timer Asked: Apr 26th, 2020

Question Description

Once you have read all the information, you will need to contribute to the discussion forum with at least one post and at least two responses to the posts of your classmates.

The post should summarize the points in which you agree and disagree with the readings. You must also indicate what methods you believe you will use and why. Review the following information that pertains to leasing.

  1. Chapter 15 of the Pivar textbook.

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The Commercial Property Leasing Guide A RESOURCE FOR LANDLORDS & PROPERTY OWNERS Colliers International Commercial Property Leasing Guide P. 1 “The broker showed up with a big, fancy proposal and made me all sorts of promises about what she would do for my property— but nothing has happened.” WE WANT TO ENSURE YOU NEVER SAY THIS. That’s why we created this guide exclusively for landlords and property owners, to help you choose the right business partners­­— brokers and property managers. We also offer suggestions on setting the right strategy for your building and following through with measurable solutions and accountability. “What really makes me mad is that the building down the street just leased to a tenant that I didn’t know was looking.” “He hung a sign and made a flyer… and then waited for the phone to ring. I haven’t heard from him in a month, so I assume he hasn’t done anything.” P. 2 Commercial Property Leasing Guide Colliers International Contents > 4 PROPERTY LIFE CYCLE Approach your asset from every angle, taking advantage of unique collaboration. > 5 TOP 12 LANDLORD MISTAKES Find out where other property owners stumble in leasing decisions, from leasing the wrong space first to spending capital improvement dollars in the wrong place. > 6 ASK TOUGHER QUESTIONS Don’t settle for the same old claims of “biggest, smartest, best.” Before hiring a broker, cut to the core of what makes them different and find out how they will add real value to your building. Colliers International > 8 ANOTHER ONE BITES THE DUST > 14 STAYING ON THE SAME PAGE Property managers can make or break tenant retention: paving the way toward a win-win lease renewal or turning off a tenant prospect. Set up a specific, customized reporting plan to track not only your building’s leasing performance, but also the performance of competing properties. > 10 PLUS: 7 Prospecting Hierarchy 7 Transaction Filter 9 True Cost of Vacancy BEYOND CURB APPEAL Positioning your property against competitors starts with a story—creating a compelling hook that makes prospects take another look. > 12 HAVING ALL THE ANSWERS You think you know your building inside-out. Pinpointing certain property limitations early avoids prospecting to the wrong tenant market. 9 Tenant Survey 9 Leasing Process Chart 11 Defining Your Building’s Theme 15 Key Contract Considerations Commercial Property Leasing Guide P. 3 The Property Life Cycle ACQUISITION > Appraisal > Investment sales > Capital markets financing DISPOSITION > Contract administration > Investment sales > Valuation EVALUATION & IMPROVEMENT > Brokerage leasing services > Project management > Consulting LEASING & STABILIZATION > Brokerage leasing services > Property management > Lease & tax audit ACCESSING THE RIGHT RESOURCES We’re working to fundamentally change your partner, and how to set up systems to ensure management, valuation, project management, AT EACH STAGE OF OWNERSHIP experience from a relationship with a vendor future success. mortgage banking and consulting. Although This is not a promotional brochure. It’s not to a strategic partnership. A key theme that emerged was that owners about us. It’s about you—owners and asset What makes a partnership work? We listened want their service partners to see them managers—and how to get the most out of to dozens of success stories—and horror stories through a property’s full life cycle. the services provided by brokers and property —from clients, brokers, property managers managers. and asset managers to find out. This book is about how to carefully choose your business P. 4 Commercial Property Leasing Guide That’s why our approach is based on an integrated team, including brokerage, property you might not need all of our professionals at all times, we believe the team approach helps us offer a seamless experience at any stage. At Colliers, partnership means approaching assignments with clients’ interests first, and treating the property as if it were our own. Colliers Colliers International International Top 12 Landlord Mistakes MAJOR MISSTEPS THAT CAN SLOW OR DERAIL YOUR LEASING EFFORTS 1. 2. Signing leases without a strategic Hiring a broker without the a come-as-you-are creative firm plan. A whole-building approach right specialization—experience is bound to create friction. to leasing is critical to achieve working with properties of a the best rates and best tenants. similar type and location. Leasing the best space first. This 4. 