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Going The Extra Mile to Lease Retail Space in Today's Market

Today's Slow Leasing Market Requires Aggressive Tenant Sourcing and Creative Leasing Strategies
July 9, 2009
Retail Leasing Agents Go the Extra Mile to Lease Space in Today's Market
Retail Leasing Agents Go the Extra Mile to Lease Space in Today's Market
The job of retail leasing brokers has become more challenging than ever in today's commercial real estate market. That said, deals -- while much fewer and further between -- are still getting done. So what does it take to lease that vacant shopping center space that's been on the market for so long?

John Bemis, director of retail leasing for Jones Lang LaSalle Retail, said the key is working creatively, harder, smarter and as a team. "There is no secret formula. Above everything else, it's simply hard work. People have to work harder and smarter than they ever have before to obtain new and retain existing tenants at shopping centers."

CoStar interviewed a number of retail real estate agents to learn about what new, creative, or unusual methods agents or companies are using -- beyond the basics of hard work, efficiency and persistence -- to improve their chances of winning out over their competitors to sign tenants.

TEAMWORK



WORKING BEYOND YOUR ROLE
Bemis said Jones Lang LaSalle is encouraging all of its staff, not just leasing agents, to get engaged in leasing efforts -- from general managers and marketing managers to specialty leasing managers and support staff. "We are getting all of our field people into leasing, getting them involved in prospecting."

For example, one specialty leasing agent whose main job was leasing to temporary tenants went "beyond the call of duty" at the Westgate Mall in Texas, Bemis said. "She took a call from Earthbound Trading when the lead leasing agent was on vacation. Instead of leaving it until the leasing agent returned, she tracked the lead agent down and got the go ahead to pursue the deal and did not rest. She landed the deal in three weeks and the tenant is opening this year."

"Don't get all tied up in roles," Bemis advised. "It's about getting the job done -- not about authorship or ownership, but completing and fulfilling the job."

INTER-COMPANY INCENTIVES
To encourage teamwork, JLL Retail may award a "VIP" gift card valued from $100 to $500 to staff that go above and beyond the call of duty, including bringing prospects that result in a lease, working beyond their job description to get deals done, or marketing deals in a particularly creative way, Bemis said.



AGGRESSIVE / CREATIVE TENANT SOURCING



All of the agents interviewed said that being persistent, aggressive and creative in tenant sourcing has become essential in today's market. Sitting on the phone fielding calls that come in is no longer effective. Long hours researching prospects and pounding the pavement is the name of the game. "We are definitely in aggressive canvassing mode," Bemis said.

TARGETING COMPETING SHOPPING CENTERS
While targeting tenants at competing shopping centers is a method that's been utilized by leasing agents traditionally, companies have become much more aggressive in their efforts to do so, agents said. On the flip side, this activity also makes it harder to retain existing tenants.

Bemis encourages leasing agents to visit not only competing centers in their markets, but also outside their markets to encourage tenants to open second or third stores in one of JLL's centers.

TARGETING EXISTING TENANTS TO OPEN SECOND LOCATIONS
Existing tenants are an excellent source for leasing, whether it be expansions or new stores, agents and managers said.

Bemis said that JLL Retail has had success in getting local tenants "to take on second concepts within mall food courts," for example.

Karen LaFleur, marketing manager at Miami-based Terranova, said the company has had particular success in sourcing new tenants from its existing tenant base, "especially with local tenants. They know us and we know them, so maybe we're more lenient with them because of that relationship, whether it's with lease terms or with promoting grand openings, etc. Or maybe they're more likely to lease with us because they know the job we do." For example, a nail salon in one of Terranova's centers that just opened a second location is opening yet another in a center under construction. Also, a pizza restaurant is opening a second location and is in negotiation for a third -- all within Terranova's centers.

TARGETING NON-TRADITIONAL TENANTS FROM OTHER PROPERTY TYPES
Filling shopping center vacancies in today's market requires thinking outside the box, beyond traditional tenant types. Agents are now wooing tenants that may currently be located in office buildings or stand-alone buildings off the beaten path, with the pitch that such users could benefit from the additional exposure gleaned from shopper traffic, especially as rental rates have become more reasonable.

