How to Source a Commercial Property
This article was first published in Property Investor News, March 2023
I’m sad to announce that, after 2 years, this edition heralds my last article (for now) for Property Investor News. I’ve loved writing these articles, but I’ve taken on some big new projects recently, which are more time consuming than anticipated, so it’s time to pass the baton on to a new commercial property columnist!
With this last edition I’m going to go back to the start and talk about how you source commercial real estate. On the face of it, this sounds obvious, but as with all things commercial there is skill set that is needed in order to source the very best properties. There are many ways to source, but I list below my top 5 ways to source commercial property.
1. Niching
You didn’t expect me to finish my last edition and not mention niching, did you?! The reason that niching is so powerful in commercial is that the market is so vast and within it there are so many microniches that can be extremely profitable. Niching can be of benefit in so many ways – not least a laser sharp focus on your niching strategy and location, which in turn can make sourcing so much easier. It also means that you are not competing in crowded waters with the masses. As you are concentrating only on one or two areas it means that you can also build up knowledge and relationships – both of which are key to successful sourcing. It also means that, through the knowledge you have built up on your niche, you can make decisions quickly which can provide you with a competitive advantage by providing speed and certainty to vendors which can often be reflected in the pricing of (particularly) off market assets.
2. Commercial Property Online Portals
The main portals that can be used to source commercial real estate include https://propertylink.estatesgazette.com, https://www.loopnet.co.uk (formerly Realla) as well as Right Move and Zoopla commercial, amongst others. However, whilst many agents (particularly the larger agency practices) advertise on these portals, many do not and so it is worth looking at the individual websites of commercial agents in your investing location where they will usually advertise all the properties they have available for sale.
Don’t be put off by sourcing through these portals – whilst it is always better to source properties off market as there is less competition – you can still find some gems on market – especially if you have a greater knowledge of your investing area / niche than others and are able to see angles that others can’t.
It’s worth looking out for properties that are ‘For Sale’ and ‘To Let’ simultaneously. This often shows that a vendor is motivated and may be up for a creative solution to their property problem.
3. Through Commercial Agents
Building relationships with commercial agents is one of the keys to successful commercial property sourcing. Did you know that often well over 50% of deals done through commercial agents are actually dealt with off market? Commercial agents usually have a ‘little black book’ of trusted investors who they send deals to before they go anywhere near the market. Why go to all the hassle and expense of marketing if you already know the main investors who are most likely to buy the property anyway? In order to get into that trusted pool of investors you will need to build relationships and, importantly, credibility with commercial agents. Commercial agents are fee driven, like all agents, so only want to deal with investors who know what they are doing and will follow through to complete a deal as quickly and with as little hassle as possible!
So, it’s important to approach conversations with commercial agents in the right way. Many ‘newbies’ to this market often approach these conversations the same way they would with residential agents – which will usually not get you too far. The keys to successful conversations with commercial agents include:
Language – make sure you understand some of the commercial lingo – dropping the right language can subtly make an agent realise you know what you are talking about.
Finance – cash buyers will always get to the top of the list. As the commercial finance market continues to prove challenging in the current market this is even more true.
Knowledge – this is where niching can continue to benefit you as you will know the market, the location, the pitch, and potential tenants better than others. This will not only provide credibility but will also enable you to make decisions quickly, further enhancing your credibility.
Fees – always make sure that agents know what is in it for them – agents are fee-driven so get this into the conversation early and never ever cut an agent out, even if you end up dealing with a vendor off market.
Reliability – Do what you say you are going to do, when you say you are going to do it. The last thing any agent wants is to work with someone who is unreliable – make sure that you have a follow up system and reminders to make sure that you do this.
4. Direct to Vendor
This can be a great way to source commercial real estate. The key to successful direct to vendor sourcing is, once again, niching. Distressed or not, a vendor will only deal off market if they can successfully achieve what they are looking for – which is very often speed and certainty. If your knowledge of your niche means that you can make quick investing decisions that could be just what a vendor is seeking in order to solve a particular property problem they may have. Niching can also mean that you can be more laser focused with your direct to vendor letter campaign and save you a lot of money and time chasing properties that don’t fit your investing criteria.
I have found that the keys to this type of sourcing is to utilise leverage, processes and systems.
Leverage – You can use online mapping packages – such as Nimbus Maps – to make sourcing the right type of property to fit your niche easier. It’s pretty time consuming doing this and sending out letter campaigns on a regular basis and, if you sat down to work it out, probably isn’t worth your hourly rate. Always write the text of the letters yourself but look for ways to outsource the distribution of the letters, whether that means using online help – such as https://www.stannp.com/uk, virtual assistants (VA) or personal assistants (PA).
Processes – However, it’s not advisable to outsource unless you have written up your niching criteria and processes clearly so that you can outsource with confidence, so getting processes sorted before you outsource is key.
Systems – Once you have outsourced, it is key to have check ins and follow ups with your VA or PA to ensure that they are carrying out your processes properly. It is also important to make sure that when you do have replies to your letters, you can follow up yourself quickly and efficiently.
5. Follow Up
This is the most underrated method of finding commercial real estate deals! You may have missed out on a commercial deal, but it’s always worth following up – many deals fall over before they complete – particularly at the moment with the nervousness of commercial lenders and rising interest rates.
Systems are also key here – make sure you have a follow up system in place and make sure you follow it!
And so, it’s time for me to sign off. Wishing you all the very best with your commercial investing journeys. It’s been an absolute pleasure writing for you and working with Richard and the team over the past 2 years. If I can help you with your commercial property investing in any way, please do contact me at suzi@commercialpropertyacademy.co.uk and I would be delighted to have a chat.
