If you are a landlord in Brisbane and wanting to lease a property to a new tenant today, it pays to fully understand the leasing and vacancy competition that you are up against. Let’s face it, tenants are looking around at everything that is available, and they are more selective in making a final decision. They generally know what the rents are doing, they know what their cost limitations are, and they can generally ‘shop around’ for the ideal vacant premises.
What’s Your Leasing Focus?
So, what are your priorities in leasing premises? What do you prefer out of the following?
A tenant leasing space?
A high rental?
It is sometimes difficult to achieve both points of focus in the one leasing transaction. A good lease with a new tenant should be a priority. A ‘fair’ rent is the best way to attract a lease and tenant arrangement. The escalation of rent over time can then be improved by a rent review strategy.
Today’s property and leasing market in Brisbane provides a broad selection of vacant space to the active tenants in most locations. The vacancy rates in the local property precinct can make your selection of rental a key part of the leasing process. Add to this some other leasing decisions such as:
Rental type (gross or net rent)
Expert leasing advice is critical here. Leasing a vacant tenancy is not just a simple decision. We guide our clients through some key decisions like those above so that the best lease can be created given all other property factors and pressures in the local area. Timeliness is important in getting a property leased today.
When you sell a commercial investment property, the price you achieve is driven by the market. It is the buyers in the market that generate the interest and ultimately make the offer. Contrary to popular belief it is not the sellers or the real estate agents that set the final price.
What the sellers want for their property and what the agents think they can get are in reality an educated guess or wish based on market trends. The end price for a property is driven by the buyers in all cases. If a sale goes ahead it is because the buyers are willing to pay the money; sure the seller has to accept that price, but without a buyer making the offer, the price for a property is just a number.
Real estate agents offer real benefit to the sale process because they are working with buyers and tenants all the time. The database that an agent has is a huge source of opportunity when it comes to selling your property.
The bigger and better the database, the more exposure to qualified buyers your property will have. This massive exposure that some agents have to buyers is of great advantage to you when you want to sell the property.
At the time of putting your property on the market, find the
agent with the best and most up to date database; it will be a direct
reflection of their market penetration and territory domination. They are the agents that should sell your
property and they are the ones that will have an idea of what buyers are
willing to pay in the current prevailing economy. Make the right choice and get the best agent
to help you sell your property.
Property owners that lease commercial property to tenants should keep a close eye on the terms and conditions of their leases. It is all too common that a critical date or situation is overlooked in a lease and the landlord or property manager has to chase down and remedy the matter.
The key secret to keeping a commercial property on track is in understanding the leases and thoroughly actioning any date critical terms and conditions.
There are many things to look for but here are some of the
main ones to monitor:
Rent review dates
Option to renew dates
Lease expiry dates
Renovation date requirements
Insurance certificate of currency evidence
Charges for outgoings
Reconciliation of outgoings
Payments of sundry charges under the lease
Rent payment provisions
Turnover reporting to the landlord
First right of refusal provisions
The list can go on, but importantly the critical dates in a
lease are handled and controlled. In
this way the property can be optimised for the landlord and the tenant.
When it comes to marketing and selling your property, the
time you spend on tracking and checking critical dates is invaluable in the
When you own a commercial or retail property, it pays to
keep in close contact with your tenants.
They are a key part of the property performance and should be nurtured
to stabilise income from the property.
As part of keeping in contact with the tenants in your
property, you can create a tenant contact plan that formalises the meeting and
any feedback that may happen as a direct result. Many larger landlords in high performing
properties will create and hold tenant contact meetings with all tenants at
least every 90 days. In retail property
this cycle is shorter given that a retail property is a very active type of
So just what can and should you talk to your tenants
about? Try this list:
Need to expand premises
Need to contract premises
Maintenance needs in the property
Interaction with other tenants in the same
Exercise of lease option
Use of the building
End of lease issues
Renovation or refurbishment plans
Terms and conditions of their lease and
compliance to that
It is interesting to note that good tenants are constantly
being networked by other property owners and real estate agents in your local
area. All the more reason to keep in
contact with your own tenants to make sure they are happy in occupancy.
When you own commercial property or retail property, the
leases that reflect the tenancy mix are the foundation of the cash flow. Then when it comes to selling that property
it is the leases that will drive buyer interest and ultimately assist in
getting a better price for the property.
