Tips for Leveraging Commercial Real Estate Lease Negotiations

A commercial real estate acquisition strategy may take time and focused attention, but the process is critical if you want to keep your portfolio aligned with your overall strategic goals, while also adding value to your business.

As part of our team’s CRE acquisition strategy blog series, we’ve discussed how to: establish your CRE project strategy and selection criteria, conduct CRE market research and screening, and secure decision support. The next step of your acquisition strategy? Conduct leveraged negotiations with property owners and their agents.

No contract should be considered final without having gone through the negotiation phase. It’s an important step; the purpose of negotiating is to ensure the business and legal terms are fair for each party, while also creating competition for your tenancy. 

Thorough negotiation can save tenants significant sums on their lease terms while also minimizing risks and responsibilities.

How Does a Real Estate Advisor Better Prepare Tenants for Negotiations?

Knowledge and experience are essential when it comes to negotiating more favorable terms in lease agreements. Reputable real estate advisors are immersed in the intricacies of lease agreements and can help tenants navigate the complexities of all the different components that make up the total value of a lease.

Negotiation Involves More Than Price

Although rental rates might immediately come to mind when tenants think of negotiations, there are several other items that impact the final terms of a lease agreement. Real estate advisors help tenants see more than just the price, and assist in negotiating factors like:

  • Operating expense pass-thrus and escalators
  • Restoration responsibilities 
  • Subleases and assignment flexibility
  • Termination rights 
  • Lease incentives such as free rent and tenant improvement allowances
  • Default provisions 

Tips for Negotiating

Leveraging years of experience, our team can confidently say that negotiating is an art, not a science. Whether you’re entering your first or one-hundredth lease negotiation, here are a few tips to keep in mind. 

  • Use a well designed  Request for Proposal (RFP). It’s critical that you enter negotiations with a sound RFP. Meet with your real estate advisor ahead of time to ensure yours includes all the necessary items and inquiries. 
  • Create a market. Make sure that multiple landlords receive the RFP and that you are negotiating at all times with multiple options. This ensures that your team is fully in the know with what terms the market is bearing and maintains competition between landlords.
  • Address major issues first, before dealing with minor ones. To get the most out of your lease negotiation, we recommend starting with major issues like evaluating the premises and rent rates, before diving into less important details like parking. 
  • For some inspiration, read “Getting to Yes” by Fisher and Ury. This book offers great examples of how negotiations work, as well as proven strategies for intelligently approaching negotiations. 

Why Partnering with a Real Estate Advisor Is Key to Successful Negotiations

Selecting a reputable real estate advisor is essential to getting the most favorable terms included in your leases. Each advisor at Allegro Real Estate Brokers & Advisors walks tenants through all steps of a commercial real estate acquisition strategy and empowers them to trust the process from beginning to end. 

Our firm practices proven, successful asset acquisition advisory steps. We guarantee that all clients who create a sound RFP and complete financial analysis will be set up for success. The Allegro process enables clients to have a solid understanding of and confidence in all meaningful data points. In short, when our tenants are informed and other parties are not, our tenants have the upper hand in negotiations

Superior Negotiation Skills 

Our clients trust our team and our process for a number of reasons. We believe in and promote collaborative environments, and sharing negotiation tactics and knowledge with each other, including terms and conditions. Our competitors often compete with each other internally. We do the opposite, and that benefits both the tenants we’re representing and our team. 

We also employ a number of proven tactics during the negotiation process, including:

  • Having multiple bidders.
  • Creating a marketplace for our clients.
  • Reminding clients that they do not want to lose leverage, so remain ahead of whatever decision needs to be made.

Tenant-Focused Representation

There are times when an advisor represents both the tenants and landlord, known as dual agency. This position makes it difficult for the real estate advisor to advocate for either party. In contrast, Allegro remains unbiased; we only work with tenants to represent their side, ensuring they have a strong, experienced advisor in their court. 

Ready to speak with an Allegro team member?

We’d be happy to help you implement your CRE acquisition strategy. Contact us today for a free 30-minute consultation to see how our team can help you establish your selection criteria, conduct CRE market research and screening, secure decision support, and leverage negotiations. 

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