For example, Bemis said that one of his teams recently went after University of Phoenix and landed the tenant at the Genesee Valley Mall in Flint, MI. Sourcing tenants who typically lease medical office space has also become more common. Bemis said pediatric doctors or dentists are "great candidates for mall entrances, as moms can shop while they wait for their kid to finish their appointment." Moreover, the doctor gets greater exposure where moms spend their time, he added.

"One of our brokers used Costar to gather a list of office users with leases expiring that we have a space available in a shopping center that may fit their needs. This week, we are having members of our staff deliver cookie bouquets to these tenants personally, which is better than just a delivery person, with a card that says, 'We have a space if you're looking to move,'" said LaFleur. In the past, these tenants might have been sent a simple letter, or just received a cold call from a leasing broker, she added.

For more non-traditional tenant ideas, click this link for a recent CoStar article on the topic.

INCENTIVES FOR EXISTING TENANTS
Jones Lang LaSalle has even gotten existing tenants involved in sourcing new tenants. "At a couple of our malls, we have offered to tenants that give us a good lead that ends up panning out something like a $500 credit on their rent, etc," said Bemis.

"All of our non-national tenants are aware that if they were to bring a tenant, they would get a benefit," said Tim Roe, president at Pine Tree Commercial.



Have you or your company employed some creative methods to retail leasing that have had a direct impact on your success in leasing or selling a retail property? Please share your thoughts and anecdotes with us. Pertinent comments will be posted as updates to this story. Email the editor, Sasha Pardy, with your thoughts.


SOCIAL NETWORKING



Social networking, or having a personal presence on Facebook.com; MySpace.com; Twitter; or a blog, has skyrocketed in popularity in the last couple years. Now, the method has gone beyond personal use, with commercial real estate brokers keeping in touch with each other and actively talking about their property listings to the brokerage community and the public. Additionally, CRE companies are creating blogs or utilizing social networking opportunities for their company, malls or shopping centers.

With the ability to talk openly about properties -- whether it's details on space for lease or sale, events at properties, promotions by tenants or simply conversing on idle topics with friends or followers -- the medium is increasing exposure for not only other commercial real estate agents and their companies, but also their properties.

At JLL Retail, Bemis said the company has launched an initiative to get all the malls they manage or lease to have Facebook and Twitter accounts.

While additional exposure for a property is great in any situation, Bemis explained that being active on social networking sites is fostering leasing in an indirect way. "We think it’s a good way to get future leasing. It helps to increase retailers' sales at the centers, which always helps leasing and drives rents in centers." Additionally, Bemis said the malls use the accounts to promote events they hold at the malls and also advertise space that's available. "These formats target a younger generation and as these kids get out of college, they may be going into franchising or entrepreneurship, and this increases our chances of them thinking of our property when they want to open store." Bemis also said that JLL is finding former executives interested in opening a business following the properties on these social networking mediums.

Blogging has been popular for much longer, as the medium is much more customizable to the look and feel of a company and typically has more options to add pictures and attachments and outside links -- which is particularly helpful when it comes to exposure for listings or the capabilities of your company. The key is that the quality of the blog's content should keep visitors coming back. The blog should also be 'keyword optimized,' which helps increase exposure on search engines. For commercial real estate agents and their property blogs, that may mean keeping listings up to date and sharing of pertinent news or market knowledge.

Pine Tree Commercial recently took a bold step by launching a social networking site for the industry, called "The Real Corner", which is designed "for those in the commercial real estate world to network, share best practices, and collaborate." The site's features include commercial real estate events, job listings, an industry news feed, blog posts, videos of interviews pertinent to market trends or news, a member forum discussing industry topics and their listings, issues or ideas; a chatting function, and links to Twitter and Facebook. While the site serves the entire industry, Pine Tree is benefitting because many of the videos, blog posts, and forum discussions either feature or are led by a member of Pine Tree Commercial.

At Pine Tree, Roe said, "We saw a need for it in the commercial real estate community. It’s a great way to exchange information. If a lease gets done, we'll post it and we are also posting listings. Further, as a developer, every broker that represents us is a member of Real Corner and is talking about their listings. It's not a site that's meant to accommodate leasing, but it's meant to bring people and ideas together. It's also the exposure factor," he said.