6. 9. Pricing the building incorrectly. Holding out for an extra nickel Failing to investigate the tenant’s or dime in pricing may keep the can devalue the rest of the building’s finances, business plan and revenue building stuck in vacancy limbo. available space, such as leasing stream, and failing to require a half of a floor with a better view, substantial security deposit. 10. Failing to evaluate the competition. 12. The biggest mistake? Lacking a story. Your building should have a compelling message that differentiates it from the competition. The building’s story should be tailored to a key tenant driver, such as visibility, tech infrastructure or Ruthlessly compare your building’s accessibility. Some landlords develop Allocating capital incorrectly: pros and cons against competitors— a theme or foster tenant clustering. Failing to ensure each tenant’s spending money on things that aided by your broker—to determine lease terms support the long- won’t help lease the building, such your unique selling points and high- The “story” is a creative ele- term investment objectives for as replacing sconces on the exterior impact improvements. ment of a leasing business plan repositioning or disposition. of a building. A better use of funds or leaving small spaces vacant. 3. 5. 7. might be replacing dated light lenses Faulty termination clauses that in a vacant space to refresh it. Ask, allow tenants easy “outs” can leave “Does my improvement help lease you, the landlord, with unamortized the building more quickly or at a costs from tenant improvements higher rate?” before spending. (TIs), incentives and fees. 8. Colliers International 11. Forgetting the small stuff. Prospective tenants can be turned off by the little things, so keep empty spaces free of debris, lights working and blinds open. Common areas should be clean, parking Choosing incompatible tenants. and signs in good condition, and Placing a staid law firm next to a consider investing in seasonal bustling sales organization or plants at entrance points. that many brokers fail to develop. Your broker will collaborate with you to identify and enhance your property’s unique story, and then use that story’s powerful potential to drive tours and contracts. Commercial Property Leasing Guide P. 5 Ask Tougher Questions TEN QUESTIONS TO CLEAR THE CLUTTER AND HELP YOU CHOOSE THE RIGHT PARTNER Virtually every commercial real estate broker tells property owners the same story. They are experienced. They’re knowledgeable. They’ll work hard. They’ll spend a lot of time on the project. They promise, promise, promise, promise. property will not be their top priority (or even Our resources cross geographic boundaries, close). These brokers may speak only in general property types and client types. terms to what they’ll do for your property. To ensure your broker will devote substantial WHAT IS THE BROKER’S SERVICE time to the project, ask to see the broker’s GUARANTEE? detailed marketing strategy and action plan. BUT WILL THEY DELIVER? WHAT IS THE BROKER’S EXPERIENCE? Choosing a broker as your business partner Your broker should provide information is daunting, especially when wading through on his or her track record of dealing with a sea of sameness. These points—questions similar leasing challenges, similar building to ask when hiring—are designed to clear the types and buildings in the same area. clutter, and help you choose the partner who best fits your needs. WHAT IS THE BROKER’S SPECIALIZATION? WHAT IS THE BROKER’S MOTIVATION? Will your goals for the property be aligned with the broker’s goals? For example, hiring Although no one can guarantee an outcome For example, ask whether the broker will based on the marketplace, our sales profes- be present at every property tour. They can sionals and their support teams are committed describe the value proposition of the building, to keep their promises. learn about the motivations and needs of the prospect, and hear feedback that can help your positioning. That means we guarantee our services through a specific action plan. We will define, from the beginning, expectations for service, reporting and accountability. WHAT ARE THE BROKER’S RESOURCES? Many boutique and local commercial real estate WHAT IS UNIQUE ABOUT THE BROKER’S firms have very limited platforms, with little KNOWLEDGE? Does he or she focus specifically on the geo- a broker who is not specialized in properties graphic area where your building is located like yours might mean he or she spends less and your building’s type and class? Does the time studying your submarket and specific At Colliers, we believe a collaborative approach company seems to have, what kind of insight broker specialize in representing owners? challenges in-depth. serves our clients best, which is why a portion can your broker offer? What uncommon market of your gross commission dollars supports our