6 Ways CRE Owners Can Ensure a Robust Leasing Pipeline
As competition for deals continues to rise in CRE, asset managers and landlords need to make sure their leasing pipeline is as robust as it possibly can be. Here are 6 ways to make sure you are getting the best quality and quantity of deals into your pipeline.
1. Ensure a balanced leasing pipeline: tenant demand at every stage
Do you know how much square footage is in each stage of your deal pipeline? How much square footage is being toured, is engaged in proposals, and has received signed LOIs? Is it balanced, do you have a lot of low-probability deals, what happens if you lose one or more later stage deals?
Since you’re not going to close every deal that comes into the pipeline — even deals that are at later stages — you want to make sure you are always generating some demand. In today’s competitive environment, the last thing you want to be doing is sitting around waiting for your next deal, wondering where it will come from.
Knowing these metrics may seem like the concern of the leasing team — after all, you probably only care once paper is being traded — but these numbers will help keep the top of the funnel loaded, identify bottlenecks, and track where you are going.
2. Know your conversion rates
The second key metric to gauge the health of your deal pipeline is the conversion rate at each stage of the process. You should be asking yourself: how many prospects are converted to tours, tours to proposals, and LOIs to executed leases? And, as deals advance, are these conversion rates increasing?
When you track conversion rates, you can understand when and why you are losing deals.
3. Understand why you’re losing deals...and adjust accordingly
If you aren’t already tracking dead deals, how do you record what happened to the tenants you lost? Do you know where those tenants are going? Why didn’t they choose your space? Are you losing them to competing assets, and if so is it due to price? Once you know how much and to whom you are consistently losing deals, you can have a plan to stay the competition.
By knowing where your tenants are going, you can better limit your exposure to competition and proactively improve the robustness of your leasing pipeline.
4. Track the activity on your space and revisit your strategy regularly
How long does space, on average, stay on market? How much tour activity has there been? Although these metrics will vary by submarket, building type, quality, and size, having a clear idea of relative activity and what is average will help you understand if your marketing strategy is working.
Ask yourself: How does it compare to other spaces in the building and submarket? Is there a theme associated with space type? Maybe the condition of the space? Is it a property or space positioning issue? Is it a function of the market or are asking rents too high?
Knowing the answers to these questions, together with tracking conversion and dead deals, will give you the tools to identify the problem and create a solution to solve it.
5. Make sure your deals won’t get blocked by encumbrances
There are countless stories of leases signed that ultimately get torn up or cost a lot money due to options, rights, or encumbrances. Despite this, there are very few owners that feel confident in their ability to track encumbrances in a reliable way.
Be sure to track the deals in your pipeline that have encumbering options associated with the space, and check this early in the process. This insight will allow you to actually close on the revenue that you’re planning on.
6. Identify the brokers that are creating value
Brokers are critical for fostering and executing your leasing pipeline. Understand how your brokers are performing and make sure you’re working with the strongest teams in the market. Do you have the tools to see which companies, teams, and individuals are doing the most deals and bringing you the most tenants?
For listing brokers, focus on leads generated, number of tours, leases signed, conversion rate, time to close and total deals / revenue represented. Tracking performance is the first step.
For tenant rep brokers it all comes down to the tenants. Which team or broker is bringing the most leads to the asset? Is one better to work with than the other or converting more deals? Who is representing the most and types of tenants that are a good fit for your asset? This information will help with more targeted and efficient marketing and a higher chance of closing deals.