NEW / CREATIVE LISTING MEDIUMS



While advertising to the brokerage community has been the most common practice in commercial real estate to date, many mediums are increasing the exposure of listings to the general public. "My view on this medium has changed dramatically over the years. Several years ago, it was about proprietary information -- what could be released to general public was highly controlled. Today, its become less and less proprietary. Listing of space to a broader range of people makes sense today," said Bemis.

COSTAR SHOWCASE
CoStar Group recently launched CoStar Showcase, an online listing product that is easily searchable by the public for free, giving increased exposure to those companies listing properties for sale or lease. Through CoStar's efforts with Google, Yahoo! and Search Engine Optimization, those listing space on Showcase enjoy their properties coming up among the top search results when people search for space for lease or commercial property for sale in specific geographic regions. The resulting links provide "one-click" access to the listings.

John Moss, vice president of Parker Commercial Brokerage Co. in Lake Forest, CA, said of his company's subscription to the service: "It broadens whom you're reaching. People are using Google more now. They used to call off the signs -- now they just Google. Plus, it’s one more thing where we can show our landlords that we go that extra mile."

As of July 8, CoStar had more than 63,000 for sale and for lease retail listings available on Showcase, plus tens of thousands more available listings for other property types; and the number grows every day.

CRAIGS LIST
Craigslist.com is another Internet listing medium that has become increasingly popular. Anyone can list commercial property for sale or lease, first by clicking the specific page pertaining to the property's geography, then by clicking under the "office / commercial" sub-category, which falls under the broader "housing" category. The listings appear in search results in date order, with one-line headings that can be clicked for further information. In general, most listings provide text details on the property for lease or sale, contact information and pictures. However, HTML listings are also possible, so when a user clicks on the link, it appears like a web page, which gives more options for pictures and maps and links to download or view information from another site.

While Craigslist is a fairly new trend in commercial real estate, the popularity in metro markets has soared. While Moss' firm usually posts listings on the Craiglist Orange County site, he said that so many competitors are also posting their listings that the top postings on the list results don't stay on top for long (Craigslist's first page of listings is limited to 100 results). In New York City, for example, there were more than 3,000 listings posted on July 8 alone, and only the first 100 postings are viewable on the first page of search results. The good news, however, is that the service does have a key word and square footage range search, which helps to narrow down the results. Despite this, Moss said Craigslist has "been a pretty good source for leads" to date.

TWEETLISTER
Dave Lewand, marketing director at Metro Commercial Real Estate, described a new product called "Tweetlister" that is connected to Twitter. The service, which was primarily used by residential agents, but is now increasing in popularity among commercial real estate agents, increases listing exposure for the broker and their properties online, but more importantly, directly funnels listings to Twitter as users and other brokers seek listings in real time from their handheld devices.

Lloyd Chrein, a partner in the Tweetlister service, which is free to use, told CoStar that the company just launched this week its "Version 2 release, which includes the ability to add enhanced listing details and agent profiles, among other updates." Additionally, he said the service can accept feeds from realtors and MLS's, "something that can save a great deal of time for brokers." Additionally, Tweetlister has upgraded its search functionality.

INTERNET AUCTIONS
Prior to the current recession, this was almost unheard of, but commercial real estate agents are now actively listing property on the world's largest Internet auction medium, Ebay.com. Ebay now has a dedicated category for commercial real estate listings by state and property type. A search on July 8 produced 154 listings in the commercial real estate category, across most states in the country.

However, Ebay is not a popular outlet by any means. This same search revealed only 17 retail properties being auctioned. The listing length is typically 30 to 90 days and minimal information, but ample pictures, are typically provided with phone numbers available to contact the person listing the property. Retail property types listed included a vacant car dealership, convenience stores and restaurants, freestanding retail buildings in smaller towns, net-leased freestanding retail buildings, and land development opportunities on the day our search was conducted.

