How tenant rep brokers use commercial lease comps to win, negotiate, and close business
From prospecting to pitching to negotiating the deal, lease comps are integral to everything tenant reps do. As clients expect brokers to be experts and use all available tools, brokers increasingly act as consultants as well as deal negotiators. CRE brokers now use commercial lease comps creatively to put themselves ahead of the competition and exceed their clients’ expectations. CompStak interviewed 20 brokers in Atlanta, Chicago, Los Angeles, New York, San Francisco and Washington DC outlining best practices for using commercial lease comps to win, negotiate and close deals. In part one of the series, we cover the use of lease comps in the prospecting process.
Go to Part II.
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Part One: Prospecting
Going after tenants with expiring leases
The most popular way to prospect for new business among tenant reps is to look for comps for leases expiring within one to two years. After you have the comps, you can then try to reach out to tenants and secure a first meeting and, hopefully, a new client. Here are several variations to the process:
Look for a warm introduction or connection
Tenants who are on the market for new space or renewal are often pursued by many brokers. If you get a warm introduction through a mutual connection, it can make all the difference. “I look at historic comps for deals that took place 7-8 years ago and are about to expire in 18-24 months. Then I research those companies on LinkedIn and try to find whether I’m connected with any of the executives,” said a New York City broker.
Use the details of the current lease to pique the tenant’s interest.
With access to the tenant’s current comp, you can compare the current rent to the market and use a possible opportunity to secure lower rent as a first pitch. “Regardless of the expiration date, seeing that a tenant is paying more than the market rate may be a good reason for a call,” said a broker in San Francisco.
Find a niche: Focus on expiring leases in certain buildings or submarkets.
You can carve yourself a niche by becoming an expert on certain buildings or submarkets, and only pursue clients in those areas. One senior broker in New York said, “We use the comps to build mailing lists of tenants in certain geographies and them send them mail merges, offering information about the submarket.”.
Find a niche: Focus on tenants in certain industries.
Technology, Advertising and Media tenants (TAMI) are popular industries of focus for many brokers, especially in creative and technology hubs like New York and San Francisco. Brokers with such focus look for comps for expiring leases for tenants in those industries.
Going after tenants with newer leases
As you get more experienced, you may want to put less weight on the deal expiration date. Many leases have early termination clauses that may or may not be listed in the comp, and this can be an opportunity for a new deal several years ahead of the lease expiration date. In some cases, tenants may outgrow the space and want to move or expand regardless of the existence of a termination clause. “As long as the tenant has been in the space for a few years I can reach out. You never know when they’re thinking about real estate” said a DC-based broker.
In any case, having the comp for the prospect you’re pursuing when you first approach them works to your advantage. “If you know something about a tenant, you sound smarter than others,” said a Chicago-based broker. “For example, you can tell them: I know you’re in 12,000 SQFT and your lease is up in 18 months. Have you thought about renewal or expansion yet?”
It’s also helpful for you to review the entire leasing history of a particular tenant before you make the first call. A San Francisco-based tenant rep said, “I look at old comps to find out where the company was before, so I can understand what submarkets they prefer before I call them.”
Excluding prospects from the list
You may also want to rely on lease comps to weed out leads with no real opportunity.
Look at comps for recent deals in the market:
Tenants who just recently signed a deal are probably not in the market anymore.
Check who represented the tenant:
Some lease comps contain the name of the tenant rep who represented the tenant in the past. “If the comp is showing a tenant rep, and I know this is a good tenant rep that probably has excellent relationship with the client, I may not waste my time in pursuing that tenant” said an Atlanta broker.
Check your CRM:
if you work in a larger shop, you can refer to the CRM to see if one of your colleagues is already pursuing the same tenant. Depending on the competitive environment in your shop, you may want to exclude such prospects from your list.
For free access to commercial lease comps, sign up for a CompStak Exchange account. Please contact us with feedback about this content at info@CompStak.com*
CompStak Exchange is a free platform for CRE brokers, appraisers and researchers to exchange verified commercial lease comps anonymously. CompStak Enterprise offers unlimited fee-based access to comp information to CRE landlords, lenders and investors.