Talk to Your Landlord 6-9 Months in Advance

GotOffice — Mon, 14 Feb 2011 05:39:04 +0000

All landlords expect to make deals well in advance of actual lease expiration dates or new lease commencement dates. So we use this time to your advantage, by beginning your negotiation early. This does two things; 1. it sets the stage for your ability to move in the eyes of your landlord, and 2. it allows you ample time to really consider other options, options you can potentially play off your landlord to generate even greater leverage.

Ask for a Written Lease Renewal Proposal

GotOffice — Mon, 14 Feb 2011 05:37:28 +0000

The old adage is “He who speaks first loses”. Well, that is very true in the office leasing world. Your landlord should be able to provide a written lease renewal proposal the same day they are asked or the next day at the very latest. You may be pleasantly surprised how aggressive your landlord gets in an initial proposal to keep you out of the market. We use a carefully crafted form called a Request For Proposal (RFP) to start all negotiations. This document sets forth the basic deal points you are looking for in your renewal and the parameters by which you would consider renewing. Then your landlord can respond with the economic deal points they are willing to offer based upon your unique needs. Having everything in writing also keeps your landlord honest when its time to draft the lease.

Let Them Know You are Reviewing the Market

GotOffice — Mon, 14 Feb 2011 05:34:35 +0000

Many brokers will shy away from this approach because they want to endear themselves to you by showing you all sorts of options before they speak to your landlord. We couldn’t disagree more. We’ve seen from our years on the Landlord side that those tenants who are in constant dialogue with the landlord regarding their review of the market always get the best deal. They wear the landlord down over time, giving the landlord multiple opportunities to compel the tenant to renew. The alternative of waiting until you’ve lined up other options and hitting the landlord between the eyes with an initial lowball offer is often so shocking that it makes the landlord turn up their nose and sometimes they won’t even respond to your proposal. You would be much better served to create a congenial negotiation where the landlord wants to keep you in the building. This approach is much better than creating an adversarial position where the landlord only keeps you because they have to. So, be in communication.

Everything is Not Perfect

GotOffice — Mon, 14 Feb 2011 05:32:37 +0000

If you tell the Landlord that the space is great and/or the building is great, or give them other reasons why this is the perfect office for you, you’ve just eradicated your negotiating leverage. Instead highlight the challenges you have in the space, or the building, or even your issues with the management team (this should be done very politely). The bottom line is this; Your Leasing Situation is Not Perfect. We know, because we’ve never seen a perfect scenario. There is always wasted space in the office, or the building is not ideally located, or the tenant down the hall is noisy, or you’re tired of the restaurant selection in the area, or whatever. Just put a little fear of doubt in the landlord.

Let the Landlord Spend a Little Money on You

GotOffice — Mon, 14 Feb 2011 05:28:36 +0000

If you are considering renovating your space, by all means request that the landlord set up a meeting with their space planner. The landlord will generally gladly comply with your request and will pick up the cost of the space plan and space planner’s time (don’t ever let the landlord talk you into reimbursing them if you don’t renew). Once the landlord has spent some money, they will be more attached to the idea of renewing your lease. No landlord wants to lose a deal after spending money on that deal and have to deduct space planning costs from their marketing budget. They would much rater put those costs in with the tenant improvement budget and reflect the costs as a positive measure to encourage their successful renewal of your lease.

Call the Head Honcho on the Landlord’s Side

GotOffice — Mon, 14 Feb 2011 05:26:50 +0000

It never hurts to develop a relationship with a senior individual on the landlord’s side of the table. We’ve seen building leasing agents bend over backward just because a call came down from on high saying “take care of this tenant”. If you’ve got a top end relationship, by all means use it. However, never rely on it entirely. You still need a qualified Leasing Expert to ensure that you’re getting a great deal. Like we’ve said before, have your Leasing Expert in place before you make the call. And don’t worry, it won’t jeopardize your top end relation ship, it will just make them respect you more.

Show the Landlord Your Alternatives Matrix

GotOffice — Mon, 14 Feb 2011 05:24:25 +0000

Assuming you (or your Leasing Expert) has developed other leasing alternatives in the marketplace, and assuming those alternatives are compelling when compared to your landlord’s proposal, show your landlord the numbers. Now that doesn’t mean that you go and print out the proposal matrix and give it to your landlord. Don’t ever disclose the address of the competition, you probably don’t even want to disclose the square footage of the competitive spaces. However, if the rates are compelling, show those rates side-by-side with your landlord’s rates. Likewise if the overall monthly rent is compelling, show that side by side with your landlord’s proposed rent. The person you are probably speaking with on the landlord’s side is probably the leasing director or leasing agent for the Building. They need ammunition to be able to go to their superiors and ask them to give you a better deal. So, give them the ammo to sell on your behalf.

Select an Inferior and/or Smaller Competitive Alternative

GotOffice — Mon, 14 Feb 2011 05:21:16 +0000

One strategy is to select at least one competitive building/space that is either inferior (therefore less expensive per square foot) and/or is smaller in terms of square footage (therefore less expensive overall). Then, if you share the numbers as instructed above, you should get the landlord to stretch even further with their rate structure. This is a good strategy even if you probably wouldn’t go to the inferior building and even if you don’t think you could squeeze into the smaller space. And, who knows, the deal may be so compelling or the space may be so efficient, that regardless of your initial thoughts, it may become a real cost-saving solution.

Combine Efforts With Another Tenant

GotOffice — Mon, 14 Feb 2011 05:18:00 +0000

We’ve seen many smaller companies combine with other companies in their negotiation or piggy-back on a larger company to get a better deal on their renewal. Remember that the larger tenants enjoy the best pricing power and so if you have an affiliate relationship with another tenant in your building, it may behoove you to buddy up in your lease renewal strategy. For this to be effective, you will need to have leases that expire in the same year, you will need to create some kind of affiliate linkage and you will need to work with the same Leasing Expert. However, you can also use a version of this strategy if you are aware of the details of another larger tenant’s deal in your building. If a deal was recently completed with a larger tenant for the same basic lease term and similar tenant improvements, often you can go to the landlord, state that you know that you know the terms of deal and then you can cut to the chase very quickly.

Ask For a Turnkey Solution From Your Landlord

GotOffice — Mon, 14 Feb 2011 05:15:35 +0000

If you are going to be doing some improvement/refurbishment to the space, it is often better to get a turnkey deal from the landlord (meaning the landlord builds what you tell them to build), than to get an allowance (where you control your own construction). Many brokers are advocates of allowances, but allowances generally work out better on larger transaction with lots of special design elements. However, if you are looking for fairly minor improvements, it often makes more since (and carries less risk and hassle for you) to have the landlord cover all the costs associated with the improvement. For example, if you want new carpet and paint, its probably better to pick the carpet grade, style and color and the paint color you want and ask the landlord to do it all, including temporarily moving your furniture. Otherwise, you could be forced to source 3-4 different trades to complete and manage the process.