A property with a good lease profile will create property investor interest; it’s that simple. It then stands to reason that the lease negotiations that occur in your property should be carefully planned and optimised with the ‘end result’ in mind. You never know when you want to sell or refinance your property. The leases will be the attraction to support your processes and needs.
It can also be said that not all tenants are equal when it comes to investment performance. Ultimately you would want a mix of tenants that are not too ‘volatile’ in the daily events and operations of the property.
So, What Are Your Investment Systems?
So what can you do here as a property investor? Take a look at all your leases and the broader tenant mix. If you own a shopping centre or a large office tower with many tenants, think about creating a list of tenants and splitting them up into priorities and retention groups. It stands to reason that you may want to keep some of your tenants more than others. What can you do to negotiate leases with your ‘desireable tenants?’ Try a tenant retention plan for starters. That strategy should feature in your investment or property business plan. Understand the deals that you are prepared to do with your better tenants. That will include incentives, rents, and lease terms.
Set some rules and standards about these things below and then see a good solicitor to help you with the lease creation:
Rent review timings and standards
Make good provisions
Lease terms and conditions
Ideal tenant type and operations
When you make every lease count, the property starts to take
on a whole new level of performance.
As a property owner and investor, you will sometimes be actively seeking a new tenant to fill a vacancy in your property. The best way to market the vacancy is through the dedicated efforts of an experienced real estate agent that is working for you on an exclusive agency basis for a period of 3 or 4 months; that is generally how long it takes to tap into the target market for the property and find the right tenant.
The exclusive agency method gets the agents full focused efforts during the time that the listing is promoted. If the property has not leased by the end of that time then something is frustrating the leasing process (such as high rents, poor quality premises, abundance of lettable space available or poor location)
Let’s say your marketing of the property has just
commenced. The adverts are on the
internet and you have a signboard on the property. Enquiry is good and inspections are
occurring. So along comes a new tenant;
and then another and yet another. All of
a sudden you have 3 tenants all looking at the premises and soon the offers
come in. So the question is just who do
you choose as your tenant to take the premises and why?
The issues involved in leasing decisions are complex and
involve many long term issues. The
reality is that the best tenant is not always the one that is paying the
highest rent; it is the one that is producing the best cash flow over the lease
term (plus other things). To analyse
that fact you can do a net present value (NPV) analysis of the passing income
from the lease taking into account the key factors from the lease over its
duration such as:
Rent review methods and timing
Value of incentive provided
Cost of money (%) over the term
That will give you a better reason to select one tenant over
another. Interestingly the tenant with
the highest NPV will not always be the one with the highest start rent. It is the long term package and rent review
structure that matters and you will see that in the NPV number calculated.
Its times like this that we can easily see the benefits of investing long term in Brisbane property and particularly commercial and retail property. On average, investors keep the commercial property for about 5 to 7 years; sometimes longer. After that, they know what they can do with it when it comes to diversity, enhancement, or repositioning. That is where investment strategies can bring value to a property or property portfolio
Investment changes can be in buying more properties, and or to
sell, develop, or refurbish. Some property
owners use the capital gain from their investments over time to refinance or
improve their portfolio. Commercial and
retail property is interesting and sometime challenging. It is supported by business sentiment and
local area demographics.
Investment Strengths and Weaknesses
Certainly, mistakes are made by some investors (as in all
investments) but the retail and commercial property market remains a solid
investment vehicle over time for many astute investors. Why is that? It is not hard to understand; it
just takes a bit of knowledge and ongoing market research. The returns from commercial and retail property
are generally better than residential property over time although the higher cost
of the asset class can delay some people from entering the market.
Know Your Location and Property Types
What can you do with this in Queensland? Do your research into the property types and
see what appeals to your plans. Find a
good real estate agent that knows the location, the property types, rents,
prices, and the changes of activity in a location. Here is a checklist to help you do that:
What property types do you know something about?
Can you focus on quality investment property in
Have you visited your bank or financier to assess
your lending position?
Can you hold your assets for the longer term or
are you a short-term holder?
If you need help with any of these concepts in Brisbane or
Queensland, contact Specialist Commercial Agent, John Highman on 0417221108