The Right Time to Negotiate


 

When is the right time to negotiate your lease? NOW!

This is a question that has been posed to us hundreds of times. The answer is simple: now! A company’s business should drive its real estate needs, not the other way around. The real estate should support the business. Many people believe that a lease is a fixed liability and that nothing can be done, changed, or improved in your lease until it is a few months from lease expiration. The truth is that a lease is a more fluid document than people think. It can be amended and improved during the term of the lease depending on if you have the right leverage and story to tell your landlord.

Another question we often hear has to do with approaching lease expirations. When should we start looking or negotiating for a renewal? The answer is – whether relocating or staying – the time frame is the same. To achieve optimal leverage, and therefore optimal results in a renewal negotiation, you need to retain the perception that it is possible for your business to relocate. The relocation process – from site selection, negotiating business terms, negotiating the legal terms of the lease to submitting for permits and construction – can take 12 to 18 months. And that’s assuming the transaction is a priority for the tenant, the landlord and the brokers.

If you approach the landlord three to six months prior to your lease expiration, they can be quite certain you have not spoken to other properties and they will present an offer in confidence that they are not competing to retain your tenancy. In a lease negotiation, time provides the tenant with leverage. So do competing offers. Therefore, we recommend giving yourself a minimum of 12 months lead time (18 months if you are above 10,000 rsf) to begin researching the market for competitive offers. The earlier you approach your landlord, and especially if you approach them with another offer in hand, the more likely you are to get fair market terms.

The Value in Networking


 

I recently came across a very interesting article regarding networking and the “golden rules” that comes with it. I would like to take this further by showing how TAG views networking and the benefits it has delivered.

Tenant Advisory Group believes that networking is key for any sustainable and growing business. There is tremendous value in it and we know it works.

Networking, to be precise, is not just going to an event or getting someone’ card after an interesting conversation. It includes following up, and having a one-on-one, and understanding how you can help someone else- that’s where the real “magic” happens. When you sit down with someone, you are learning how your contacts/clients may be useful to them and vise versa. In the end not everyone reciprocates but having good intentions of wanting to help others always comes back.

At TAG, a substantial amount of our time is devoted to networking. We build, rebuild, and reinforce our connections. The remainder of our time goes to transactional client work. We devote a large portion of our time to relationship building so that we are more valuable to our clients and our contacts. We know that having a good network allows us to help our clients grow by connecting them to the right people. In addition, having a quality network allows us to be more of a “trusted advisor” and not just a broker.

Thanks to networking and relationship building, 100% of our clients come from referrals. 50% of our clients come from our networking partners and 50% of our clients come from passed clients who are referring us to new ones!

Another note to make about TAG is that we do not cold call. We find more value in warm calling and networking because we know relationship building is a long-term commitment that will pay off far greater in the long run.

The value in networking comes with an immediate assurance and confidence because it is proven that something good will come out of it. The number of opportunities in any networking setting is countless and we try to make the most of it. Referrals are exchanged, power partners are built and reinforced, friendships are being made. We network to help our company, but we also do it to help our client’ companies.

We also believe networking involves connecting people together, whether or not you are our client. That’s why people like to return the favor and keep us in mind. We actually want others to be successful even if it has nothing to do with real estate.

A company is never too large or too successful to stop networking. No matter how well your business is doing, networking will be the foundation of your growth and success in the long run. You won’t regret it!

 

 

“How Does the Economy Affect Real Estate?”


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I’ve had countless people ask me that question, and I’m glad they did.

What I’ve noticed most during these conversations is the assumption that a bad economy equals a bad real estate market.

My answer is that it doesn’t have to be that way. And it isn’t for TAG.

In the real estate market, a bad economy may be bad for the landlord, but it is good for the tenant, which is good for our clients.

During a bad economy, there tends to be a high supply of space available and a low demand for it. Businesses need less space because they are reducing their company size and make their existing spaces smaller. As a result, there is more supply available in the market than demand, and hence, the price of space goes down. Because of this, tenants are able to get better deals for a space of their choice at the lowest negotiable price.

