Even in a tenant's market, many businesses are still negotiating poor leases because they:
Landlords also have the upper hand because they have skilled commercial real estate agents working for them who negotiate on their behalf and fight for their best interests.
Here are six ways to help increase your leverage in negotiations and level the playing field:
One of the best things a commercial tenant can do to aid their lease negotiation is to get started early.
Even in a tenant's market (like we're in now), it still takes time to source a great relocation option or renegotiate your lease well. It's best to start your project early to:
The amount of time you need depends on several variables, like your business and the market conditions. However, as a rule of thumb, leave at least one year's grace unless you're a larger occupier (i.e. an industrial tenant or global company with lengthy approval processes). In this case, give yourself more time.
Even if you have your heart set on lease renewal, it's important to canvass the market for relocation options. This will ensure:
Once you've done that, hit the negotiations. Submit proposals to your current landlord and the landlords of alternative properties. And remember, don't make any decisions until you have negotiated the best deal on all your options and analysed costs and potential savings.
Tenant tip: you never know, you might find your dream space and deal where you least expect it. So, explore all options thoroughly and keep an open mind.
Creating a solid paper trail for your negotiations aids clarity, reinforces accountability and allows you to record any agreements you make. At a minimum, ensure to document:
Tenant tip: Never trust what you're being told verbally (even from your existing landlord). Nothing is worth anything unless it's in writing.
While securing a commercial lease is mainly about meeting your business needs, gaining insight into the landlord's motivations can help increase your leverage in negotiations. Here's why:
When it comes to lease negotiation, some obvious terms need to be ironed out, such as rent, lease duration, renewal options and permitted usage.
However, what many commercial tenants may be unaware of is that virtually every clause in a commercial lease is open to negotiation. In fact, a standard lease contains more than 40 negotiation points that, if overlooked, can spark problems because they're written by the landlord in their interest. For example, we recently came across an auto-renewal clause in a lease which stipulated that, if the tenant did not give six months' notice to vacate before lease expiry, their lease would automatically renew.
Most landlords enter negotiations knowing they have an advantage because they have an agent negotiating on their behalf who has strong knowledge of the building, market expertise and robust strategies.
So, if you don't have a rep on your side and aren't an expert negotiator in commercial real estate, you'll be at a disadvantage in negotiations.
The bottom line - if they're repped, why shouldn't you be?
The team at Tenant CS are consultants who provide real estate advice to commercial tenants. We negotiate on your behalf, securing savings, best-fit premises and favourable lease terms. Because of this, you'll see the best stock in the market (across all agencies), and our strategy will get you the best negotiation outcome for your business.
Level the playing field by getting Tenant CS in your corner. Book your obligation-free discovery call today.