The negotiation process can be intimidating, but it doesn’t have to be if you go in with the right attitude and information. Whether you’re looking to increase your salary, restructure part of your lease or save money on that new car, follow the tips below to get what you want and feel good doing it.
Know the market. When negotiating, specificity is key. Hone in on exactly what you want, and then provide reasons why you should receive it. For instance, when negotiating a higher salary, look up standard industry salaries for your position and take note of how your salary reflects that. Hard statistics strengthen why you deserve additional compensation. From there, put together a comprehensive list of your accomplishments, any projects you’ve managed and any initiatives you’ve been part of within your company, as well as any relevant outside qualifications you have. Use your hard work as leverage. A negotiation is never a time to sell yourself short.
Don’t be afraid of no. Ideally in your negotiating process you’ll get exactly what you walked in for, but the best negotiators also already have alternatives in mind. It’s essential for you to go into your meeting under the impression that you will receive your requests, but also find a few alternatives to your original offer that you would be happy with. For example, if you’re buying a home, but the realtor is not willing to budge on price, try asking for some repairs or upgrades to be covered instead. No matter what you’re negotiating, having a counter offer prepared will help ensure a successful negotiation.
If your boss doesn’t want to raise your salary and the conversation is stagnating because neither party will budge, you can offer up other ways in which you can be compensated. Try requesting benefits such as extra PTO, a gym membership or an end of year bonus. When you look at your total benefits and re-frame your requests from that perspective, your odds of a successful negotiation are much higher.
Listen. When the person you’re negotiating with is speaking, listen carefully. By asking open-ended questions and utilizing active listening, you’re setting the stage for an actual discussion instead of just a bargaining match. The more time you take to listen rather than just waiting to reply, you can get a better understanding of where the other party is coming from, and you can adjust your negotiating tactics accordingly.
The best way to successfully negotiate is to be mindful throughout the entire process – from the time you take to properly research before the meeting to the meeting itself. With the proper information and a good attitude, you’ll be able to take on any negotiation confidently and successfully.
Relocating and choosing a new office space is a lot of work, no matter the size of your company. However, it also provides an exciting opportunity to start fresh in a new space. Carefully consider the following points to ensure you get the most out of your move.
Select a location that works for both clients and employees. You want a space which clients can find easily and employees can comfortably commute to – perhaps close to public transportation or with a parking lot if many clients and employees will drive to reach you. Consider where your key employees live and whether the space is convenient for them.
Find a space that doesn’t stretch your finances too thin. Make sure to calculate the full cost of the space and consider any hidden costs carefully to make sure nothing sneaks up on you (parking, utilities, any necessary construction, taxes, phone & data set up, janitorial, new furniture, etc).
Look for a space that will allow room for growth. Opt for a space that could potentially accommodate a growing team or evolve with your business. Also, check that any new space has sufficient area to allow for breaks and group or client meetings.
As you evaluate your options, look for a space with easy-to-use and secure IT systems, particularly if you need a reliable internet connection for your business to function properly. Understand and test the current technological infrastructure of each space you consider to ensure it can accommodate your business needs or if a potentially expensive build-out may be required.
Think about what amenities you’d like your new space to offer employees. Sunshine can be a great easy perk as access to natural light can affect mood, energy levels and alertness. See if your new location has space for a stocked beverage center or coffee bar. Also, consider investing in employees’ health with an on-site fitness center or dedicated wellness room.
Where you work matters. That’s why we’ve partnered with an online software platform to make it easy to search for spaces that are specific to your needs. All you need to do is enter your information here, and you will be given access to a database of office space listings complete with virtual tours, floor plans and all-in monthly prices. Finding the space of your dreams is only aclick away.
Reviewing each section of a commercial lease is a long process, but it’s essential to identifying ways a tenant can save money. One often overlooked area of these documents is the array of options that can be used to securitize a lease, as well as the Surrender Clause upon lease expiration. Here are a few different options a tenant should consider when negotiating their lease.
Types of Securitization
There are multiple options and opportunities when it comes to security deposits. Review your options thoroughly to decide which makes the most financial sense for your business.
- Cash Security Deposit: A landlord will hold this in an escrow account, and it is returned if the space is in good condition at the end of the lease.
- Letter of Credit: The bank holds the money while it earns interest. However, there is a fee of one-half to one percent each year.
- Checking Account: The money is held in a checking account, and it can’t dip below the amount of the deposit. This can allow tenants to keep the money in their own account, which is beneficial if the business wishes to acquire equipment, property or another large purchase, as it shows stronger financials.
- Surety Bond: This acts as an insurance policy if things go poorly, and it doesn’t impact credit. Surety bonds are available for larger companies. If the landlord draws upon the security deposit, then the insurance company will cover it.
