Commercial Classroom: The Redundancy Factor - by Edward Smith, Jr.

Comparing residential to commercial real estate.

I think of residential as a one shot deal, selling one house to one customer one time. Granted they may give you some referrals or employ your service to move again. 

Where commercial opportunities abound, many different types of properties we can sell or lease: office, retail, industrial, multi family, mixed use and specialty buildings. We have various types of clients, users who are looking for a location to house their business, their main concern being the success of their business. User-investors who will buy a building larger than they need, put their business there and have income to offset their costs. Developers who will build-to-suit for their clients and pure investors who focus on what their Return on Investment (ROI) will be. 

But the best part is the redundancy factor. If you place a tenant in a five year lease, you can service them again when their lease is up. If you wait to contact them four and a half years later, when you call they will reply “Ed who”. After you place them in the building call them up every few months, see how they and their business are doing, which will build the rapport for future business.

Remember businesses do not stay stagnant; they either grow, shrink or close. Two years into their five year lease you call them and they tell you they just got the biggest deal ever and they need more space, but they are stuck in this lease. You can find them more space and sub-lease the space they are in. Your regular phone calls just got you two more commissions.

Let’s not forget about the landlord, call them up every few months too. How’s my tenant doing? If any of your other tenants are not renewing their leases, I can get you another great tenant. Buy the way, are you ready for another investment; have you thought about selling this building?

Each day some time should be spent prospecting business for the future. 

One technique is to systemically go door to door introducing yourself to all tenants and building owners in town. Visit just two business a day, that’s10 a week, 40 a month. Our business is one of relationships and referrals. Meeting current tenants and owners helps develop your presence in the community as "the commercial go to person". 

What do you say? Introduce yourself. I go past your store almost every day and I have been meaning to stop in. How long has your business been here? Eight years they say. I will bet that your lease is up in 2027, March of 2027. They reply no, it’s April 2027. 

Retail leases are generally in five year increments, and being there eight years, they probably have two years to go. They will correct you if you guess wrong. Just in case they are also the building owner have some investment property flyers with you so you can show them. If they are a tenant before you leave, ask who their landlord is and how to contact them. You want to make an appointment to meet the landlord and offer your services.

Now that you have made initial contact you want to stay in touch. To catalog this valuable information, you can buy all sorts of software programs, or you can simply use the “word” and calendar programs found on most computers.

You want to regularly stay in touch, so enter a follow up visit date in your calendar for 3-4 months; these subsequent visits continue to develop your relationship with the potential client. With each visit, end by asking for a referral "is there anyone else you know that I may be able to help?"

Each time you meet a business owner set up a simple “word document” about the potential client you just met. Include whatever information you have gathered, name, address, owner or tenant, type of business, how much space they occupy, when they expect to move and lease expirations. Include any personal information they shared with you about their family, etc. You learn they are going on vacation next month. Keep this chronological record of activity for each call or visit. Before you talk to them again, consult your log. You may want to begin your conversation with a question like, “Hi John, how was your vacation? This type of personalization develops relationships.

If when their lease expires, they decide to stay in their location, consider them a source of referrals or a potential buyer until they need to move.

In your initial visit you learned they lease 2,500 s/f of retail space. Set up group files in your computer by square footage: for example, retail tenants leasing 2,000 - 3,000 s/ff, retail tenants occupying 3,000-4,000 s/f etc. When you list a retail building for sale in the area a bit larger, say 5,000 SF email it to the appropriate groups, they may be ready to buy! Create the same type of catalog for office and industrial tenants.

Don’t forget about building owners; in prospecting you meet the building owner, they may have their business in this building or not; either way they are an investor. Your investor files can be cataloged by size, price category or both. Get those new investment listings out to these potential buyers. Don’t forget to look at other commercial brokers listings for sale, that may work for your clients, arrange to co-broke and send these to your groups.

Seems like a lot of paperwork, but you are only meeting two business owners a day. Taking the extra time to catalog all you learn, leads to future business.

Edward Smith, Jr. CREI, ITI, CIC, GREEN. MICP, CNE, e-PRO and CIREC program developer, is a commercial and investment real estate instructor, author, licensed real estate broker, speaker, a consultant to the trade and is a real estate broker with Smith Commercial Real Estate, Sandy Hook, Conn.