Suite Deal

by Alice Devine

  In order to organize these inquiries, leasing professionals use a software program, an electronic spreadsheet, or go old school with paper to log the inquiry. As you speak with brokers, note their names and contact information, the tenant’s size requirement, and if a broker will convey it, the tenant’s name and current office location. If the broker does not book a tour in the following couple of days, add this broker to your weekly (or biweekly) call list to see if the tenant is still a prospect. If the tenant has pursued another building, stay in touch with the broker. Sometimes deals fall apart and prospective tenants are back in the market, searching for space. In addition, tracking the inquiry (and ultimate deal comps) allows you to round out your market information.

  The more specific the broker or prospect is about a space requirement, the greater the chance the prospect is legitimate. For example, if the broker conveys the square footage, provides the tenant’s name and business, states any other requirements (looking for ample parking, signage a must, etc.) and most importantly, gives a compelling reason for the tenant to leave its existing building, the prospect appears viable.

  If a broker, however, will not divulge much information, consider one of the following possibilities. First, the broker may not have control of the tenant, meaning that he may not have obtained an exclusive listing agreement to provide tenant representation. Second, the broker might be trying to represent your own existing tenant. By asking about availability, particularly in the tenant’s size range, the broker feels out a potential rent renewal (and possible leasing commission). And third, the broker might have control of the tenant, but the tenant does not want the marketplace to know it’s looking for space—perhaps the tenant is high profile, or is trying to negotiate with its current landlord, or wants to keep information (such as a company downsizing) confidential.

  Meeting prospective tenants will provide more information to ascertain their true intentions. At any rate, be aware of the above possibilities so as not to cannibalize your own leasing efforts. This awareness requires somewhat of a double-faced attitude. On one hand, you must treat the inquiry as a straightforward opportunity to lease space to a new tenant. On the other hand, as a landlord, you are trying to hedge against losing an existing tenant or complicating a lease renewal with an existing tenant.

  Schedule the Tour

  Given an opportunity, leasing representatives can improve tours with some attention to timing. For instance, ask for the first or last slot on a tour itinerary to allow your property to emerge from the crowd. One caveat—avoid the slot right before lunch, because hunger tends to cloud judgment. As evidence, one university study evaluated nearly a thousand judicial rulings over a ten-month period and discovered that the highest percentage of prisoners given parole occurred after breakfast (65%) and lunch (70%). The percentage of prisoners given parole immediately before lunch shriveled to nearly zero.3 While you can’t compare prospective tenants to prisoners, you might schedule tours in the morning or early afternoon if possible, before hunger pangs overwhelm everyone.

  Next, limit the number of tour suites at any one property to a maximum of three. For laypeople, buildings and suites can become a jumbled blur as they learn about neighborhoods, properties, and specific spaces. Start with the suite you believe is most appealing. Even if the tenants find that suite not quite to their liking, the positive attributes of an appealing suite can carry over to another, more appropriate space at the same property.

  Talking Rent Before the Tour

  For tour purposes, it is best to talk in generalities and quote a range of rents. Hear what the broker thinks is a comparable, and if it’s incorrect (and accrues to your advantage), correct any inaccuracies.

  Be Aware of Existing Space Encumbrances

  Before showing vacant space, make sure you understand any encumbrances on the suite—that is, the rights other existing tenants have with regard to that space. To help keep records straight, colored floor plans or lease software helps track rights. (Because granting tenants rights creates a complex puzzle to manage, experienced leasing agents become parsimonious when negotiating such concessions, but more on that later.)

  In the event of encumbrances on a particular space you plan to show, make sure to communicate the proper notices. For example, if an existing tenant has a right of first offer, send the notifying letter before showing the vacant space. If there’s a right of first refusal or other expansion right that hinges on another interested third party, disclose such to your prospective tenant at an appropriate time so you can administer the existing lease agreement properly and your prospect isn’t furious. These notices—usually a letter—generally require a specific format to ensure they comply with the terms of the lease, so make sure your legal counsel approves the letter.

  Checklist of Common Encumbrances

  Right of first (or second or third) offer

  Right of first (or second or third) refusal

  Right of lease extension

  Right of expansion

  Right of termination

  Right of relocation

  Make the Space Appealing

  Studying individual spaces, with their attributes and challenges, allows you to craft customized marketing plans and presentations that lead to better leasing results.

  Effective leasing agents take oldie-but-goodie songwriter Johnny Mercer’s advice to “accentuate the positive, eliminate the negative,” especially relative to competing buildings.4 Calling attention to positive attributes, via marketing materials and in presentations, keeps the property’s best characteristics front and center in the prospective tenant’s mind.

