Tag Archives: attorney

Mastering the Art of Commercial Real Estate Negotiation

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In commercial real estate, we are constantly honing our negotiation skills. Our ability to negotiate will be put to use, not only in the process of creating an offer and working diligently to get it accepted, but also with your contacts, brokers, buyers, sellers, landlords, tenants, vendors, and lenders. In any situation where there are more than two interests, we know that negotiations will take place in order to satisfy everyone’s goals.

Many people fear negotiation, usually due to a lack of experience. But, once they begin practicing, over time it becomes progressively easier, and may even become fun! Negotiation is filled with tactics and problem-solving, used to yield the best results for each party. Being a good negotiator is very important to our business, especially in a challenging economic environment.

There are different negotiating styles that work for some people, and not others. For example, some find success with a very strong, even intimidating approach in negotiation.  This method is successful on occasions where the other party is easily intimidated or extremely motivated to relinquish their position. Personally, I prefer to use a straight forward approach, whereby I am prepared, informed and persuasive. As I have anticipated the questions and concerns the other party may have, I find it easier to answer them. This helps me to clearly and confidently negotiate terms. As a result, closing deals is often easy and fun. It is true that different styles should be used in different situations, so study others who negotiate and develop a style that works best for you.

In commercial real estate brokerage, as in most businesses, it is best to yield to an agreement that is win-win, meaning both parties are satisfied with the results at some level. If the strongest concerns of each party are addressed and a solution results, the agreement is of mutual benefit to both parties.

If you are not familiar with negotiation, I suggest that you take a class, purchase a book (I just completed ‘Essential Negotiation’ from The Economist), or find a seminar that covers the basics of negotiation. There are many generic tips and tactics that will sharpen your negotiation abilities and make it easier for you to get what you want out of an opportunity.

In commercial real estate, there are specific negotiation tactics that can be written into contracts. Many of these tactics require some creativity and are specific to certain situations. Don’t be afraid to get creative; after all, this is where commercial real estate becomes exciting.

We are always making an effort to sharpen our negotiating skills, and shape our strategies to increase our clients’ bargaining power.  Having a few extra tricks up our sleeves to help influence a deal in your favor does not hurt either.

Office Relocation Plan – Robert S. “Bob” Lowery

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Below is an office relocation plan as implemented by Robert S “Bob” Lowery’s Tenant Representation Group.

The most streamlined and effective approach is summarized here:

  • Establish a relocation team to coordinate the move. This may also include an advisory team consisting of real estate and relocation professionals and real estate attorney.
  • Determine your needs.  How much space do you require?  What type of building fits your business?  What is your preferred geographic location?  Do you need to be located near restaurants, hotels and/or public transportation?  Lastly, you’ll need to prepare a budget.
  • Identify potential properties. Obtain a list of available properties from your tenant representation broker.  Narrow the list by excluding properties that are unsuitable.  Schedule a tour of the remaining facilities.  Determine which locations could be appropriate for your business.
  • Prepare a preliminary space plan. With the help of a space planner or architect, determine the most efficient use of space at your two or three top building choices.  For construction cost estimates, establish a general type and amount of changes required.
  • Develop a Request for Proposal (RFP).  Your tenant broker will prepare and distribute an RFP to the landlords of your top building choices.  Based upon response, determine which space would be the best alternative for your business.  Once determined, your tenant broker will submit a letter of intent to the landlord outlining the terms you intend the lease to be based upon.
  • Finalize space plan. Get input from departmental representatives and have a formal blueprint created to represent your new space should remodeling/construction be necessary.
  • Negotiate the terms of your lease. Once a lease is obtained and reviewed by decision-maker(s) from your company, get input from your tenant representative and attorney.  Renegotiate and/or accept lease terms.

Now, having conceptualized the process, you’ll need to dive a bit deeper into the details required for planning your move.

  1. Identify dedicated resources. This should include a relocation coordinator and departmental representation.  Each participant should understand occasional evening and weekend work may be necessary.  The team should also plan to attend weekly progress meetings, once details begin to materialize.
  2. Develop an advisory team:

A Tenant Real Estate Representative:
Choose someone experienced in lease negotations and specialized in similar types of space (e.g. office, industrial, retail, etc.). Understand how he/she finds available space. Ask how this person will get paid for providing services. Also ask for 2 or 3 references of similar clients.

A Real Estate Attorney:
He/she should help in determining rights of both parties and understanding the significance of all lease terms. Should also recognize and leverage the goals of the business with those of the landlord.

