How to Run an RFP to Landlords

In commercial leasing, a request for proposal, or RFP, is a short document the tenant’s broker sends to a landlord’s leasing agent. It describes what the tenant needs and asks the landlord to respond in writing with specific terms. It comes after tours, when the list is down to a handful of buildings, and before a letter of intent.

The alternative is to ask each landlord for a proposal and accept whatever format comes back. That hands control of the agenda to the landlord. Each proposal will cover the terms that owner wants to discuss and stay silent on the rest. An RFP reverses this. You set the questions, and silence on any of them becomes visible.

An RFP is not a binding offer, and neither is the response. It is the opening of a negotiation, in a form that makes the answers comparable.

Landlords price against their sense of how likely you are to sign elsewhere. A tenant talking to one building gets a proposal built on that owner’s asking terms. A tenant with written proposals from several buildings gets proposals built on the knowledge that someone else may win.

Include every building you would truly accept, and only those. Landlords and their agents talk to each other, and a proposal request sent to a building you would never lease does not create leverage for long. If you are considering a renewal, include your current landlord in the same round, on the same schedule, so that staying is evaluated as one option among several.

Do not rank the buildings out loud. The moment a landlord learns it is your first choice, the proposal you get from it stops improving.

A good RFP is specific enough that two landlords answering it are answering the same question. For a technology tenant it usually asks for the following.

• Premises: the suite, the floor, the rentable and usable area, and the measurement basis used.
• Term and dates: the length of term, target delivery and commencement dates, and early access for furniture and cabling.
• Rent: the starting rate, the escalation each year, and whether the lease is gross, modified gross or net.
• Operating expenses and taxes: current estimates, the base year or expense stop if any, recent history, and any cap the landlord will offer.
• Concessions: free rent, and when during the term it applies.
• Build-out: a turnkey build by the landlord or an allowance, what the allowance may be spent on, and who manages construction.
• Security: the deposit or letter of credit the landlord expects and whether it reduces over time.
• Growth and exit rights: renewal options, expansion rights, rights on adjacent space, any termination right, and sublease and assignment terms.
• Building systems: available electrical capacity, hours of heating and cooling, after-hours charges, supplemental cooling, connectivity providers and riser access, backup power, and rooftop or equipment rights.
• Access and security: hours of access, the building’s security systems, and your right to install your own.
• Parking, signage, amenities and any building rules that affect your use.
• Ownership: who owns the building and any pending sale or financing that could affect the deal.

Give the landlord enough about your company to take the request seriously: what you do, your size, your funding position in general terms, and your timing. Detailed financial statements can wait until a landlord is a finalist, and they should be shared under a confidentiality agreement.

The mechanics are simple, and discipline in following them is what produces usable results.

1. Agree the requirement internally before anything goes out. An RFP that changes mid-round costs you credibility.
2. Send the same document to every landlord on the same day.
3. Set one response deadline that gives landlords a reasonable period to answer properly.
4. Route every question through your broker so that all landlords get the same information and none gets a private read on your preferences.
5. Ask technical questions in writing and request supporting documents rather than assurances.
6. Log each response as it arrives and note what was left unanswered.
7. Go back to each landlord for the missing answers before you compare anything.

While the round is open, keep your team quiet. A founder who tells a leasing agent on a second tour that the team loves the space has undone part of the work the RFP was meant to do.

Responses will arrive in different shapes even when the RFP was identical. One landlord quotes a higher rent with a generous build-out. Another quotes a lower rent and expects you to fund construction. One includes operating expenses in the rent and another bills them separately. The first job is to translate them into the same terms.

Your broker should build a side-by-side comparison with two parts. The financial part converts each proposal into total occupancy cost over the term and a net effective rent, using the same assumptions for every building. The second part covers the terms that do not reduce to a number.

• ✓Does the space fit the brief without compromise on any must-have?
• ✓How much of the build-out cost would fall on us after the landlord’s contribution?
• ✓What rights do we have to grow, shrink, sublease or leave?
• ✓Can the building support our power, cooling and connectivity needs, and has the landlord said so in writing?
• ✓How large is the security requirement and does it reduce?
• ✓Can the landlord deliver the space by the date we need?
• ✓Is the owner financially able to fund what it has promised?
• ✓Which questions did the landlord decline to answer?

The cheapest proposal is not always the right one. A lower rent in a building that cannot deliver on time, or a lease with no way to exit, can cost more than the difference in rate.

The first responses are opening positions. The next step is a counter to each landlord still in contention, asking for improvement on the specific terms where it trails. Because the comparison shows where each building is weak, the counters can be precise. One round is rarely the end. Several exchanges are common before the terms settle.

When one or two buildings are clearly ahead, the negotiation moves into a letter of intent that records the agreed business terms in detail. Keep a second building active until the lease is signed. Deals fall apart in lease drafting more often than founders expect, and a landlord who knows it has no competitor negotiates the lease accordingly.

Preparing the RFP, managing the round and building the comparison is core tenant representation work, and it is what TAG does for technology, software and data companies in Chicago and in other markets.