  I know a developer who assesses buildings with a quick peek into the stairwell. If the stairwell is swept clean and well lit, he knows the property maintenance staff is top notch. Why? He reasons that only high-quality real estate personnel pay attention to the spaces rarely seen. Conversely, if stairwell lights are burned out or cigarettes clutter the corners, he’s found a mediocre manager and an owner that does not care about details (Caution: if you try this yourself and the stairwell door closes behind you, be prepared to walk all the way down the flights to the building exit! Fire codes can require locked doors to preserve the fire-rating function of a stairwell.)

  Accentuate the Positive

  To promote a property, focus on its three most appealing qualities. The time-honored selling points for real estate remain constant: location, access, cost, amenities, and quality of space. While these traditional values point you in the right direction, evaluate your own property for its strongest assets.

  In addition, the most desirable space mirrors the cultural values now prevalent in today’s society, with emphasis on flexibility, technology, and health. Yesterday’s paneled corner office has given way to today’s bright open-plan offices where hoodie-clad CEOs share stand-up desks alongside employees. Technology companies and their offices provide the archetype of today’s equalitarian business ethos. For instance, author Ken Auletta explains that Google founders wanted “to recreate the feel of the Stanford [University] campus” where employees could gather each Friday afternoon for nachos, hamburgers, and drinks, “with employees at other Google locations around the world on videoconference.”5 While not every tenant shares this culture, Google’s example reflects marketplace trends of informality and technological connectedness. Undoubtedly, space preferences will change over time, but understanding trends allows you to make your tours relevant.

  When assessing space, pay attention to details that promote any of the attributes valued in your marketplace. For example, good lighting and the ability for individuals to adjust room temperature create an enjoyable environment. While unique characteristics such as exposed brick or high ceilings are evident during tours, health features such as carpets that contain a minimal amount of chemicals need to be proactively highlighted. As you assess your space, note these items so you can incorporate them into your tou
r presentation.

  Wise leasing agents weave building assets into a consistent tour itinerary. For instance, if your building boasts views, consider starting your tours from a great vantage point and then reiterate the view via high-quality photographs (of the same) throughout the floor lobbies. Or, if your building has an excellent café or gourmet coffee kiosk, you can greet brokers or prospective tenants with a prettily wrapped baked good or to-go coffee and mention the café’s quality. Some building owners dedicate a parking space for prospects to guarantee smooth tour arrivals. The point is to show, rather than just tell, the best parts of the building.

  In addition to physical space, landlords can distinguish themselves with excellent service. This attribute remains very much within your control and can be a game changer for prospective tenants. For instance, a leasing agent who introduces a uniformed engineer or friendly concierge or relates a story about staff service underscores the landlord’s quality. Although service remains a soft feature of the property as opposed to architectural features or engineering aspects, it’s a significant element of any building. Perhaps the conventional saying that real estate is all about “location, location, location” should be changed to “location, service, service.” Excellent property management can best a competing building that lacks attentive care for its occupants because it’s particularly important in a long-term relationship.

  Living Green

  Studies support the notion that optimal office space promotes productivity and reduces employee absenteeism. Chicago-area researcher and consultant Tim Springer, PhD, lists important design criteria as: spatial equity (adequate privacy, daylight, and access to views for all), healthfulness (free of harmful contaminants and excessive noise), flexibility for easy configuration, comfort, technological connectivity, reliability, and a sense of space.6

  Because I managed a small building that couldn’t afford a full-time concierge, I subcontracted an online concierge service. The nominal fee was billed back to the tenants via operating expenses. The virtual concierge could secure tickets to events, make travel reservations, and complete local errands at a fraction of the cost of employing an individual to do the same. My tenants loved the extra help a keyboard click away.

  Eliminate the Negative

  To preview a property from the perspective of your prospects, take a walk in their shoes. Arrive at the property as if you are a first-time visitor. Notice that crowded parking lot? That stained or worn carpet? That dark suite? Each fleeting experience informs a prospective tenant about a landlord’s attention to maintenance and property management service.

  Once you’ve arrived at the vacant (or soon to be vacant) suite, make a list of the needed maintenance items. Be sure to eliminate all signs of previous tenancy—everyone likes fresh, new spaces. For improvements such as new paint, select a neutral color for long-term value. Once you’ve completed the cleanup or improvements to the vacant suite, place it on a regular janitorial schedule to ensure maintenance.

  Next, assess any leasing challenges and brainstorm potential (or partial) solutions. For example, is the suite situated down a long hallway? It may be best to meet the broker and prospective tenant in the building lobby rather than trekking down a corridor to the management office and then backtracking to the suite. This approach de-emphasizes the corridor length and gives the tenant a realistic sense of the path to the proposed suite.

  Another challenging instance may be a suite with a sweeping view . . . of the parking lot. Some attractive (evergreen rather than deciduous) trees or shrubs planted outside the office windows will soften the outlook. In this situation, open—but do not raise—the blinds for increased light. Turn lemons into lemonade by marketing the suite to a sales firm or to companies with frequent visitors, where parking lot proximity is an asset.

