9 Great Tips for Checking Market Rental Evidence

In commercial real estate, it is essential to maintain accurate market rental information. As the property market shifts and changes, the levels of rental and incentive also shift and change. The sharing of rental information between commercial real estate agents is therefore a productive process and a key element of market intelligence.

Rentals in commercial real estate and investment property will typically be either net rental or gross rental. There are also variations in which these rentals can be applied to the particular lease and the relevant property.

Given that each lease is unique and different, it is critical that you investigate the full elements of the rental and lease details you come across in each and every case.

This will mean the following:

The date on which you acquire the information is fundamental to your record keeping process.
The date on which rental information has been struck is relevant to the market only at that time, hence that date is critical to your analysis and assessment.
The source from which you gathered the information must be recorded and checked for its validity. At first glance, the rental information may appear accurate, although further information may discount the relevancy. When you rely on this information in a rental dispute process, the validity and accuracy of rental records and benchmarks cannot be overstated. Any property valuer that is appointed to resolve the dispute will seek evidence from you on the source of your information. In this case, the more information you have the better it is to support your argument.
The location of comparable rentals and tenancies in other properties should be inspected before they are considered directly comparable. This means that the details of the rental alone are not sufficient in the first instance. Comparable tenancies and comparable properties are not always as you expect. The location of the other tenancy relevant to the facilities, services, and amenities to the property will always create differences in rental profile. In retail property, passing foot traffic will also have impact on the rental levels. In this case, seek to understand the access points to the property and where most of the foot traffic passes. Take particular care to note that this will change at different times of the day and on different days of the week.
When comparing rental information with other leases it is wise to seek a copy of the other lease documentation where possible. In only this way can you fully understand the original occupancy circumstances of any potentially comparable tenancy.
When the new lease situation is created, the relevant tenancy can be given an incentive from the landlord. This can be in the form of a rent free period, landlord funded fit out, landlord cash, and discounted rental. This will impact the rental established at the time of lease commencement and should be removed from that lease structure when you are comparing tenancies across different properties and or locations.
The presentation levels achieved in a retail tenancy will have immediate impact on the levels of trade. The levels of trade will always impact of the rental paid. This is another reason to inspect comparable tenancies and compatible properties before you accept the rental as being relevant to your market rent investigation.
In a retail property, the days on which the property trades to the local community will also impact the rental. Any comparable properties in your market rental assessment should trade under similar circumstances and times of the day.
The levels of outgoings that are paid in each and every lease can be potentially different. This is another reason to read the leases before the rentals are considered directly comparable.

In summary, the gathering of market rental information in a commercial or retail investment property is an important task that requires dedicated focus. Pay attention to the property in all respects and make sure you inspect any comparable rentals before accepting them.

About this Author

John Highman is a prominent investment real estate speaker and coach that helps property investors, and real estate agents globally to improve their commercial real estate property performance. He himself is a successful real estate agent that has specialised in major commercial asset sales and leasing for over 30 years.

You can get John Highman's free tips and tools in commercial, industrial, and retail property at http://www.commercial-realestate-training.com

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