Tactic #7: Price Tight to the Market – SHIFT Pricing Strategies

“Bad news isn’t wine. It doesn’t improve with age.” Colin Powell

Human instinct studies tell us that we are more afraid of the risk of losing than the risk of winning, yet odds tell us that in reality we win as often as we lose if we play the game long enough. Our experiences tell us that winning just feels better than losing.

When it comes to setting prices for sellers, they often want to keep their price high and never want to sell for less, but the reality of the market we find ourselves in is they must lower their prices if they want the property to be leased or sold.

Savvy tenants and buyers are letting the market tell them what the price should be by getting comparable market analysis just like landlords or sellers. They check in monthly, if not more often, with their brokers who report to them. Many factors might play into the price that is eventually set. Sellers and Landlords want guarantees that if the price is X, then the property will move in 30 days. There are no guarantees in this economy so what can brokers do?

As experts who are in the market every day, our clients expect us to guide them. Our job is to help our clients price as tightly as the market will allow based on our  “market knowledge, network of experts, and research.” What lays in the balance is our knowledge of the market combined with our clients’ needs and too often, challenging problems. Questions that need to be answered according to SHIFT Commercial in this tactic are:

1. Why is the client selling or leasing? What are their expectations?
2. How can I set realistic expectations and get the client focused on the “wins” of completing this transaction?
3. What is a tight-to-market price range for the property or space?
4. How can we make the property as attractive as possible or overcome hurdles for potential investors or tenants?

Motivation questions for landlords and sellers change every 6 to 12 months based on projected net operating income as leases come closer to expiration. Buyers and tenants gain momentum in favor of lower pricing if vacancy and absorption remain high and the days on market and lease terms lessen for properties where they have potential interest.

Some tactics for setting sale prices tight to the market:

1. Weight older comparable sales lowest.
2. Weight income highest, but base it on conservative projections of future net operating income.
3. Use discounted replacement value, particularly for distressed properties.
4. For distressed properties, consult with the bank early to determine an acceptable short sale price.

Tactics for setting lease rates tight to the market:

1. Identify real comparables, based on an expanded audience of prospective tenants.
2. Use your network to uncover actual rates.
3. Start slightly below market, but prepare your client for additional concessions and even lower rates.

Finally, lessons for brokers in a Shifted market:

1. Don’t be afraid to ask for marketing fees from Landlords or Sellers upfront.
2. Be flexible with commissions, especially for long term relationships.
3. The first offer is often the best, even if it is discounted.

Our clients place trust in us as experts in our business. The bad news is never fun to deliver, but we owe it to our clients, buyers or tenants, landlords or sellers, to share the reality of the market and the leadership to get them a closed transaction, freed up capital or improved occupancy. After all, isn’t that why they hire us?

Tactic #6: Catch People in your Web – Internet Lead Conversion

“Surprisingly, today’s tech tools aren’t simply about generating leads; be prepared to expand your thinking as you explore the power of the Internet in lead conversion.” SHIFT Commercial

These days it is imperative to embrace social media. You may remember that we’ve touched on this topic before in both our blog and our newsletter. While many business are doing a great job, there are others that either choose to ignore this growing trend or those that try to embrace it but don’t do so consistently. Consistency is the key. Too many people try to do it all at once and then fizzle out because they didn’t streamline the process – they didn’t master the first step before moving on to the next!

While tweeting  and blogging  might not be for everyone, there are so many opportunities out there that you can find ones that fit your personality and enact those. From networking sites like Facebook, LinkedIn or Google+, to media-sharing tools like YouTube and Flickr, to blogs and micro-blogs (Twitter) there really is something for everyone. In the real estate industry, social media and internet lead conversion has been used by the residential agents for a while now. They have been adopting social media practices for years and doing quite well with capturing leads. Other, more referral based businesses, like commercial real estate, are slower to adapt. That’s why now is the time to put systems in place so that your competitors don’t leave you in the dust.

