By Stephen A. Cross, CCIM
This article presents insights into the leasing process and methods used by commercial property owners to market and lease vacant or soon-to-be vacant space, and is a companion to the article titled “How to Hire, and When to Fire, Listing Agents,” which can be found in the Articles section of my website (crossrealty.com). I concluded that article by saying your property is just that – your property. Therefore, decisions on how to market space, whom to lease to and under what terms are entirely up to you.
Learn about market conditions. Interviewing a number of real estate agents is helpful in determining the current market rate for space similar to yours and the probable “getting” rate, including concessions you may need to grant and the costs you’ll likely incur. They can also provide insight as to the supply and demand for your type of space.
Create marketing material. Brochures (physical handouts and PDF files) are essential and should include color photographs of the building, grounds and interior, accurate floor plans, a location map, and details about each vacancy. If a space has newer furniture, upscale improvements, is move-in ready (“Plug & Play”), offers building signage or other unique attributes, highlight these features.
Get the word out. Proactive marketing includes, but is not limited to: cold calling, sending direct mail to prospective tenants, agent mailings and e-mails, holding open houses, advertising in newspapers and magazines, erecting property signs and posting vacancies on websites and widely used commercial databases, such as CoStar and LoopNet. CoStar is the commercial equivalent to the MLS system and does not charge property owners to list their property (that’s right, it’s free!).
Make every agent your agent. Landlords with a desire to lease space sooner rather than later may offer agents a full commission and hold open houses, inviting agents known to work the area or who represent the types of tenants they are seeking. Many property owners induce select agents to attend and tour by giving each a $50 gift card and catering a light breakfast or lunch. Techniques used to stimulate future site visits include cash payments of $100 for each tour plus a generous bonus if the space is leased within a specific period of time.
Mini billboards. Property signs should contain the size of the available space or spaces; the name, telephone number and e-mail address of the leasing contact; and a rider that says “Brokers Welcome!” If you have a website for the property, include it.
Timing considerations. The length of time necessary to lease a particular space is a function of the number of potential tenants that are exposed to the space, the asking rental rate, the condition of the space, and whether the landlord is either accommodating or indifferent. In a robust market, space that is appropriately priced, advertised, and prepared can reasonably be leased within 3 to 6 months. Note that holding out for tenants willing to pay top dollar can result in a prolonged vacancy period and cost landlords time and money – neither of which can be recovered.
Targeting tenants. I suggest approaching tenants observed to be occupying space 50 percent smaller or 50 percent larger than the space(s) being offered for lease. On an 8,000 square foot space, this would include businesses thought to be leasing approximately 4,000 square feet to 12,000 square feet. Note that some tenants may have had the foresight to negotiate an early termination provision in their lease and can relocate quickly, so do not overlook businesses based on when you think their lease expires.
List or self-market? Hiring real estate agents can be cost-effective if they are likely to add meaningful value to the process… and your bottom line. In that regard, listing agents typically charge commissions ranging from 5 percent to 8 percent of the gross value of the transaction. I suggest preparing a cost-benefit analysis to determine whether you are best served to market your space internally (and retain the listing side of the commission) or outsource the task.
Selecting agents. While you may initially get a sense of comfort by hiring a team of experienced agents to represent your property, be mindful that as the number of agents sharing a listing increases, the portion of commissions each will receive gets smaller – hence, the less time and effort each is likely to devote to actively promoting the property. In my experience, and regardless of the size of the project, property owners wishing to delegate leasing responsibilities are best served by hiring an industry veteran who will pledge to closely supervise one or more motivated junior agents. To clarify, a motivated junior agent is one that needs to get deals done in order to pay their bills and will cold call until their knuckles are raw seeking the best-suited prospective tenants.
Industry insights. Professional designations are not an indicator that an agent will actually do the work required to lease your particular space(s). Neither is being affiliated with a prominent brokerage firm. Also, be aware that agents purporting to have many listings may solicit your listing merely for the exposure the property sign provides them to tenants seeking space – but not necessarily your space. To the detriment of the property owners, these agents may control more listings than they can service effectively.
Stephen A. Cross, CCIM, owns CROSS Commercial Realty Advisors and is a licensed real estate Broker. Mr. Cross advocates exclusively for tenants and buyers and, since 1984, has advised over 2,700 business owners, attorneys, physicians, facility executives, investors and corporate decision-makers on ways to lease and purchase property at the lowest cost and most favorable terms. Contact: 480-998-7998 or email@example.com.