When negotiating a lease, the best deal often seems to favor just one side, whether it’s the landlord or the tenant. While you might think that the outcome is obvious, what if I told you that, with the right approach, either side can come out on top? By learning the secrets of successful negotiation, you can gain the upper hand in any lease discussion.
Secret #1: Familiarity with the Property
As the saying goes, “knowledge is power,” and this is especially true in real estate. Landlords typically hold an advantage because they know their property better than anyone else. They are aware of the tenant mix and often feel they control the negotiations. However, tenants can level the playing field by understanding the property in detail. If you know what’s important to the landlord and which property features to highlight, you can strengthen your position. In short, familiarity gives you leverage.
Secret #2: Understanding the Market
It’s no secret that landlords with more experience tend to have an edge in negotiations. Their knowledge of the market allows them to navigate the process with confidence. As a tenant, you can’t afford to go into negotiations without understanding the market yourself. Therefore, you need to know when to stand firm and when to compromise. Hiring a commercial real estate (CRE) broker to assist with negotiations can save you time and money. Having a professional on your side ensures you are well-prepared.
Secret #3: Recognizing the Power Dynamics
In most cases, landlords hold the upper hand in lease negotiations because tenants need the property more than landlords need to lease it. This is a classic supply and demand situation. The landlord controls the supply, and this often dictates the terms of the agreement. Nevertheless, tenants can still take advantage of specific strategies to shift the balance of power in their favor, even when landlords appear to have the upper hand.
Tips for Tenants to Gain the Upper Hand
Hire a Real Estate Agent
First and foremost, one of the smartest moves an inexperienced tenant can make is hiring a real estate agent. These professionals are experts in lease negotiations and can help you secure better terms. Many tenants mistakenly view hiring an agent as an unnecessary expense, but in reality, the long-term savings far outweigh the upfront cost. Therefore, having an agent on your team is an essential step toward success.
Consider Multiple Locations
Another powerful strategy is to negotiate for more than one property at the same time. This gives you options, and options equal leverage. If landlords know you are considering multiple properties, they are more likely to compromise. As a result, you can choose the property that best fits your budget and needs.
Negotiate for a Better Base Rent
When it comes to rent, negotiating for lower terms can be challenging but essential. One way to approach this is by offering to sign a longer lease in exchange for better base rent. For example, you could negotiate a 2-year lease with an option to renew at a minimal rent increase, rather than committing to a 3-year lease upfront. This approach allows you to lock in favorable terms while maintaining flexibility. Additionally, focus on securing favorable termination and subleasing clauses for added peace of mind.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
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Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
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