knowledge will help you identify trends and specialized team of researchers, marketers take advantage of them, or ensure that you see and administrative staff, who provide deeper every tenant prospect in the market? We believe it’s impossible to know the market unless you live, sleep and breathe it, which is why we strongly support specialization. P. 6 Commercial Property Leasing Guide WHAT IS THE BROKER’S CAPACITY? research, marketing and administrative support. Some brokers who claim to dominate the market market insight, unique go-to-market strategies, have taken on so many assignments that your and responsive administration. Beyond the quarterly market reports that every Colliers International PROSPECTING HIERARCHY TRANSACTION FILTER How we segment tenant targets to reach the best prospects with the strongest tactics How marketing moves a tenant prospect toward a successful transaction TERTIARY UNDERSTANDING PRIMARY TRANSACTION The prospect moves through the negotiation and contract phase. We connect with our database list of appropriate targets through direct marketing flyers, mail and e-mail, and broker contact. Find out whether the broker considered all of strategy. But prospecting for tenants requires A marketing strategy that takes each prospect and converting likely tenants, as well as a a more thoughtful approach on two levels. through the transaction filter to build awareness, supporting a broadcast marketing program understanding, interaction and then cement the (such as advertising, online listings and signs) transaction is critical. Otherwise, your broker to ensure every potential tenant is aware of may be basing your building’s promotion on your building’s opportunity. the possibilities for your building before they First, the broker must define which tenants selected their action plan. are most likely to lease the space and pay the Too often, brokers simply recycle a proposal from one owner to the next. We believe you deserve a plan tailored to the unique opportunities and challenges of your property. highest price. The characteristics of this group should be used to sort the database. The broker Many brokers submit a laundry list of market- Colliers International little more than a flyer, a sign and a prayer. should describe how a high-touch, personal and fast-acting campaign will be implemented. Second, the broker must define how each mar- WHAT IS THE BROKER’S STRATEGY? INTERACTION The prospect tours the building and/or does space planning SECONDARY WHAT IS THE BROKER’S METHODOLOGY? The prospect sees value for his/her own business & unique needs PRIMARY We connect with the best prospects through personal contact such as calls and tours. ing tactics to a landlord and call that their AWARENESS The prospect is aware of the building availability, its location and features We ensure we connect with every potential target with broadcast tactics, such as advertising, online listings, signs and network exposure. If you’ve worked with several brokers in the past, consider which of them were true busi- HOW WILL I KNOW I’VE SEEN EVERY ness partners, working in an advisory capacity OPPORTUNITY? to support your building’s value long after the tenants had been placed in your vacant space. keting element connects with a specific group Among owners’ greatest fears is missing of potential tenants, including those prospects an opportunity to lease their space to the Your assignment should open the door for the that you didn’t even know were looking. best possible tenant. The broker should broker to add value to your business, both now provide a clear plan for defining, approaching and in the future. Commercial Property Leasing Guide P. 7 Another One Bites the Dust A relationship with the property manager is key to tenant retention. The property manager could have worked out reported back to the owner for a complete the problem in advance, by scheduling the perspective on the property. contractor for a day the sales organization was closed, by temporarily relocating the sales force, or by rebating rent or another financial It seemed like the hard part was behind them—the broker identified a good prospect, brought the firm in for multiple tours, helped the owner through negotiations, shepherded the contract through legal review and, finally, handed the keys to the new tenant. And then it all fell apart. The number one reason that an owner’s relationship with his or her tenants falls apart is lack of communication—and this is often the responsibility of the property manager. For example, one property manager sent tenants a memo about street construction the next day. And sure enough, the next day, the property owner got a call from a tenant who was shouting into the phone because incentive for tolerance. But after the fact, few solutions were possible, and the tenant said, “You’ll be hearing from my lawyer.” “Tenants have long memories,” said a Colliers manager, who previously worked