Keys to Successful Commercial Lease Negotiation
It is important to make sure that you choose a tenant or landlord rep that has experience with Commercial Lease Negotiation. Increasingly, tenants are telling landlords they can’t afford to pay the rent or are complaining that “everyone else” is paying less than they are. That doesn’t mean that landlords are agreeing to lower their lease rates.Below you'll find some keys to successful commercial lease negotiation.
While its true that now is a good time to lease space, tenants can’t expect to get everything for nothing. If they did, the landlord couldn’t survive and ultimately neither could the tenant. It is important to understand why negotiations are so important.
A professional facilitator or commercial real estate broker can explain to both the landlord and tenant the difference between a good deal and an unreasonable deal. Believe me, that’s easier said that done when landlords and tenants are diametrically opposed in their definition of the word.
What’s reasonable to one side might be completely unpalatable and unfeasible to the other side. In such cases, tenants may be forced out of business, leaving landlords with empty space or non-starts. Both sides lose.
On the other hand, having a fully informed commercial real estate broker involved in the negotiation process often prevents adversarial relationships between tenants and landlords. This is critical because these relationships between landlord and tenant often last for years. An experienced broker can educate both sides about current market conditions in roder to forge a deal that will benefit the landlord and tenant alike.
The power to negotiate can be affected be several variables, including the length of the lease and the remaining term. If the lease is many months of years away from expiration/renewal, amending the terms may be difficult. After all, leases are a contractual obligation that must be honored as they are, unless the terms are renegotiated mutually. In that respect, landlords could have an advantage over tenants who were not fully informed be executing a lease agreement.
Whether you’re a tenant starting out in a new lease or you wish to renew or exercise an option, it is eessntial that you enter into that negotation with good informtion. Here are just a few ways that a tenant rep can assist in negotiation lease rates, conditions and concessions.
- Evaluate your needs. If you’re a tenant, an expert commercial lease representative can help you determine how much space you need and how it should be configured for maximum efficiency. I know of one case in which the tenant thought he needed 20,000 square feet. However, after a thorough evaluation of the tenant’s operation, the tenant rep determined that 15,000 square feet could no only provide for the tenant’s current business volume, but also accommodate its growth plan for the next five years.
- Great reps identify all suitable solutions, not just obvious choices. Having the appropriate amount of space in the optimal location will help your business save money and operate more efficiently over the term of the lease
- Create competition between landlords. When landlords compete, tenants receive the most favorable price and terms. Ideally, there should be a three-way competition for your business, even if you prefer a single property. Competition creates concessions and inventives int he market. While landlords don’t like hearing this, this is the same process they utilize when investing in property.
- Analyze cost of breaking the lease. A professional tenant rep will help his client negotiate terms that not only meet their present needs, but that also consider their options for an exit strategy. Even if it’s after the fact, a qualified professional can evaluate both parties’ options in case the tenant needs to move.
- Good tenant representatives act as buffers. During lease negotiations, a qualified tenant rep definitely should come between the tenant and landlord. If negotiations become tense, the “go-between” will always soften the potential conflict and introduce new and creative ideas that often eliminate the problem.
- Handling the paperwork and details. Real estate documents can be complicated; having a tenant representative can help resolve issues and eliminate potential problems before the final lease is prepared. In addition, a representative can keep you from unintentionally agreeing to unfavorable terms and conditions – before you sign. Should disputes arise after the lease is signed, a rep can verify the details of a transaction and resolve the disagreement.
Successful commercial lease negotiation starts with a qualified tenant representative with knowledge and experience. Commercial Property Southwest Florida, a Cushman & Wakefield Alliance office, provides Fort Myers, Naples, Bonita Springs, Cape Coral and the rest of the Lee and Collier County areas with Commercial Lease Negotiation assistance. We represent both landlords and tenants in signing deals that work for all parties involved.
Learn more about our team and how we can successfully handle your commercial lease negotiation.