Doing Your Market Research in Commercial Real Estate Brokerage

Relevant market data in commercial real estate can help you with property presentations, prospecting activities, and negotiations.  As the real estate agent or broker in your local area property knowledge and information will help you close more listings and facilitate more transactions.

Whilst most clients think that they own a high quality property commanding a good price or rental, the facts of the matter can be far from the truth.  Local property market information will help you position the client’s property for better levels of enquiry and negotiation.

Here are some facts that will help you stay ahead of local property market activity:

  1. Track the number of sales occurring in the local area by property type.  Focus on the local area and your property specialty.  Determine the averages that apply to sale prices per square metre or per square foot.  That information will be helpful when it comes to pricing other listings.
  2. Watch the trends that apply to leasing and renting commercial and retail property.  Industrial property may also feature as part of that analysis.  Leasing strategies and rental levels provide the basis for property investment today.  The ratios between net rent and property value provide a yield or capitalization factor.  That number will change throughout the year based on the supply and demand locally and within property types.  Oversupply will typically see prices fall against rental income.  That will improve the yield ratio to encourage any sale.  In undersupply situation, prices typically rise against passing income and rental.  That then produces a lower yield for the property investor.  It directly follows that you should track supply and demand factors that exist within your property type and within your town or city.
  3. Market rentals will shift and change throughout the year.  Over an extended period of time you will soon see patterns to any rental growth and leasing incentives.  In any oversupply of vacant space you will see that the incentive levels will grow to attract more tenants to a property.  The levels of incentive will conversely fall away as the vacancy levels decrease in the local area.  Look at the patterns that apply to market rent within the property type and your specialty.  Understand the reasons why tenants lease a property today locally.
  4. There will be changes to the business community regionally and locally.  Those changes will have impact on business sentiment and occupancy costs.  Some segments of the business community will be more active and successful when it comes to levels of trade and sales.  When you can identify a successful business segment, focus your prospecting efforts within that segment and with those businesses.  Any successful business over time will require relocation or expansion to other property.  Get to know the local business owners for this very reason.
  5. New property developments come and go from the market.  The ratio between supply and demand, together with the availability of vacant land locally will activate some property developers to consider new projects.  A property developer will only consider a new project or building construction when they can see that the demand exceeds future supply.  They will also look for reasonable levels of profit from the project based on expectations of rental and price.

So you can see the reason why it is necessary to stay ahead of market activity in commercial and retail real estate.  Property trends in rentals and prices will help you see new business leads and clients to serve.  One other key factor to remember in gathering property information is that of specialization.  As an individual agent you cannot serve every market and every type of client.  Specialize personally within a segment of property and within a location so that you can become a top agent.