as an owner’s representative. “You can have the best customer service on the planet, but when property management breaks down personally connect with the tenants. Only through this routine face time will they notice simple things like a broken handle or missing outlet cover. A towel dispenser hanging askew might never be reported by tenants—it’s not critical—yet tenants will continue to be annoyed by it until it’s fixed. through lack of foresight or poor communica- Security personnel can be a strong partner, tion, that one action can strike a fatal blow as these people are often the most visible against all the goodwill you had built up.” members of the building staff. Those who That’s why owners should carefully select a property management company with the experience to anticipate and solve problems before they happen, and the resources to take care of issues immediately. he couldn’t be heard over the jackhammer in Colliers’ 24-hour Service Center logs, tracks the street. There was no way his sales force and reports every call to reveal common could work with that kind of disruption. tenant concerns, frequent maintenance challenges and property trends. These are P. 8 Commercial Property Leasing Guide Property managers must also get out of their offices frequently to walk the building and learn tenants’ names and make an effort to provide a personal touch can take the tenants’ overall experience from average to exceptional. Ultimately, property management is an essential link to a building’s positioning. When a manager demonstrates they care about the building, in the tenant’s mind, it also means “they care about me.” Colliers International LEASING PROCESS CHART OBJECTIVE >> Owner’s long-term investment goals >> Building’s immediate and future leasing needs SWOT ANALYSIS* >> Define competitive set >> Create building improvement plan >> Determine unique selling points STRATEGY >> Create a building “story” >> Develop marketing plan to support this story TARGETING >> Define target prospects’ unique characteristics >> Create target tracking lists from databases TACTICS >> Plan marketing tactics >> Determine direct tactics and volume >> Determine broadcast tactics and frequency EXECUTION EVALUATION >> Create system for tactical execution >> Gather and synthesize prospect feedback >> Track each prospect’s progress through transaction filter >> Evaluate activity, strategy, tactics and price >> Determine next steps *Strengths, Weaknesses, Opportunities and Threats The True Cost of Vacancy HOW THE COST OF REPLACING A TENANT CAN ADD UP FOR PROPERTY OWNERS Losing a tenant can be a bigger financial blow Professional services—including space plan- to owners than simple loss of income. ning, architectural and consulting services The cost to re-lease and refurbish a space can Demolition—removal and disposal of the add up, which is why spending a little extra to former tenant’s improvements ensure strong tenant retention can yield solid financial returns in the long term. We suggest taking into account the full scope of potential costs when choosing whether to renew a tenant in their existing space. Vacancy time—no lease payments made Marketing costs—signs, open houses, direct mail, property web sites, tour incentives Leasing costs—brokerage commission, Materials—for tenant improvement Signs—both inside and outside the building Professional services—legal, accounting and management fees Relationship—to other tenants: is another tenant’s business tied to the departing tenant’s? construction Labor—for demolition, construction and systems installation TENANT SURVEY Tenant surveys can increase satisfaction Moving costs—a typical incentive to encourage for your current tenants, and highlight both a tenant to relocate benefits and problems with your property. Free rent—in some markets, free rent may Surveys offer a rich source of information to be offered in lieu of or in addition to tenant owners and brokers who are preparing a leas- improvements ing strategy for the property’s vacant space. Tenants can also be allies—or detractors—in the leasing process. Consider asking these questions, and be sure to follow up on any “trouble areas” as well as using the information from the latter two questions to create your building’s story. – What are we doing right? – What can we do better? – What about the property supports your business goals? – Why did you choose this property/location? leasing incentives Colliers International Commercial Property Leasing Guide P. 9 Beyond Curb Appeal DEFINING THE PROPERTY’S UNIQUE VALUE AND HAMMERING IT HOME WITH PROSPECTS A standard approach to marketing commercial real estate—how much space, how much cost—is an analog approach to this new digital world. Many commercial real estate flyers advertising vacant space fall into the same ho-hum, heard-it-before advertising patterns: “Well-located, modern building ...
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