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Qualifying your tenant prospects is a key part of the contact process in commercial real estate. Essentially you must be able to quickly get to the following issues and factors.

Are they serious about moving or expanding and the reasons why?
Are they able to afford the new space that is available in the current market?
What is their timing and urgency factor?
Are you dealing with the real decision maker and how honest are they in briefing you?
Are they familiar with the elements and procedures of commercial real estate and the market?
How many other agents are they talking to?

This awareness is achieved through a questioning and probing process. Your time is too precious to waste on tenants that do not satisfy or communicate the above criteria to your satisfaction.

Many tenants do not understand the elements of the market including the types of rental and occupancy costs. It pays you to explain these trends and costs that you have observed in the market. With the use of a simple calculation, you will know if the tenant can really afford to relocate.

Many tenants will ask for incentives as part of the process of relocation. This will come in many forms including rent free, rent reduction, Landlord funded fit out, and specially expanded or constructed premises. What you should remember here is that all incentives are amortised back into the lease deal. The landlord must receive reimbursement for the incentive funds or discounts provided.

In the case of corporate tenants, it is common to work with their architects and engineers to ensure a suitable design of new premises. To assist in this process, it is appropriate for you to keep in contact with local councils and building approval authorities so that you can relate to the type of premises that can be constructed or occupied in particular building precincts.

In the early stages of contact with potential tenant prospects, you can fast track the tenant’s awareness of the market by taking them to example properties that have or can show marketable rentals and the quality of occupancy achieved in those premises. The tenant can then relate to the types and size of premises that they can achieve in any new lease in the current market.

As part of the showing of the premises process, you should discuss the types of rental in both gross and net terms so that the tenant understands the types of deals that can be done. Both gross and net rentals are commonly used in commercial real estate. It is simply a matter of the rental type that suits the landlord and the subject tenant.

Incentives may also enter into the conversation with the tenant as you show them premises. Incentives are usually provided only in the longer deals of beyond three years. If the tenant appears to require incentives in any future lease transaction then you should introduce the idea of 5 year lease occupancy with rent review escalations annually that reimburse the landlord for the original incentives provided plus an appropriate interest on the monies expended.

You should always try to work with the company decision maker regards rental and lease decisions. With some major corporate tenants, you may find that you are dealing with a middleman to whom the task has been delegated on behalf of a board of directors. The politics of decision-making is unique and special in every situation. Selectively question the person that you are dealing with to see if they are the person who can sign off on the final lease proposal and decisions.

If you are dealing with a middleman in the decision process, it pays to document all key discussions and information provided. This will preserve the integrity of the negotiation relative to any property.
If any information is provided orally over the telephone or in any meeting, adopt a process of supporting that key information later with a follow-up e-mail or suitable letter.

When tenants get serious about space occupancy, you can get serious about the questions you are asking. Serious questions denote serious interest. There is a process of drilling down on the information you need and get from the tenant in the following categories.

What is their type of business and does that present any special needs and demands on the property?
What is their current area of occupancy in their current premises?
What is the size of occupancy that they need to move to in the new premises?
What is their current level of rental paid including all occupancy costs?
Do they require car parking, and if so how many car Parks?
Are there any special layout needs for the new premises such as floor plate size?
What rental can they afford in the new property relocation?
How soon must they find the new space and affect the move?
What type of lease documentation will they require and who will be involved in the documentation process? This can include solicitors and accountants.
Do they have a need for access to public transport, raw materials, transport corridors, or suppliers?
How long will they require the new premises and will expansion be a consideration in their new occupation?
Do they have storage issues to contend with in their relocation?
What are their needs of technology and communication in the new premises?
Do they require signage or branding on the premises that they occupy?
What hours of occupancy and business operation would be applied to the premises?
What standard landlord works would be required to prepare the premises in a satisfactory condition for the Tenant? This normally involves decisions on carpeting, painting, wall construction, lighting, air conditioning, and minor structural works.
Does their business create any environmental hazard or impact which needs special attention in the leasing process?

Given that these matters are diverse and can create secondary and supplementary discussions, it is essential that you keep notes and a checklist of your activities with the potential tenant. Most real estate agents and brokers work on a number of tenancy deals continually hence the record keeping process is essential.

Given the items above, you will be able to understand the most important parts of the property to show the tenant as part of the inspection process.

The fruitful tour of a property is enhanced by providing the right information package. This will not only avoid any misunderstandings, but it will also allow you to collaborate on the key issues that the tenant will find important to future occupancy.
The inspection documentation should include the following –

A plan of the premises
Photographs of key parts of the property
Details of floor layout. This can include extracts from the as built drawings that apply to the premises.
Details of the physical aspects of the property and its surrounds
Regional map of the area showing property location
Details of services and amenities provided in the premises
Indicative terms of lease required by the landlord
A description of the property precinct and surrounding neighbour’s
Your contact details for any questions and comments

Rarely will the tenant make a decision on the first inspection of the premises. When it comes to business premises, the tenant will usually return with experts to look at an array of issues. You can expect an involvement of architects, engineers, solicitors, and accountants. All of these people may influence the decision and hence any of your discussions or comments with these people must be documented in writing back to the main person with whom you are originally in contact.

There is good money to be made in undertaking a lease brokerage. Many agents exclusively specialise in leasing premises to corporate tenants. Given that the business community is always expanding and changing, they are always a source of opportunity for your commercial real estate business.

Qualifying Leasing Prospects

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