real estate are reasonably comfortable in circumstances of business negotiation. This means they may not tell you the total big picture or all the elements of a transaction until they are ready. Conversation and connection in the presentation process should be biased towards the client or customer using well selected questions which allow the agent to interpret the body language coming from the client’s response.

When you believe you have identified the element of clients pain related to the property transaction, you start to magnify the problem in terms of today’s market, then offering stable and logical solutions that your real estate agency business can provide to the client or customer. Invariably, the commercial real estate transaction in today’s market centres on financial matters such as:

  • High vacancy factors
  • Other property choices and chances are available
  • Underperforming leases
  • Unstable cash flow
  • Unstable tenancy mix
  • Tenanted conflict
  • Escalating building operating costs
  • A shift in demographics which exposes the property to a unstable future
  • Mortgage payment pressures
  • Age of the asset
  • Needs for refurbishment or extension
  • Competition properties attracting tenants away from the subject property

This type of information and interpretation requires your intimate knowledge of the local region. This is by both property type and by location. This is the higher value that you bring to the customer or client. Being able to distinctly define local market awareness is a major advantage in any commercial real estate presentation or sales pitch. You must be seen as the best knowledgeable solution to the problem.

From Experience

After many years working exclusively in the commercial real estate industry, I found that my unique skill was in market knowledge and the display of that in any formal presentation to the client. Being able to talk about market trends and financial performance in a solid and sound way will help the client understand that they need your services. Coupling that with your extensive and relevant database of enquiry clearly shows the client that they need you.

A fantastic commercial real estate presentation is a function and balance of lots of things. Things like:

  1. A well established pre-planning process is a strategic advantage for every commercial real estate presentation. Strategy is everything in commercial real estate. Every property presentation requires planning.
  2. Making sure you are asking the right questions of the client or prospect. Plan your questions relative to the subject property so that you help the client think about opportunity and changes that are possible.
  3. Using your market knowledge and giving good answers. Have a variety of market facts and trends available to call on. Feed them into your presentation; facts are always useful. They can also be used as a channel to direct the discussion when the client is forcing you to justify your approach or your experience. Confidence and control must be the basic rule of your property presentation. When the client takes control of the presentation you have lost.
  4. Using your experience in the marketplace so that you are telling relevant stories of success in similar properties. Stories of other properties will always interest of the client.
  5. Making sure your personal presentation is optimised for the connection in the presentation. It can be that you are using a combination of the proposal document, the marketing document, and computer slide presentation, samples of your database, photographs of the subject property projected on to slides, and photographs of comparable properties projected on to slides.
  6. Choosing the placement of people at the table or strategically positioning them in the room is always important. Much has been written about where you should sit relative to the client. The basic rule is adjacent to the client rather than across an area of barrier such as a table. Being within arm’s reach allows you to pass documentation to the client at the appropriate time. Documentation should not be provided to the client until you are ready for them to review it; otherwise it is a distraction of their attention.
  7. Make sure that your proposal is simple and yet well directed with a clearly defined outcomes of sale or lease. Many proposal documents in commercial real estate are much too wordy so the main messages are lost and not clearly defined. The best proposals are less wordy and more illustrative. The best balance of a commercial real estate proposal is a mixture of 25% words, 25% pictures, 25% graphs, and 25% white space. This becomes a document which is clearly read and understood.
  8. Combine good illustrations and photographs of the subject property into the proposal or presentation so that any lengthy descriptions or paragraphs are broken up. This will keep interest of the client in your documentation.
  9. Make sure that your marketing package is value for money, and yet reaching the target market that the property serves or needs to attract. All too often, we see examples of generic marketing by the commercial real estate agent to the broader and less specific marketplace. Showing the client that you clearly know and will attract best the target market will always help your conversion to a potential listing. Be very specific about the target market and how you will reach it.
  10. Ensure that your commission costs are fair and reasonable for the location. In most circumstances, discounting your commission should not be an option as it will make you poor and remove or detract from your enthusiasm for the sale or lease. ‘Cheap’ means ‘cheap and without focus’ and the client needs to know this. The property deserves better. You are not cheap because you are the best and you do a great job. A fair commission is always paid for a positive property outcome.
  11. Always provide testimonials that are relevant to the property transaction. When you combine relevant history and details of happy customers into your presentation you will make the client feel more comfortable.
  12. Always display clear and sound market knowledge that impresses the client relative to their property. This will include extensive awareness of comparable properties that compete with the subject property. You should be able to talk solidly about property prices, comparable rents, rental growth, returns on investment, changes to the future demographics of the area, and properties in the immediate precinct of relevance. In many cases, it pays to walk around the local area just prior to any property presentation so that you bring immediate and clear pictures of the precinct to the discussion. Many times this has been of significant advantage in my presentation processes. Talking about neighbouring properties localises the client and their thought processes.
  13. Come up with a variety of ways to serve the client. Innovation and relevance will always impress. In today’s market, this is relatively easy considering the marketing opportunities and tools provided by the internet & technology. Be proactive in your property promotion processes so that the listing for sale or lease stands uniquely different in its marketing campaign from the others in the area. This does not have to be expensive to the client or to your office, given that the internet and electronic technology is historically cost effective. In today’s market, the traditional methods of publicising the property in the property pages of the local paper, is becoming much less important in the marketing campaign. Most commercial property buyers and tenants research the market from the Internet first and foremost.
  14. Almost every property agency will say that they have excellent communication and connection skills to support the property promotion process. From experience, this is largely incorrect and typically the average commercial salesperson or leasing person will exercise ordinary communication channels with the client. Put yourself in the shoes of the client. They expect and deserve frequent updates on the promotion of the property even when nothing is happening or when the adverts are producing little response. When a property campaign is not producing the results, it is important that you act or adjust with alternative recommendations and strategic changes to the promotional campaign for the client to consider. Rarely would you get to the property campaign correct in the first week. It is in this time that you must consider fine tuning the promotion process so that the target market is being reached in a timely and effective way. This means that every property enquiry generated from your promotions must be tabulated so that you understand what channels of marketing work most effectively with the property in question.
  15. When addressing the client or the client group in a formal property presentation, the answers and information you give must be delivered well and provide relevant solid property knowledge, in a practiced and professional delivery. Any sales or presentation tools relative to the property must be relevant and you should know how to use them with exceptional skill. Fumbling and faking information is not tolerated by the client.

So there you have it. These are some of the key skills to use in a commercial real estate presentation. Whilst many real estate agents think that they are the best alternative in the market to promote sell and rent commercial property, the reality is they do not get the message across when it matters most in front of the client.

To be the best commercial real estate agent in your area, you must show that you are just so, and you do this in the first 10 minutes of the time that your presentation takes. The client will have formed an opinion by then.

Be prepared to walk away from any demands for discounting that the client or customer demands. In this market they need a great commercial real estate agent providing a great job; discounting is not an option. Show pride in your services and walk away when the client demands discount in marketing or lower commissions.