At the time I was on Ebay, there was a 1,400-square-foot convenience / gas station in Ackerman, MS, that had nine active bidders on it and with 18 minutes left, bidding was up to a price of $26,000. NAI Capital in Apple Valley, CA posted one very interesting listing. The seller was seeking either a 50% joint venture partner for $500K+, or an outright buyer at $7.25 million, for the Fountains at Quail Ridge, a community center under development in Apple Valley. To entice bids, the listing said the property guarantees a 15% annual return.



Have you or your company employed some creative methods to retail leasing that have had a direct impact on your success in leasing or selling a retail property? Please share your thoughts and anecdotes with us. Pertinent comments will be posted as updates to this story. Email the editor, Sasha Pardy, with your thoughts.


HOLDING EVENTS



BROKER EVENTS
Bemis said that JLL also continues to hold broker open houses at its properties. "We supply information about the center and feed them. It may pay off immediately or it may not. Its an ongoing effort to keep out product in front of them."

Roe said that Pine Tree is encouraging its local brokers to have lunches and meetings with the local brokerage houses and the company is also funding incentives of larger commissions to encourage outside brokers to bring deals to the table.

LaFleur said Terranova continues to conduct broker events, while most of its competitors, constrained by budgets, have stopped holding them. "We've been full force on this. Once or twice a month we'll hold broker luncheons with great giveaways at our centers." She confirmed leads continue to be sourced from these events.

Bemis said JLL takes caution in broker promotions. "While it may be acceptable in most states, you have to be careful that you're not violating local brokerage laws."

OPEN HOUSES
While open houses for the public are common practice in the residential real estate market, it has been considered unorthodox in the commercial real estate community. However, John Moss, VP of Parker Commercial Brokerage Company in Lake Forest, CA, thought his company should give it a try.

The company held an open house for Seal Beach Village in Seal Beach, CA on July 8; and is holding an open house at San Clemente Plaza at Camino De Estrella on July 9. Both events are scheduled to last four hours. To publicize the event, Moss said the company didn't bother with traditional print advertising, and instead sent press releases to all the commercial real estate news outlets and local newspaper editors, posted the events on Craigslist, and contacted the local chambers of commerce so they would know about the events in time for their weekly member meetings.

"We were brainstorming for what we could do a little different when we came up with the idea. There have been a few occasions where we were at a showing appointment, the doors were open, and someone walked in off the street wanting to see the space and get more information on it. Both of these centers we're holding the open houses at have really good foot traffic, so we said, if we're getting that kind of traffic, lets throw the doors open and see who comes in," said Moss.

Specifically, Moss hopes that shoppers and local residents who may be considering opening a new business or moving from an existing retail location will come to the open house.

Update 3:00pm July 9; on first open house: Moss said that the open house drew about 20 people to the one shopping center space, with about half of them being residential real estate agents making efforts in the commercial real estate market. Additionally, a number of tenants and brokers that had seen the space before came back to see it again. The good news is that Moss did receive one offer on the space.

SHOPPING CENTER EVENTS
At Terranova, LaFleur said the company has "toyed" with holding an even for local retailers, in the hopes of attracting tenants interested in moving or opening second locations. But to date, she said the importance of holding fun events at shopping centers for the general community couldn’t be discounted.

"We continue to hold property level events designed to be fun for the shopping community. It shows tenants that we go the extra mile in bringing shoppers to the center. Of course, we make sure our leasing agents are in attendance," to promote the center if the opportunity should present itself, she said.



GOING THE EXTRA MILE



TENANT MARKETING ASSISTANCE PROGRAMS
LaFleur told CoStar about a unique program Terranova has developed that is attracting tenants to vacancies in its centers.

The company is offering prospective tenants a marketing support program designed to "help new retail tenants stand out - and remain standing." The company uses its own marketing personnel and financial resources to aid the tenant in marketing initiatives including: logo development, promotional materials, building a website, designing business cards and banners, conducting mailing campaigns, marketing plans, and executing a grand opening event.

LaFleur said Terranova launched the program because it recognized a need among many of its smaller, independent tenants. "What we've learned is that many tenants leave no money for advertising or promoting their store once they finally reach the point of opening," said LaFleur. She said leasing agents are using the program as a selling point with potential tenants and point of negotiation with leases. "It gives us a leg up, and shows that we're truly full service. If the tenants are able to open strong, with our support, they'll be able to survive longer," she said.

