Sunday, July 29, 2012

Commercial Property Leasing Negotiation Tips

foyer of a commercial office building
Prepare for every lease negotiation the right way.

When you take a tenant through a vacant commercial property, they will ‘try you on’ when it comes to asking rent and lease terms and conditions.  When this happens you must remember just who your client is in the process and the target lease terms and conditions that the client requires.  To do otherwise will waste a lot of negotiation time.

Here are some tips from our Bulletin this week.

What's Easy is Not the Best

It is sometimes easy to take the ‘middle road’ when it comes to matters of lease offer and acceptance.  The reality of the matter is that the final lease offer should be relevant to the property and the prevailing market conditions.  Ask yourself, ‘Is it a fair offer in the existing property market?’

Top Agents 

Top agents are expert lease negotiators and are very prepared to drive a strong market relevant lease deal.  The rents and lease terms will be on par with the local area and the condition of the property.  A fair market rent is one that takes into account all the prevailing market conditions and property factors.

So here are some tips that can apply to negotiating a lease today in any property type.

  1. You should know that you are really dealing with the decision maker for the potential lease.  In the case of a company it may be necessary to get a business plan or company performance report from them as part of the qualification process.  It could also be necessary to get a company search done to ascertain where they are based and what the legal company structure is in your country.
  2. The offer that they make should be in writing and reflect the fullest terms and conditions possible that are on par with the trends of the local property market.
  3. Check the history of the tenant to make sure they are who they say they are and they have given you a real legal entity as a potential tenant.  Evidence from their solicitor or accountant may be necessary.
  4. The prevailing market in the local area will have levels of acceptable rental and lease profiles that would be applicable to the property type.  Target the best package that you can for the client that you act for.
  5. Factors of supply and demand will have impact on vacancies and levels of enquiry from tenants. Your clients should be fully briefed on those facts before you put a lease offer in front of them.
  6. Always negotiate face to face with all parties to a lease offer.  It is far too easy in a telephone conversation to decline or deny a fair and reasonable lease offer.

A successful lease negotiation is a reflection of a controlled and planned strategy from the very start to the very end.  Stay with the negotiation to the very end and be prepared to work any discussion or debate from a base of local market knowledge and fair market conditions.

If you want some more tips on leasing commercial or retail property you can get them here.