  I once leased a mid-rise building with skimpy bay depths (the distance from the common corridor to the window line) of only twenty-three feet. Tenants struggled to visualize an office layout as they stepped into the narrow gray shell space. So I enlisted an architect to sketch potential office configurations. I then had the plans enlarged and displayed on foam board and easels. By anticipating questions and providing solutions with easy visuals, I was able to show tenants how the space might work for them.

  Getting Physical: Prior to a Tour

  Do the lights work?

  Do all the (squeak-free) doors open easily?

  Does the suite need recarpeting or carpet cleaning (furniture indentation marks removed)?

  Does the suite need repainting?

  Are the blinds open?

  Has the previous tenant’s nameplate been removed from the front door?

  Are there other reminders of the previous tenant that need removal (kitchen debris, junk mail stuffed under the door)?

  Has the suite been placed on a janitorial maintenance schedule?

  Does the suite need some type of illustration of a potential configuration?

  The Tour Presentation

  Crafting a tour presentation allows you to present the property in its best light, makes good use of limited time, and frees your resources to focus on individual prospects. While the term script may seem contrived, the best public speakers—and make no mistake, this is public speaking—prepare a delivery, even if it appears improvised. After all, why reinvent the wheel for each tour? Also, a crafted presentation makes the best use of limited tour time. Most brokers and prospective tenants allot twenty to forty-five minutes per building tour, and less if the tour does not capture their fancy. What good is a great selling point when watching the rear taillights of a prospect? Most importantly, because you know how you are going to present the property, you can pay attention to each prospect and tailor your delivery to their specific concerns.

  Be Brief, Be Positive

  So, how to craft an effective tour? First, think brevity. A good introduction should last two minutes or less, especially given the brief nature of most broker visits. Add that to a prospect’s dizzying schedule of multiple property tours and real estate jargon, and it’s the perfect storm: glazed eyes, restless tenants, and impatient brokers. To stay relevant, make the introductory presentation short and crisp.

  As a general note, use vocabulary that frames statements in a positive manner because optimism lends a forward motion to leasing. For example, when tenants ask if they might have a $50 per square foot improvement allowance, instead of replying “no,” you might explain, “We give a competitive tenant improvement allowance of $25 per square foot and will work with you to achieve the most value for your tenant improvement dollar.” This habit of framing questions with a positive response becomes important as you field questions from the prospect on the tour (more examples below).

  I sell in a positive way and resist any temptation to speak negatively against competition. As an example, we successfully lobbied our city to install a left-hand turn signal into our parking lot. My competitor’s building across the street, however, has a cumbersome U-turn a block away. So when highlighting access to the freeway, I point out that my property enjoys easy parking lot access via a turn signal that holds traffic at bay (especially helpful to a sales force that spends time in the car). I find little need to say anything negative about another property. By drawing attention to the positive aspects of my property, such comparisons are effectively made.

  Preparing a Rock Star Presentation:

  What are the three best attributes of my property?

  How can I highlight these?

  What are the negative aspects of my property and can they be mitigated?

  Is my presentation brief and compelling enough (two minutes or under) to retain attention?

  Use Visual Aids

  Next, think visually. Plan to start your property overview with an aerial photograph of the property, which can be displayed on an easel or carried to a tour group, if needed. Orient tour atten
dees to the property by noting the surrounding freeways (good access), available parking (if it is an amenity), and the front entrance of the building. While enumerating the various nearby amenities such as banks, restaurants, and shopping centers, plan to point to the locations on the photo. Then, use language that circles back to the building, noting some of the most prominent, long-standing tenants (it’s cachet for you and shows you maintain good relationships). Consider finishing the overview with a story of a thriving tenant who has expanded in the building over time, to show your value as a long-term, quality landlord.

  A Parting Package

  At the close of the tour, plan to present the tenant with your (take-home) marketing package, which should include a floor plan, a color flier of the property and its attributes, an aerial photo if possible, an amenities list, and so on, all housed within a folder embossed or labeled with the building’s name and logo. Many agents prefer this timing to avoid detracting from the oral presentation. (Refer to chapter 3 for more information about each of the marketing pieces.)

  Try Role-Playing

  Practice your tour presentation by role-playing. First, rehearse your tour script in front of a mirror. Learn how to tailor the description and highlight items of interest for a particular prospective tenant. Then, give a sample tour to some colleagues and ask for a critique. Tell your colleagues that this first run through will likely be lousy; that way, they feel freer to give honest feedback rather than worry about crushing your psyche. Then, check your ego! Additionally, find someone who excels at leasing and shadow them giving a tour of your building. There’s a confidence that comes from being the expert in the room, and you have the means to know more about your building or property than anyone else on the tour. So study your property, practice responses, and enjoy the feeling that comes with mastery.