Since September of last year, Terranova has helped four new tenants with this marketing program. In a few examples, LaFleur said they did a six-month marketing plan with one tenant, paid for grand opening events with a couple tenants, and have done email marketing campaigns and postcard mailings in most situations.

PUTTING THE "WOW" FACTOR INTO PITCHES OR SHOWINGS
Bemis said that JLL has gotten particularly aggressive in their presentations to specific tenant prospects. "We've gotten aggressive with targeted packaging of centers. For example, when we wanted Forever XXI specifically in a mall, we put together a very high-end advertising piece and got it in the hands of the Forever XXI real estate people and brokers. Five to 10 yeas, ago, we would have had to involve an agency in putting together such a piece and it would have cost us $5K - $10K. Today, we have in house associates with these marketing and graphic design skills and put it together for only $300."

To make it easier for a potential tenant to envision their store in a shopping center, Bemis said Jones Lang LaSalle sometimes creates a Photoshop mockup of what the tenant's storefront could look like in the lineup of the shopping center they're considering.

Bemis said JLL has found that letting a tenant know that they're important to the landlord in a creative way, beyond just leasing a space, goes a long way. "In one instance, we had a children's store coming to see a space in one of our malls on a Saturday. The mall manager met the CEO and their real estate people and when they opened the door to the space, they were greeted by a giant banner inside with their logo that said, 'We can't wait for you to get here!' Plus, it was covered children's handprints they had gathered from kids at the mall. It was really impactful; it really made the difference to help us stand out," said Bemis.

INTERACTIVE VIDEO
Roe said that Pine Tree recently hired a private firm to create video and so far, four of its properties have an advertising video. Aside from making the property look professional and exciting, it helps the prospective tenant visualize their possibilities at a center, which is important when the real estate representative is presenting to the national retailer's board, said Roe.

In this example Pine Tree provided, which was created for the company's Hazel Dell Towne Center, just outside of Portland, the video covers a wealth of information in a great visual format. In just 1 minute and 18 seconds, the property's look and feel, location, demographics, traffic counts, site plan, existing tenants, and leasing agent's contact information, are provided.

Lewand said that Metro, as well as some other companies he's worked with recently, are creating interactive videos that include strongly-graphical maps, 3-D imaging, etc for their property listings. Lewand typically uploads the videos on YouTube.com and provides a link in marketing emails to the brokerage community. "In this age of handheld devices, the video can be viewed right there. It's a great way to make the center stand out," he said.

"Commercial brokers and their retailer clients are much more demanding in the quality that they demand and so our presentations have been much stronger, including strong aerials and maps, which gives a leg up in presentations," said Lewand.





READER COMMENTARY


Have you or your company employed some creative methods to retail leasing that have had a direct impact on your success in leasing or selling a retail property? Please share your thoughts and anecdotes with us. Pertinent comments will be posted as updates to this story. Email the editor, Sasha Pardy, with your thoughts.


A Director of Leasing in the Baltimore area wrote:
"In one of our centers, we had a local toy store operation for many years. The owner grew it to two locations, then sold it about four years ago to a 10-store chain, which recently went under - probably a combination of the debt they took on in their aggressive growth these past few years and the lack of quality management. As soon as it became evident that this space was coming back to us, we tracked down the original owner - he had years of experience and connections, and he always had a passion for the business. "

"To pull the original operator out of retirement, however, we knew we would need to offer a deal that would minimize his risk - so we did. He took the space in as-is condition for a two-and-a-half year term (three Christmases, essentially), with a five-year option thereafter. The option is at a fixed rent per square foot, but the first two and a half years are at a percentage rent only. We knew the sales history of this store, dating back ten or more years. Even taking his worst year and deducting 25% for the down economy, we will be getting a decent rent for the space. More importantly, the tenant has agreed to continuously operate the store, with firm penalties if he goes dark. In doing this deal, we hopefully head off the domino effect of more and more stores going dark and we keep rent coming in on what could have been a sizeable vacancy."

