Jonathan Keyser is the founding father of Keyser, one of many largest occupier providers business actual property brokerage companies within the nation.
The business actual property atmosphere is all the time impacted by the overall financial system, however at the moment’s post-pandemic atmosphere additionally has the added pressures attributable to the rising work-from-home motion. Whereas many landlords are holding on to excessive rental charges regardless of climbing vacancies, tenants nonetheless maintain the playing cards. Rising workplace sector emptiness charges have given tenants sturdy negotiating leverage, and that leverage shouldn’t be going away any time quickly.
Industrial tenants have traditionally gotten lower than optimum lease phrases as landlords and conventional brokers are consultants at taking part in the negotiation sport to get probably the most out of a tenant that they’ll. My firm, Keyser, is a tenant-only business actual property brokerage agency. Listed below are only a few of the basic negotiating methods we use that you just may discover useful in your individual offers.
1. Going Darkish
Silence might be one in all your best negotiation techniques. When you’ve ever been a part of a negotiation, maybe one which went sideways, silence typically means a misplaced alternative. If the opposing negotiating celebration is sensing shortcomings within the authentic phrases they’ve offered because of prolonged silence, they could be further proactive when speaking, and even make an additional effort to get the deal again on the desk.
How this works within the tenant’s favor: Making a “deadline” that’s weeks forward of the true deadline applies stress on negotiating events. This early timeline together with a “going darkish” technique typically persuades landlords to point out their finest supply sooner.
2. Phantom Growth
A phantom enlargement is when a tenant positions themselves as being able to develop, merge or purchase one other enterprise. On the time of negotiation, the enlargement shouldn’t be at present underway however is posed to be a future chance, no matter precise enlargement plans.
How this works within the tenant’s favor: Asking the owner for enlargement choices not solely units them up with hopeful expectations but additionally provides the tenant extra credibility with regard to stability. If the tenant is taken into account small however anticipated to develop quickly, the owner could also be extra keen to safe that tenant in hopes that they lease a bigger share of the out there house sooner or later. No matter whether or not you implement this technique or not, asking for enlargement choices is all the time a robust finest apply in negotiations as a result of the added flexibility to develop might be needed because the tenant’s enterprise progresses via its lifecycle.
3. The Unfixable Flaw
In evaluating every potential business actual property alternative, make sure you establish any weaknesses current, particularly ones that will probably be laborious to treatment or extremely pricey/inconvenient to repair. This flaw shouldn’t be a deal-killer however relatively one thing the tenant must take into deep consideration earlier than shifting ahead. This unfixable flaw might be something — the situation, parking state of affairs, clear top, tenant combine and even company neighbors.
How this works within the tenant’s favor: Stating this flaw gives you leverage to ask for extra concessions to sweeten the deal and make up for the unfixable flaw.
4. The Understatement
Understating a dimension requirement can open the door for a candy deal — no less than on a portion of the tenant’s house. If the tenant is on the lookout for 50,000 sq. toes and the owner is providing 50,000 SF, the tenant can state that they’re solely on the lookout for 42,000 SF, permitting the owner to upsell them to their authentic, unannounced dimension requirement.
How this works within the tenant’s favor: If the tenant could make it look like the extra 8,000 SF is pointless, they’ll simply negotiate a decrease price due to their “take-it-or-leave-it” mindset. This seems like a win for the owner as a result of they had been capable of upsell the tenant and fill their complete house relatively than on the lookout for a secondary tenant or leaving the house vacant. In actuality, this can be a win for the tenant as a result of they could have been provided extra concessions or a decrease price on the extra house, bringing their common rental price down.
Don’t let brokers or landlords reap the benefits of you in your subsequent lease negotiation. To implement methods just like the above, ensure that your business actual property dealer is conflict-free, which means they don’t characterize each landlords and tenants.
Whereas that will appear apparent, the business actual property trade is filled with conflicts of curiosity, and the tenant often will get the quick finish of the stick. Do not get blindsided by a brokerage agency or advisor whose fiduciary pursuits lie with the owner; look to rent a agency that makes use of the above methods solely in your favor.