It is time for the third and final installment of our series on creating competition for your tenancy. If you missed either of the previous segments, be sure to check them out here: Farming the Competitive Bid to Lower CRE Costs Part 1 & Farming the Competitive Bid to Lower CRE Costs Part 2.
In part 2 we finished touring our top commercial real estate comps and decided on our top three or four buildings. Regarding these top qualifying properties, the next step in the process is to distribute the request for proposal. As also discussed in part 2, we really want to set the negotiating stage in this step so it is crucial to put together a rather comprehensive request for proposal.
Before we get further into the negotiation process, there are some general rules to keep in mind:
- Be fair and realistic. That said, you want to remain aggressive in your approach, but understand that there is a give and take element to this. Consider current market rates and conditions and how offers measure up to their competition.
- Alert the landlords that they are among several candidates for your tenancy. Not only is the transparency appreciated, it will nudge property owners to offer more competitive bids.
- Keep all parties of informed and subject to deadlines. You don’t want your top building dragging negotiation and potentially keep you from getting your deal done as scheduled. If the landlord isn’t pushing for you to absorb their space, their is a good chance that owner will not take care of you the way any tenant would need.
When submitting your request for proposal, be sure to also request a copy of the landlord’s Standard Form Lease. Think of it as the landlords preferred negotiating position. An understanding of that preferred stance in addition to your already-developed extreme market intelligence be leveraged to negotiate more favorable lease terms.
After establishing the basis for your negotiations, you will want to submit subsequent RFP’s that address everything you would require to either continue to occupy your current space or relocate your business to the new location. A strategy to consider in doing this is to include other items that would be nice, but are trivial in terms of your needs. This is a good opportunity to make concessions while, at the same time, not losing too much ground.
The appeal of your tenancy (i.e. your credit, space requirements, lease term, etc.) will also help determine how much the landlord is will to bend. Landlords often have standard concessions they are willing to offer, but they will often be willing to go further for a company that is sure to stay in place for ten or twenty years. Companies with better credit and planning to stay in their new locations for extended periods of time are typically afforded larger tenant improvement allowances and that sort of thing. Negotiation in real estate optimization is not only getting the most for your money, but also for your tenancy.
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