If you haven’t incorporated any of the above tactics, you might wonder, how do I start? First, build your online presence by identifying your brand and then picking the avenue that best supports it. A website is an absolute must and then you should choose the social media sites that best fit that brand. For example, we have had a website for many years and rebranded it in late 2009. We also have joined all of the major social sites that make sense for our business.

The next step is to actively market your goods and services to drive the traffic to your website and chosen other media, as well as generate leads. The last and most important step is to capture and convert those leads in a way that you know where they are coming from. Google Analytics is a great resource for tracking what pages are the most effective as well as using other tools. Ben Kinney of IMSD’s e-book Soci@l is a wonderful resource for more information on the capturing the leads.

Many books, e-books and blogs have been written about capturing leads, so for more information, head to the web! If you like what we’ve done with our social media tactics (or if you don’t), let us know. Happy capturing (leads of course)!

Ownership can benefit tenants

Tactic #5: Get to the Table – Lead Conversion

“The ultimate success of your lead generating is directly dependent on your lead conversion ability. One can’t work without the other.” SHIFT Commercial

The ability to get to the table and convert a lead to an appointment and an appointment to an opportunity  can eventually lead to a sale. However, getting the assignment  depends on your market knowledge, experience and expertise coupled with a solution-based presentation that offers accountability.  All of these skills take  practice, coaching and experience.  These skills, when learned coupled with listening and rapport building attributes, build trust and with luck a broker can gain an exclusive agreement be it listing or the right to represent the client in a commercial lease or purchase.

Getting to the table is hard, especially in this economy. Businesses are focused on survival and they see you as a diversion to get their eye off the ball. Understanding possible objections and knowing how to respond to them is the key to getting an opportunity to uncover a need and present a solution.

Your unique ability is at the heart of your value proposition. Positioning yourself as a specialist, be it landlord or tenant representation, industrial or office or retail production types or investment sales and triple net properties, is key. There are a myriad of ways to become a specialist in commercial real estate; for some in smaller markets being a generalist is a specialist – you can have tons of different experiences which makes you unique. This could mean you think creatively and outside the box like my friend Kristin Cole from Wasilla, Alaska who demonstrated her ability as a specialist in a remote market, but took a listing with a larger commission because no one else wanted it…and sold it within 60 days of securing the listing agreement!

What makes you special or unique or sets you apart from all the other brokers who might be calling on a client? Know your strengths and share them with others who might see your experience worth consideration. If you have no experience, become an expert in an area. It takes hard work and tenacity to become an expert, but with extra effort it is possible. An example in SHIFT Commercial that I really like is the new broker who became an expert in a particular intersection of Dallas, Texas.  He knew everything about every building, landlord and tenant in that particular intersection. He quickly became the expert as he uncovered information that was valuable for others to know. Vacancy and absorption statistics, rental rates and opportunities enabled him to gather knowledge and access  opportunities that he would not have otherwise. In summary, commercial real estate is hard work, but remember to practice and role play your scripts and dialogues, know objections and be ready with a response, become an expert and differentiate yourself.  Now get out there, make those calls and make something happen.

Tactic #4:  Find the Motivated – Lead Generation

“When times are lean, lead generation takes more skill and more grit. It takes MASSIVE ACTION – cold calling, canvassing, referral networking, web-based marketing, and more.” SHIFT Commercial

As the New Year begins, I can think of no greater tactic to achieve any goal, than time spent lead generating each day. In fact, it is likely the highest and best use of time for anyone in sales (and the thing we all avoid doing because we do not like to hear “no” or “not now”)! According to Buddy Norman, author of SHIFT Commercial, a slightly different way to think about lead generation is to look for problems to solve and find people to meet to find the motivated. The goal for lead generation is nothing more than talking to decision makers and getting an appointment to uncover possible pain that you as a sales consultant can help solve – it’s that simple. When you learn they have too much space or they are paying over market for rent or have equity and want to control costs or invest in real estate, but are not sure how to start, these are all opportunities.

Utilizing the phone is the most time efficient way to schedule appointments, but there is also much to be said for uncovering needs by calling on existing customers. You can double or triple your efforts by calling on neighbors of the existing customer by saying you were in the neighborhood…and wanted to dig in and see if they might need help, too. The trick is to make every dollar and every hour spent on lead generation count. If what you are doing does not yield reward, stop doing it and find another way, but do it!!! It is the life blood of sales success.

Two success tactics this chapter focuses on is to time block daily (setting aside time when you can do lead generation without any disturbances) and to have an accountability partner, coach or mentor partner and stick to it! Hard work, focus and opportunity can only lead to success!

Greater Raleigh Chamber of Commerce:  http://www.raleighchamber.org/

Durham Chamber of Commerce: http://durhamchamber.org/

Chapel Hill-Carrboro Chamber of Commerce: http://www.carolinachamber.org/

Research Triangle Park Chamber of Commerce: http://www.rtp.org/

Morrisville Chamber of Commerce: http://morrisvillechamber.org/home

Apex Chamber of Commerce: http://apexchamber.com/

Cary Chamber of Commerce: http://www.carychamber.com/

Garner Chamber of Commerce: http://www.garnerchamber.com

Wake Forest Area Chamber of Commerce: http://www.wakeforestchamber.org/

Fuquay-Varina Chamber of Commerce: http://www.fuquay-varina.com/

Holly Springs Chamber of Commerce: http://www.hollyspringschamber.org/

Knightdale Chamber of Commerce: http://knightdalechamber.org/

Rolesville Chamber of Commerce: http://www.rolesvillechamber.org/

Wendell Chamber of Commerce: http://www.wendellchamber.com/

Zebulon Chamber of Commerce: http://www.zebulonchamber.org/

Other Great Links

Triangle Business Journal: http://www.bizjournals.com/triangle/

Downtown Raleigh Alliance: http://www.godowntownraleigh.com

Raleigh Visitor Information: http://www.visitraleigh.com/visitors/

Triangle.com: http://www.triangle.com/home/

2011 Raleigh Accolades

#1 Best City in America (Raleigh) - Businessweek.com - 7/11

#1 Among Best Places for Business and Careers (Raleigh-Cary) - Forbes.com – 6/11

#1 City for Families (Raleigh) - Forbes.com – 6/11

#2 Metro for Job Growth with Average Employment 250K to 750K (Raleigh) - Business Facilities – 8/11

#2 Next Big Boom Town (Raleigh-Cary) - Forbes.com – 7/11

#2 America’s Best Cities for Young Professionals (Raleigh-Cary) - Forbes.com – 7/11

#2 Brain Magnet in the Nation (Raleigh-Durham-Cary) - Forbes – 2/11

Bronze Level Bicycle Friendly Community (Raleigh) – League of American Bicyclists – 4/11

#3 Best Labor Market for Young Adults (Raleigh-Cary) - Portfolio.com/bizjournals - 4/11

#3 America’s Cleanest Cities (Raleigh-Cary) - Forbes – 3/11

#7 Top Metro for Small Business (Raleigh-Cary) - Portfolio.com/bizjournals - 4/11

Two of America’s 100 Best Beer Bars (Busy Bee Café and The Raleigh Times Bar, Raleigh) -Draft Magazine - 1/11

Tactic #3  Do More with Less – Leverage 

“The gift of the shift for commercial brokers is that you have the opportunity to invest in the people and processes that create the most leverage and better utilize your time and talents.”  SHIFT Commercial

All of us have likely had to learn to do more with less in the past several years.  Businesses of all sizes have been exploring options on how to leverage with less and get the same production out of fewer people.

One key resource at our disposal, particularly in the area in which we are blessed to live, is our outstanding colleges and universities in the Triangle. The students from these institutions are interested in mentorships, internships and training experiences to help them with real world understanding.  Juniors and seniors in their fields of study are eager to find employment opportunities, either paid or unpaid, which are often required for their course requirements.  Frequently their professors will come in to see them on the job and get evaluations from those supervising their work.