An Architect/Space Planner:
Relocation is an excellent opportunity to design a more efficient working environment. This person can help in determining the correct amount of space required, taking into consideration current/future employees and growth expectations.

A Furniture Consultant:
If buying new furniture, bring a furniture vendor into the process to help with the type of configuration of workstations and individual office furniture. Design services are typically offered at no charge to you, depending on the type of and quantity of furniture ordered.

An IT Consultant:
This is crucial in helping to design and setup telephone/data services, esp. if you are planning to move significant existing equipment. Key considerations include building ample capacity for phone/data networks with appropriate access points throughout the new office. This resource may also be helpful in coordinating external vendors, such as utility providers, ISPs, phone companies, etc. and renegotiate contracts.

  1. Determine the budget. Consider the costs of professional advisory fees, hiring a moving company, relocating your equipment and computer network, replacing office furniture and printing costs for new business cards, stationary and other printed material, including relocation announcements for customers.
  2. Establish a Time Line. A typical move can take anywhere from 6 to 12 months of planning.  In general, your facility selection and lease review process will take the longest amount of time.  It’s important to continue working through other facets of the move, choosing a moving company, researching furniture options and office equipment during the facility selection process.

Key Considerations

Evaluate the feasibility of renewing your current lease before making decisions to relocate. If you choose to move, interview tenant representation brokers. Be sure to check references as well as companies/properties they represent. Establish a moving date well in advance, ideally in less busy period of the business to ensure ample time for the relocation process.

Action Steps

Depending on size of the organization, anywhere from 6-12 months prior to the move you should: Appoint a relocation coordinator, interview and select a tenant representative, engage services of a real estate attorney, select the rest of your advisory team including an architect or space planner as well as furniture and IT consultants. Next develop your relocation budget, including estimates for professional services, moving expenses and the cost of new furnishings and equipment. Lastly, schedule the prospective moving day, knowing that this may be a moving target until the office space selection and other factors are determined.

Contact us today to assist in the implementation of a relocation plan.

A Well-Crafted Letter of Intent

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Plain and simple: We, as partners in a real estate transaction, need to resolve as many issues as possible for your business, before the lease is drafted.

While we have encountered several competing brokerage firms using letters of intent / tenant proposals based on basic business terms such as rent, area, and escalations, we understand that dozens of other issues typically surface with the presentation of the landlord’s draft lease. From our point of view, this is the worst time for disagreements or misunderstandings to emerge. Your urgency to close the deal and get the relocation program underway can now pressure you to concede to unfavorable lease provisions.

A well-crafted letter of intent / tenant proposal can prevent this situation from occurring.

This type of proposal covers, in detail, the terms and conditions of the deal. It is delivered to the landlord, or landord’s leasing broker, to demonstrate intent to lease or purchase as well as for qualification and negotiation purposes, prior to the drafting of a lease.

What does this accomplish?  Your legal fees are reduced, and your leverage is conserved.

Comprehensiveness is crucial and when we draft a proposal with the highest attention to detail, nothing is taken for granted.  While listing broker’s tend to cast as little light on detail or imperfection, it is assumed that any issues omitted or inadequately addressed will ultimately be resolved in the landlord’s favor.

Among other questions that our tenant representation team has catered for industry specific needs, we find these proposal inquiries commonly omitted from letter of intent / tenant proposals, which should be clearly addressed in ours . . .

  • What restrictions will be put on the use of the premises?
  • Which of the landlord’s expenses will be included in calculating operating escalation, and which will be excluded?
  • How will you be charged for electricity usage? If sub-metered, what is the landlord’s profit margin?
  • What rights will you have to sublease the space? If there is a profit, which party will get the benefit?
  • What rights will you have to renew the lease? How will the renewal rent be determined?
  • What rights will you have if the landlord defaults on a mortgage or a ground lease?
  • What rights will you have to make alterations to the space?
  • What will your obligations be at the expiration of the lease?
  • Which party will pay for working drawings?
  • Which party will bear the cost of bringing the space into compliance regarding any Disabilities regulations?
  • During what hours will the space be heated and air-conditioned?
  • What penalties will accrue if the landlord does not deliver the space on time?

These are only some of the potentially deal-breaking or otherwise costly issues that the proposal should address. If they are resolved, final lease negotiations will be relatively swift and painless. If not, you preserve your options while looking elsewhere.

This post was republished from Robert S. “Bob” Lowery’s original post, “Resolving Issues Prior To A Landlord’s Lease”