"The lesson here is to not lose track of assignors once they have sold their businesses. Because of our prior history and knowledge of one another, this entire deal took three weeks start to finish."

Jason Schoonover, a retail sales associate at Kansas City-based Block & Company wrote:
"I am always looking to find new ways to creatively market my properties. Sometimes brokers find themselves getting into the same old rut of marketing to the same groups of folks in the brokerage community, but the real challenge in today’s market is connecting directly with any potential end users. I’ve used Craigslist, small business based forums and chat rooms to directly and efficiently market to end users without the time and expenses involved with traditional marketing mediums. In retail, your next lease is more likely to be unrepresented and driving the neighborhood or utilizing the web to educate themselves on what is available in the market. For example, Craigslist in particular helped source a lead for a barbershop in a small space in midtown Kansas City."

John D. Jennings, a Senior Director with Cushman & Wakefield Retail Advisors of San Diego wrote:
"In today's real estate environment, brokers must leverage off any and all networking platforms, use creative marketing tools and simply think outside of the box. We believe it is critical to get out of the office to personally meet with tenants/landlords and buyers/sellers."

Additionally, Jennings stressed that knowing your market and understanding the fundamentals of your property are paramount these days. "It is important to be a student of the business; to live and breathe the responsible role you're playing and take aggressive and proactive steps; to understand the ins and outs of profitability for both the tenant and landlord." This, said Jennings will set you apart from the competition.

Michael Wiener, president and CEO of Excess Space Retail Services said that sourcing temporary tenants has become necessary to fill space in today's market -- specifically, he gave the example of Spirit Halloween (for more on this tenant, click here.) But above all, said Wiener, utilizing your large broker network and "old fashioned foot canvassing" is key. "Make sure you throw everything at it," he said, including: foot canvassing, cold calling, ICSC attendance, email and fax broadcasts, talking to chamber of commerce, internet presence, advertising campaign, direct mail, etc.

Scott Tiano, a SVP in the Investment Sales Group of Los Angeles-based Wilson Commercial Real Estate wrote:
"Geoff Tranchina and I (it was Geoff’s idea) did something a little different in marketing our single-tenant, triple-net lease Advance Auto investment sale listing recently. Once a broker gets a listing, common practice is to send it to his clients first. If they can’t find a buyer, then they resort to sending it out to the brokerage community. Well, we did it the other way around. We sent the listing ONLY to brokers BEFORE we sent it to our clients. This way, brokers would be extra incentivized because they could send it to their clients knowing that there was a better chance that they hadn’t seen it before. For us, we figure that most of our clients don’t want to look at “on-market” deals from us. They want the off-market, under the radar product, so we had nothing to lose, really. The result was that we received responses from numerous brokers applauding the creative marketing strategy. Ultimately, whether this results in selling this particular asset or not is not the most important thing. It is the equity we have built among what remains of the investment sale brokerage community, that will bear fruit on future deals."

Lenore Reynolds, CCIM, V P Leasing for Bruce Strumpf Inc. of Clearwater, FL said the company has increased its marketing about "five-fold" during this recession, including the hiring of a marketing assistant. The firm's efforts include direct mailings targeted at tenants by SIC codes in the surrounding regions of their shopping centers; e-mail blasts to local and national retail tenants, as well as brokers that have called their office on inquiries before; staying active in attending and advertising with the chambers of commerce in each shopping center's area; networking with local brokers; posting listings online in most mediums; advertising in trade periodicals; and attending industry conferences.


(Editor's Note: To keep up on happenings and trends in retail real estate, subscribe to CoStar's Retail News Roundup, a weekly column covering retailer expansions and new concepts, store closings, bankruptcies, cutbacks, acquisition, mergers, sales. new shopping centers, personnel changes, and sustainability. Follow this link for access to back issues of the roundup. In addition to appearing every week in the national news and retail news sections of our web site, you may also receive the Retail News Roundup for free via email by requesting to be added to the distribution list by contacting senior editor, Sasha Pardy at spardy@CoStar.com Also, click here to subscribe to CoStar's dedicated Retail RSS Feed.




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