We have engaged many interns over the years and last spring utilized two students who almost shared a full time position.  One from NCSU who was a political science major and another from Meredith College who was a marketing major.

Both had excellent skills and a strong work ethic.  They enabled us to tackle projects that caused us to improve our systems and procedures relative to marketing to our clients.  Moreover, they were introduced to the commercial real estate industry and were intrigued to learn more.  One, in fact, is getting her real estate license!

Certain college students and junior brokers can be taught business development skills and scripts to enable them to obtain appointments.  If they can develop new business opportunities calling 15 hours a week at $10.00 per hour it could yield them incentive income and could yield a business opportunity 10-20 times that amount.  It takes a natural personality profile and consistent coaching to make this happen, but the potential rewards are certainly worth the effort!

Nationwide, a slow residential market will continue to impact the rate of growth in the commercial sector. The Triangle has one of the nation’s most productive residential markets, relatively speaking, so we will see some benefits from the ongoing influx of new residents and transaction volume generated from locals looking to seize great deals. “People are discovering the affordability of the current market based on prices and interest rates, and are beginning to take advantage. Supply (inventory levels) are back in check with November 2005 levels,” stated John Pace of Pace Realty Group, Keller Williams North Raleigh.

From the most fundamental perspective, the Triangle remains an outstanding place to live, so we’ll always have that helping to bolster our market. Additionally, North Carolina’s business relocation incentive program was ranked second nationally in terms of job creation effectiveness and accountability by Washington, D.C. non-profit Good Jobs First. This bodes well for the Triangle’s ability to continue to attract new companies.

Locally, office rent increases should occur and we will also watch vacancy decline slowly through the year. For clients, this means the windows of opportunity for the best concessions are slowly closing, something we mentioned in our June newsletter, “Companies hoping to seize similar opportunities would be wise to begin considering a survey of the market.”

Still, across the board growth is not expected to knock off anyone’s socks. Fundamentals continue to improve at an un-even pace so it will take time for them to stabilize enough to support any sort of notable boost in market conditions. Retail and warehouse will most likely be the last to recover.

As we’ve said a number of times, the best real estate decisions are the ones that best suit your company. If your company’s performance demands it in 2012, then it’s the right year to make a real estate decision. And that’s why we’re here. 

Happy Holidays to everyone. Stay safe, have fun and we’ll see you in 2012.

Tactic # 2 Re-Margin your Business-Expense Management 

“When the revenue disappears, as a business owner, you have two choices: Find new business income or make your expenses go away. The former is about lead  generation and the latter is about cost cutting.” SHIFT Commercial

As I mentioned in the last post, SHIFT Commercial by KW Commercial President, Buddy Norman, is a great resource for new and experienced commercial real estate brokers and could also be a guide for any service business who might need to change their business strategy to become more profitable even in a down economy.  As the market shifts, the book recommends evaluating all costs, especially advertising, marketing and expensive database subscriptions among every other cost to scrutinize every expense.  This tactic helped us reduce expenses and created a more profitable year in 2011 which looks like an estimated 80% increase over last year’s net profit.  I am loving that!

The book encourages a look at other strategies to work smarter and spend less money.  Our focus has always been on our mission of providing extraordinary service that adds value for our clients.  If our expenses do not address our main focus, then we are not adequately doing our job for our clients.  The kind of service we hope to provide for each client’s experience should also inspire their loyalty as well as their recommendation to others.  I feel really proud that this year we found even better ways  to stay in touch with our clients and prospects using Twitter, Facebook and LinkedIn.  While some companies maybe repositioning and laying off or cutting back, we have added staff and processes to help us become more service oriented while increasing our profit margins.

Be on the look-out for more examples that can help you have a more profitable business in the coming weeks as there will be a total of 12 blog posts in all.  Better yet, put the book on your Santa list and let Santa know how to find it here.