Expensive Lease Language
Carefully read the language of the lease as it pertains to the Surrender Clause (the condition the tenant is supposed to leave their space in upon lease expiration), as different terms carry their own meanings and some can require a lot more work and money. For example, retail landlords often want the space returned in a “white box” condition. This can be quite expensive, as it means moving furniture, deep cleaning and removing wires. If the Landlord requires the premises to be left “in the condition that existed when the premises were turned over” this could include reversal of any improvements or alterations done to the space. Tenants often underestimate the cost of these requests versus the value it will have for the business. However, you can avoid these expensive requirements by negotiating the space be returned to “broom clean” condition. Working with the language of the lease to favor the tenant can save a significant amount of money and time for a business.
With every lease, there will be an opportunity to negotiate both Securitization and the Surrender of Premises. It is best to use a qualified commercial real estate broker on the Tenant’s behalf in order to achieve optimal savings and negotiate the most favorable lease terms.
Recently, the Financial Accounting Standards Board (FASB) updated their standards effectively changing the way companies must list their lease on their balance sheet. This will undoubtedly have rippling effects on businesses, and the leasing process as a whole. The update has the potential to alter the landscape of the commercial real estate lease.
The FASB updates aim to maintain consistency among accounting practices. The update will make businesses account for the entire value of a lease in year one. While it is purely an effect on paper, bankers, lenders and investors will need to understand the changes that will show up on a company’s ledger. The impact will be felt the most by large businesses, however small- to mid-sized businesses will still be affected. The updates will be implemented as of December, 15 2019 for publicly held companies, and Dec. 15 2020 for privately held companies. While this may seem far down the road, preparations to compensate for the potential change in your business’ ledger should start now.
Commercial real estate leases need to be negotiated with the new changes in mind, as the new standard will inflate the debts of a company during the first year of the lease. This could impact compliance with current loans, affect future loan approvals and potentially mislead investors. The mandatory listing of a full lease as a liability will be a challenge for accounting teams of larger corporations who strive to maintain consistent earnings. The new standards may throw a company’s books out of balance, and this will be a major factor to consider when negotiating a lease.
The Advantage of a Professional
A professional broker who is trained in understanding the new FASB regulations will be most effective at negotiating optimal lease terms to minimize the impact on your balance sheet. This will include new ways to structure the base rental rate, timing of rent increases, separating out operating expenses and focusing on expansion rights rather than lease renewals that would leave a larger mark on your financial ledger. The ever-changing policies and guidelines are an important reminder to seek the assistance of a professional broker, such as the ones at Tenant Advisory Group. We work closely with our clients to advise them of the best way to proceed in signing a lease while keeping in mind the various impacts of the new FASB guidelines.
Commercial leasing agreements commonly extend up to 10 years – or longer – making negotiations key to long-term savings for your business. One of the greatest opportunities to reduce your monthly cost is rent abatement, or free rent. As you begin the discussion with a Lessor, it is important to understand what rent abatement is and how it can be used to your advantage.
Do You Qualify for Rent Abatement?
Unless there are extenuating circumstances at play, rent abatement is a provision best considered during new or renewal lease negotiations. This is when the Lessee has the most leverage, especially if a business has already shown itself to be an ideal tenant at the current or a previous property.
Why Would a Landlord Provide Free Rent?
If you are a new business needing time to get up and running, or even an established business faced with moving costs and possibly contributing funds to a buildout of your space, the Landlord should understand that you will need some time to build cash reserves back up before the payment of rent commences. If the Tenant is providing the Landlord a large cash security deposit, this is great leverage to negotiate more months of abatement. Furthermore, the cost of acquiring valuable tenants – tenants that take care of the space and pay rent on time – is not insignificant to the Landlord. Leasing commissions, background checks and potential lost rent due to time the space would sit on the market are just a few factors they need to take into consideration when faced with negotiating leasing terms. Potential or current tenants can position rent abatement as a concession that benefits both parties.
How Can You Have this Added to My Lease?
Many business owners don’t realize rent abatement is an option, so simply knowing about and presenting this as an option during negotiations is half the battle. When entering into a discussion with a landlord, present this incentive as one of several the Lessor can provide to reach a mutually beneficial outcome. All negotiations are a give-and-take, and ultimately the Landlord needs to know they will not be losing money in the process. Rent abatement is one of the key terms that can be negotiated, along with tenant improvement dollars and rental rate, in order for both the Tenant and the Landlord to feel they’ve achieved a mutually beneficial deal.
For more of Tenant Advisory Group’s expert tips for negotiating your commercial lease, click here.