FEATURE ARTICLE, MAY 2004

Maintaining Leasing and Management Momentum in a Recovering Market
It’s not easy, but it is simple.
Brett Hunsaker

Hunsaker

While we’ve seen the worst of the economic downturn and its affect on commercial real estate, Southeast office markets still face soft demand and high vacancy rates. Making sure all players involved in a property work together and understand each other’s goals is the key to doing business in a recovering market.

Over the past few months, I’ve spoken with a number of asset managers and leasing teams — from some of the biggest institutional owners to smaller, one-off landlords — about the best solutions for leasing and managing buildings in a recovering market.

Clearly, asset managers and their third-party leasing teams want to attract and retain tenants. The first key to doing more deals is so simple yet can be difficult for some people: make a decision. Deals are lost simply by not making a decision in today’s market. Sometimes even a poor decision is better than no decision at all. If you wait to make a decision, expect to lose the tenant. Be flexible on non-essential lease terms, and review your lease documents to make sure they’re not too onerous. In the past year, many owners have reviewed and updated leasing documents to make sure the documents are as tenant- and broker-friendly as possible.

In order to make decisions, the office leasing team has to communicate. This is essential for the agency leasing brokers, property management, outside brokers, and prospective and existing tenants. Open, candid and factual communication will keep the building moving in the right direction. And it should be a two-way street. If you are the asset manager or leading the leasing effort, demand that your team talk to you.

For asset managers, market trips are the best way to keep a pulse on their properties and the markets where they’re located. With the tough market we are in, it is important that key brokers and existing tenants know you and know that they have an owner who cares. If only for public relations reasons, trips to the local market are more important now than ever.

With more trips, the asset manager can take the opportunity to look for positives at the property level. In a down or flat market, the property team needs a good pat on the back even for the small stuff. Positive actions will get you positive reactions.

Another goal with more market trips is to meet a variety of other service providers to get their perspectives on the market. The asset manager should also clearly state where the property is in its life cycle and what the goals are for the next 12 months.

Additionally, be creative. It is the full team’s job never to let a prospective tenant walk out the door. Think way outside the box.

Also, find the hot-button passions for the tenant. Do your homework and understand tenants’ long-term business growth plans. How can your team help the tenant make more revenue at the property? Uncover and initiate relationships between tenants and other service providers in your network that can add value and increase revenue for the tenant. Create a welcome package for new tenants that is both informative and promotional. Turn over all possibilities.

The Basics

Asset managers and their property teams should always have the following goals:

• Pay all commissions quickly with a special “thank you” to the broker.

• Sign and return leases promptly before the tenant changes its mind. It can happen. Recently, one tenant withdrew its signed lease because it merged with another company before the building owner signed the final lease document.

• Be a market leader, not a follower. Know your market and raise rates before the competition in good times, and do the reverse in challenging times.

• Be selective of additional work passed on to the leasing and management staff. They work hard on the essentials of preserving and increasing value. Busy work, including reports and items that aren’t urgent and don’t impact the property’s value, will impede this effort and work against your best interest.

The third-party leasing and property management team needs to provide the asset manager with:

• Today’s weather — you can get an online weather report that will display today’s weather plus the 3-day forecast, so an asset manager can track any major conditions in key markets and review for his/her travel schedule.

• A prospect report with all active deals and a “dead” deal and “closed” deal file attached using the asset management form.

• A capital improvements report derived from the annual budget — this will include a calendar/project management report with schedules and budgets so an up-to-the-minute status can be reviewed. A list of tenant improvement work on capital projects should be included as well.

• Collections — this will list tenants who are behind by more than 5 days/15 days/30 days, etc., as well as listing amounts due and status of action.

• A tenant rent roll and a backup file for each tenant with an online clipping service to track news on tenant companies.

• A revised running work order list with closed items removed from the list and an indication of the amount of time outstanding on work orders.

• An overnight incident report — anything that happens overnight at the building will be listed for quick review.

• On-time financial and other property reporting.

• Executive summary reports from the monthly report will be on file.

Asset managers also need the following information:

• Market news — deals in the market via online clipping service, i.e. I-News.

• Transaction news — any sale/acquisition or lease transactions relevant to the property.

• Associations’ calendars of events in the market.

• Employee news (promotions, priorities, etc.).

• Service company news.

• Hot topics – relevant security and environmental information and tax incentives can be key to understanding new trends.

The asset management and the third-party leasing teams that work together providing each other with all these tools and this information will best position themselves to close more, and better, transactions for their properties and portfolios.

Brett Hunsaker is a senior managing director at CB Richard Ellis in Atlanta and oversees the firm’s Asset Services, Industrial Services, Investment Properties and Retail Services groups.

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.