In addition, when the economy is down, competitors at other real estate firms are discouraged to stay in the market, and so unintentionally hurt themselves by giving their potential clients to the remaining real estate brokers in the market. We have seen a large uptick in clients during every downturn.

When the economy is strong, landlords tend to make more money because businesses are growing and hiring more people, and so, are growing out of their existing space and needing more. This creates an increase in demand and thus, an increase in the price of space.

Accordingly, competitors have the incentive to come back into the market when its doing well, which creates more competition for other real estate brokers. But competition is of no threat when you continue to create value in finding the best and most affordable space for your clients. In other words, one will always have a strong business if they provide value to their clients at all times, strong and weak markets.

No one likes when the economy is in decline but Tenant Advisory Group tries to perform in a way that doesn’t depend or reflect on the economy for its success.

To TAG, client and team are the two most important factors that affect our “real estate market”. According to our criteria, if the client’ needs are being met, we are doing our job.

Therefore, one can control how you will do based on how you are running your business, working with your team, and meeting your clients’ needs. The economy does not have to be the scapegoat.

The Real Estate Process


 

“¢ Understand Client’ requirements in terms of budget, location, type, size and quality of space.

“¢ Put together alternative options that fit Client’ requirements and organize tour with those properties.

“¢ Draft and submit request for proposal that seeks to achieve all of Client’ goals, both financial and space quality and layout.

“¢ Run financial analysis to clearly indicate the impactful of the landlord’ response.

“¢ Draft and submit counter proposals to advance the negotiations towards achieving Client’ goals. Repeat until acceptable business terms are agreed upon.

“¢ Coordinate efforts of architect to design the space to Client’ specifications.

“¢ Coordinate the hiring of proper contractor and bidding process for build out.

“¢ Refer qualified real estate attorneys to review lease and coordinate the lease negotiation.

“¢ Introduce client to quality furniture vendor, mover, phone & data broker, insurance broker, and other ancillary professionals to help facilitate the process.

Don’t Be Afraid to Ask


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Having the most knowledge and information is a huge key to any negotiation. Simply asking is one of the most effective ways of acquiring vital information.

In most negotiations, it is rare one is asked for what they want in a deal. It is also rare for someone to get what they wish for without having asked for it first.

If a client asks a question to the landlord or leasing agent, the client will have undoubtedly gained more than they started with. Even if the client does not acquire exactly what they desired, the client has accomplished more simply by asking.

In most cases, it isn’t easy for the client to even know what to ask the landlord or how to ask the right questions.

A good broker that represents his/her client’ best interests knows what to ask for and how to get it.

For example, I had a client who was outgrowing his space but was still 2 years out from their lease expiration. He thought, “Oh well; I’m stuck until this lease is up and we can get the right amount space for our business.” He never thought to ask a real estate broker or consultant to give him the necessary information and knowledge regarding his situation. Just because you have a lease does not mean that nothing can be done to change it. We like to have your business drive your real estate needs and not the other way around.

Contrary to what some people believe, it is more than possible to negotiate with a landlord and ask them to put your company in a new space or to restructure your existing lease. Had my client not spoken with me, he would have been stuck in space that did not fit his needs.

No matter what situation or issue your company is dealing with, it is highly recommended and encouraged to ask your trusted advisors for good referrals who they recommend to help you.

Ask your trusted advisors; real estate brokers, attorneys, bankers, or CPAs to help you get the information and knowledge you need to ask the right questions.

 

 

 

When is the Right Time to Negotiate Your Lease?


 

This is a question that has been posed to me hundreds of times in my career. The answer is simple: now! What I mean by that is you should review your lease on a yearly basis. A company’s business should drive its real estate needs, not the other way around. The real estate should support the business. Many people believe that a lease is a fixed liability and that nothing can be done, changed, or improved in your lease until it is a few months from lease expiration. The truth is that a lease is a more fluid document than people think. It can be amended and improved during the term of the lease depending on if you have the right leverage and story to tell your landlord.

The next question I most often receive has to do with an approaching lease expiration. When should we start looking or negotiating for a renewal. The answer is that whether relocating or staying, the time frame is the same. The reason is that to achieve optimal leverage and therefore optimal results in a renewal negotiation, you need to retain the perception that it is possible for your business to relocate. A relocation from site selection, negotiating business terms, negotiating the legal terms of the lease, submitting for permits, and construction can take 12-18 months, assuming the transaction is a priority for the tenant, the landlord, and the brokers.

If you approach the landlord 3-6 months prior to your lease expiration, they can be quite certain you have not spoken to other properties and they will present an offer reflective of the knowledge they are not competing to retain your tenancy. In a lease negotiation, time provides the tenant with leverage. So do competing offers. Therefore, I recommend giving yourself a minimum of 12 months lead time (18 months if you are above 10,000 rsf) to begin researching the market for competitive offers. The earlier you approach your landlord, and especially if you approach them with another offer in hand, the more likely you are to get fair market terms.

 

For more information, please contact bill@tenantadgrp.com

Does Size Matter?


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Yes and No.

In theory, yes:

The larger company”…

  • Has more leverage over the landlord
  • Represents a larger share of the building’s cash flow and profit
  • Gives the building a higher occupancy, allowing them to charge more to other tenants

In addition, the better the reputation a company has, the more other tenants will want to follow them into the same property.

However, in reality, no:

Size shouldn’t matter with the right broker who is truly representing your best interests.

With a smaller company, the similar benefits are possible through a pro-active and strategic approach.

If a company is smaller, it is important to first get hold of a trusted and recommended real estate broker or negotiator who knows the business. The broker will have the experience required to compare prior deals made by larger companies in the building, and most importantly, the broker will care about the client’ best interests and negotiating the best deal possible for all of her client’.

Because the broker has significant information on the matter thus providing the client with the leverage needed, the client will get a result just as good as a large tenant that has an “˜importance in size’.

With a solid broker who has the best experience and knowledge, and who cares about the client, a small company can have the best deal, regardless of size.

Relocation Checklist


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TAG helps to relocate many companies every year saving them time, money, and hassle. Here is a relocation checklist so you can be sure you have everything covered for your next relocation.

____ Have movers come out to premises and do a walk through to determine relocation costs. Give a basic idea of what items need to move, any equipment or funiture that has to be taken down or taken apart in one location and put back together in another location.

____ Schedule time for freight elevators and docks at old and new locations.

 

____ Identify and secure insurance requirements.

 

____ Have phone and data broker arrange for telecom to be set up at new location and canceled at current location.

 

____ Contact furniture vendor to make sure all needs are taken care of.

 

____ Any sensitive items such as bank statements, contracts, invoices, client information etc need to be separated and either filed in another area of the office or if need be shredded.

 

____ Prepare an inventory of everything being moved.

 

____ Prepare change of address- notify post office, prepare business cards and stationary, send move notification to clients and vendors, change periodicals, subscriptions, and bill pays to new address.

 

____ Throw out all materials not essential to be relocated. May need to arrange for additional trash removal, charitable donation pick up, or coordinating off-site storage.

 

____ Communicate clearly with staff and movers so everyone is on the same page with how to prepare and label the belongings and what to expect with the new location.

 

____ Decommission old space. Get rid of unwanted furniture and equipment. Bring space back to what the lease terms specify- broom clean condition is typical.

 

Like anything, you should have a good team around you to help facilitate this process. Your broker should have key contacts in each of these areas that they can introduce. Always be open and honest about questions and concerns you have throughout the process.

When to Use a Broker


 

A couple days ago, I had an interesting conversation with a business owner who was looking to renegotiate his office lease. He told me he is currently working with a business consultant to help him to do this. I thought, Wow! Hold on, a business consultant?

The word “˜consultant’ can easily be misleading and tricky. Consulting is the right motive, but a real estate consultant is the right specialist.

The difference between a business consultant and a real estate can be seen here:

1. Business Consultant 2. Real Estate Consultant
  • Talks directly with Landlord, then client
  • Client first, then talk with Landlord
  • Limited knowledge= no competition, landlord has the advantage
  • More experience and knowledge= more competition, landlord will renegotiate
  • Client owes $ to business consultant
  • Client owe $0, landlord compensates real estate consultant
  • Results but no negotiation or savings
  • Best results and considerable savings

 

The more experience the better: When it comes to dealing with your second largest expense–like an office lease–it is critical to reach out and recruit the person with the most information and skills in negotiating leases.

Example 1. Renegotiating a lease using a business consultant:

The business consultant speaks directly to the landlord and asks what his best offer is. The business consultant then shares this information with the client who then calculates their best offer. The business consultant, who has no outside sources to compare prices of office leases, “negotiates” a price with the landlord. The landlord, aware that the business consultant has no outside information, has the upper hand. On top of this, the business consultant charges the client, who was left with poor results.

Example 2. Renegotiating a lease using a real estate consultant:

Clients first: The real estate consultant first asks the client what their intentions are.

The more information and knowledge, the more skilled the negotiator: The real estate consultant researches other buildings in the area, compares lease prices and shares this with the client.

The client then has the choice and upper hand to renegotiate the lease with the landlord or change offices. The landlord is now aware that he/she has competition and is more willing to seriously renegotiate the lease.

In addition, with a real estate consultant, the client owes nothing! The landlord compensates the broker.

The business consultant may have results but unsatisfying results. If you want the best results, think competition, think high savings, and get a real estate consultant.

Ten Tips to a Successful Negotiation


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TAG completes dozens of successful negotiations every year (over $30,000,000 worth of transactions in the last 2 years!) because we know the market better than anyone else and we understand how to work with others. Here are some tips you can use with your negotiations:

Information: information is the key to any successful negotiation. The more you have, the better position you will be in to achieve your goals.

Leverage: gaining leverage allows you easier access to achieve your goals in the negotiation. Often times, leverage can be found by gathering more information.

Fairness: you never want to take every penny off the table. Leave a little something for your opposition in a good faith showing of being fair. You may end up crossing paths again and you want to be able to pick up where you left off, which is successfully completing a negotiation.

Maintain calm demeanor: it is very important to never raise your voice. The purpose of yelling and screaming is to get someone to listen more closely, but it actually has the opposite effect. If you raise your voice, people will stop listening and progress will be halted.

Understand your adversary’ motivations: by understanding what your opponent’ goals are makes the accomplishing of your goals that much easier. Often times, the two sides might have varying definitions of success, making attainment a far greater possibility.

Understand your motivations: it is important to not lose sight of what you set out to accomplish. Many factors can play a role in working against you like ego, spite, saving face, or revenge. By remembering the purpose of the negotiation it can bring your focus back on what you are seeking to achieve and not wasting time and energy on things that distract you from your purpose.

Never make a threat you are not willing to keep: you will lose tremendous credibility and leverage by not following through on your threats. If you need to make a threat, you have to be willing to act on it should your adversary not comply with your demands.

Listen: this can be a tremendously effective negotiation tool. By asking questions and listening, you can gain great insight as to your challenger’ motivations, you can gain valuable information that will increase your leverage, or you may just learn something personal that you connect over. Either way, we have two ears and one mouth- use them in the same proportion.

Know your BATNA: this is your Best Alternative to No Agreement. Just because you are in negations does not mean you have to accept something that does not make sense. Having an alternative that you can fall back on provides tremendous leverage and ensures you won’t do a deal just to get something done.

Develop trust: everyone always prefers to work with people they can trust. This holds true with people you are negotiating against. It bodes well for future successes and better results in your negotiations.

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