The best deal in lease negotiations, in the end, favors only one side. Whether it goes to the landlord or the tenant, you might think the answer is obvious. However, what if I told you that with the right approach, you – be it the landlord or the tenant, can take it for yourself? There are secrets as to how they get the better end after all. And by knowing these secrets, could actually be the key to winning the negotiation for yourself.
Secret #1: Familiarity of the Subject Property for Lease
“Knowledge is power”, as the adage would have it and that about sums up why landlords hold the bigger advantage over tenants in lease negotiations. The first secret is the landlord’s familiarity with the property itself. Most landlords know what’s happening with the tenant mix and they feel they have the upper hand. However, when it comes to negotiating lease terms there are other factors that come into play that can be in your favor. Since negotiations mainly involve holding the ace card to throw at the deal, you will need to know what’s important to the owner and which feature you could use fully in order to undermine the proposal that the opposing party is throwing at you.
Secret #2: Understanding the Trade More
The second secret isn’t even a secret at all. Everyone knows that anyone who’s been in business longer than you will have the upper hand most of the time, especially in real estate. They know the ins and outs of property negotiations, and will not hesitate to use them. Winning in lease negotiations call for a full understanding of the “works”, so to speak so if you are an inexperienced tenant, never throw yourself in the battle without arming yourself. Real estate is not such a complex business as long as you know what you must and must not do in dealing with negotiations. As mentioned below, having a CRE Broker help negotiate your lease or renewal can save you time and thousands of dollars.
Secret #3: Having the upper hand
Yes, landlords most often have the upper hand or control over negotiations given the premise that tenants need the property more especially if the subject property fits perfectly with what they really need. It’s a world of supply and demand, and in most cases, it’s the suppliers that control the prices and how much you get from it. Real estate isn’t different, and with the property being a base desire for every person, it’s hard for the ones with demands to be in control. This is especially true when the landlord has exactly what you need. And so, one of the strongest points in lease negotiations goes to most landlords, however, not necessarily one that could be the winning thrust in any given dispute or concern to disclose.
If you are the tenant, on the other hand, wouldn’t you want to have the upper hand in dealing with these negotiations as well? Well, here are some tips to get you some of the upper hand over the landlord:
- Get an agent to negotiate for you
Getting an expert to do the lease negotiations for you is the wisest move for any inexperienced, yet interested tenant. A real estate agent is an expert in this field and so you will know that you are in good hands if you hire one. Sometimes, interested tenants tend to think that getting a real estate agent is simply an expense and not necessarily a help to cut the cost or close the best deal there could be. Truth be told, having an agent on your team is one of the best solutions to winning that negotiation for the exact lease you are after.
- Be open to more options
Negotiate over more than just one location at the same time – this could be the advice you get to hear from those who have experienced negotiating with a landlord over a lease. If you are to consider having an upper hand at lease negotiations, more options is more power. It is wise for you to consider negotiations over more than just one property for lease, be it with the same landlord, just so you could create a more open option for the property which your budget and requirement fit most perfectly.
- Better base rent equates to negotiating for a longer lease term
Learning how to negotiate better lease rent is one of the secrets to nailing it in any lease negotiations you could possibly face. Keep in mind that you need to achieve a base rent where there is minimum lease length however with maximum benefits. It is not a bad idea for you to work with your probable landlord in order to come up with whatever you are both willing to give just to get into what you may refer to as a “committed tenancy”.
What you need to do is to come up with a negotiation over future renewal options, like maybe getting to agree on a compromised 2-year lease with the option to renew with a minimal rent increase as opposed to that full 3-year lease. It is quite inevitable for future rent increases to come anyway so why not compromise capping it into the agreement you are going to get into? Note that most brand new retail businesses could be better off accepting the higher price of a short-term lease the first time around. This, coupled with being able to focus on getting favorable termination and subleasing clauses, could definitely offer them peace of mind.
Knowing is actually just half the battle. How you handle it will be another. Just know that in commercial lease negotiations, all will be fair and the difference will be in how you handle things or what approach to take in order to get the upper hand. So whether you are the landlord or the tenant, such negotiations will go in your favor if you know exactly what you are getting into and then follow through with how you should do it.
Even after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE