How to be a Better Negotiator


Commercial Real estate agent and customers shaking hands together celebrating finished contract after about home insurance and investment loan, handshake and successful deal. 5 Reasons to Work with a TAG Broker

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.

How to Maintain Low Rent in Booming Areas


Commercial Real estate agent and customers negotiating

Up-and-coming areas can be a scary concept for some business owners. One day you’re paying low rent in a semi-popular part of town, then a few years pass and the area is booming, people and other businesses are flocking over and rent is skyrocketing. However, you don’t have to pay a fortune in rent or change locations if you take the right precautions. Here’s how you can hold onto your prime real estate at a fair rate.

Stipulate a Rental Rate

When negotiating the renewal clause in a lease, oftentimes there is a fair market value clause that leaves negotiation of rental rates open for when an area grows in popularity. But fair market value leaves too much freedom for the landlord to hike up the rates to match the new standard, which could end up being well above your budget. One benefit to using a good broker is that they know to negotiate for a specific rental rate based upon a finite escalation instead of relying on a fair market value agreement. This ensures that the you can afford the future rental rates and also reflects the increase of growth in the area.

Negotiate a Right to Terminate

The termination option is also an extremely valuable piece of negotiation leverage. A landlord will not offer this unsolicited. For leases longer than five years, it is very helpful to have a termination right. By negotiating this into the lease, should rates dip below market value, then you will be able to exercise the right to terminate and move or use this as leverage to reduce your rate. Conversely, if rents have skyrocketed, you can utilize the leverage of the termination right to extend your lease and keep your rates below market for the foreseeable future.

Sublease Your Space

Another option you can consider when the rent goes up is to sublease. As always, any business leasing a space should work with a broker to ensure that a sublease clause is included in the lease. From there, if the ability to sublease is allowed, you can move elsewhere to pay a lower rate while subleasing your original space to help offset the overall costs. This is especially beneficial if you are able to reduce your square footage as well.   

Maintaining your presence in a popular area all comes down to your lease. Working with a reliable broker to negotiate the correct terms can take the stress out of rising market rates and give you peace of mind about staying in your space.  

What’s in a Lease? Part 1.


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The best way to navigate the tricky landscape of a lease is to stay current on all the common phrases, clauses and definitions. You may have a general understanding of the terms, but it takes a professional to really navigate the ins and outs. Here are a few of the most common points you may encounter in your Chicago office space search.

 

  • Letter of Intent: The purpose of the letter of intent is for both parties to come to agreement on various terms before spending significant resources and legal fees in pursuing an acquisition. Double check the business terms agreed upon in the Letter of Intent are the same as those outlined in the lease document. You’ll want to make sure you receive everything that was promised.
  • Sublease Clause: A sublease clause outlines the terms for when you transfer all or part of your lease to another tenant while you remain on the property. When negotiating a sublease, reasonable consent should not be withheld by the landlord. The landlord will also ask for 100% of profits, but a 50/50 split is fair. Try to minimize the notice you must give, as well as the response time from your landlord to allow you more flexibility. Consent isn’t always necessary.
  • Holdover Clause: A holdover occurs when a tenant continues to remain in possession of the leased property after the lease expires or terminates. The holdover clause specifies if a holdover can occur and at what rent. Landlords will ask for 200% of your monthly rent; however, 150% is the market standard. The clause itself should make clear that the tenant is not holding over unless they’re staying after the term ends without notifying the landlord and gaining permission. When negotiating the holdover clause, there are a few items you will want to have clearly stated in the lease: length of the lease; termination of lease; rent amount; and liability for damages.
  • Renewal Clause: A renewal clause will attempt to automatically renew your lease unless you submit a notice. This clause is something you need to know about as a landlord may ask for automatic renewal without having to give you notice. It’s nice to have the rights to a space, but it is also nice to have the freedom to move. If you plan on staying, negotiating for renewal is a great opportunity for you to negotiate for a new rent rate.
  • Work Letter: The work letter is an addition to a lease outlining the stipulations for all improvement work done by the landlord, and what work will be completed by the tenant at their own expense. This should be monitored closely to make sure everything matches up with what the landlord promised. If there is an allowance, base building items should be taken care of by the landlord, and if the landlord has ongoing construction, make sure the landlord is liable if improvements aren’t completed by the agreed upon date.

 

Negotiating a lease is the most crucial step when moving into a new building, and can potentially save you a significant amount of money. Armed with the new knowledge of these phrases, words and definitions, you’ll be ready to tackle any upcoming lease negotiation.

Infographic: How to Negotiate the Renewal Option in Your Lease


Read the original post here.

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Tips to the Negotiation Process


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Real estate negotiating can either be an exciting or stressful process. If you are a broker you must have ice in your veins and know the people you are dealing with. Fortunately, if you are a third party, this allows you to be much more objective and take the emotions out of it. Viewing the other side of the deal as your partner (rather than your adversary) is a way to get started on making both sides happy. Here are a few tips to think about while negotiating.

Allow for Multiple Outcomes

Successful negotiators recognize that there is not merely one outcome that best suits both parties. There are many different ways for you and the other side of the table to meet in the middle. No matter the negotiation, maintain an open-mind about different processes that can bring you together for a compromise. As simple as this may sound, too many negotiators get locked into their one ideal solution and do not let themselves stray from this thought process. The essence of a negotiation is that both parties come to a satisfactory conclusion, and this can only happen if both sides allow themselves to open up to other possibilities.

Listen Before You Speak

The first terms thrown out in a negotiation will be the extreme highs and lows, with the final numbers landing somewhere in the middle. Keeping this in the back of your mind; let the other side throw out the first offer and then use that information to help you make an educated counter offer. Generally speaking, you can understand a lot about what the other side values most by just paying attention to their first offer. The first person to lay down their cards naturally loses some leverage by having to show some of their hand. Listen and comprehend what they tell you and parlay this information into a quality counter offer, rather than blindly throwing out an offer first.

Cooler Heads Prevail

The entire negotiating process is as much about emotion as it is money. In the 1987 movie Wall Street, Gordon Gekko told Bud Fox to never get emotional about a stock. Of course that movie is a far cry from dealing with negotiating in real life, but some of it does hold true. You have to understand that negotiating can be a slow, painstaking process, but if you let emotions cloud your decision-making, then it will make your life much worse. Take a step back every now and then, and try to enjoy the process – the more rational you are, the better you will do.

Silence is Golden

Once you have made a counter offer, be quiet. This is a very hard point to get across because the negotiating process can be a stressful one. Everyone wants instant gratification, however this should not be the expectation after delivering a counter offer. Once this process is under way and your bid is out there, there is no need to say anything else – your silence will speak volumes. If you put out a bid, and quickly follow up with instigating questions – or worse yet, try to make your bid more favorable – your competition has the upper hand. This can be difficult, but if you have presented your position in a clear and concise manner, then it is time to play it cool and wait for an answer from the other side.

Don’t Ask, Don’t Get

This is something that rings true in all walks of life – if you fail to ask for something, how will you know if you can get it? Afraid that your bid is too low, your lease term is too short, or offering price is too high? Why not give it a shot anyway? Ensure that you are not insulting the person, but at the same time, you will not be able to achieve your ultimate goal of getting the best deal without at least offering it up. In summation, to gain something, you have to ask for it.

If you have ever been in a room with a car salesman, you know they love negotiating. They have tons of experience and are able to keep it cool. The same goes with brokers – they are the experts and typically have many years of experience. If you follow these rules, hopefully you will be able to see the enjoyable side of negotiating.

5 Tips to Be a Strong Negotiator


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From the seasoned lease or contract negotiator to the first timer, it is vital to have a strong set of ideals behind all negotiations. The more confidence in and acumen with these skills that one has, the higher opportunity for coming away with a positive outcome.

At Tenant Advisory Group, negotiations are a part of everyday life and these are key reminders that have to stay top of mind throughout any negotiation to be successful.

1. Information

Information is the key to any successful negotiation. The more you have, the better position you will be in to achieve your goals. Put yourself in the best position by doing quality research and knowing all you can about the scenario.

2. Leverage

Gaining leverage allows you easier access to achieve your goals in the negotiation. Often times, leverage can be found by gathering more information. This points to tip #1, if you have information that either the other side does not have or that they think you do not have, then the leverage has been shifted in your direction.

3. 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. Part of a successful negotiation is ensuring that neither side gets the feeling of being shortchanged, which could lead to resentment. Get the best deal, without being greedy.

4. 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. When negotiations become shouting arguments, nobody wins.

5. Understand your Adversary’ Motivations

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. If both sides can feel this success without conceding too much, then that is an ideal negotiation.

Negotiating A Higher Tenant Improvement Allowance


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A space may be absolutely perfect, but need substantial work to become the perfect space for you. For this, a Tenant Improvement Allowance, number of dollars the landlord is willing to offer per square foot of rentable space, is extremely beneficial.

 

In many of our blogs we’ve discussed the power and necessity of negotiation. You have the power to acquire what you want and more importantly what you need.

 

In big cities there are a plethora of options available. As leverage in attracting potential tenants, landlords may use a Tenant Improvement Allowance. However enticing this may seem, often landlords will not provide the amount of money necessary for a proper build-out.

 

Why would (s)he do this? What can be done to remedy this? Let’ look at a few possibilities.

 

  1. Return on Investment
    • The landlord’ main concern will always be to increase the return on the original investment. Frequently, this value is determined by rental rates in the current market. When a landlord suggests a certain dollar amount it is not arbitrary, but rather based upon the market.
  2. Return of Investment–probability of repayment
    • The landlord may be hesitant if repayment contains any element of uncertainty. Factors affecting this could be inconsistency of business, financial history (credit history), and length of lease.
  3. Tenant History
    • As a tenant, if your operating history is minimal the landlord may be reluctant to increase your improvement allowance. This is due to the high cost of capital had by the landlord, or perhaps no capital at all.
    • If the term you are willing to commit to is too short this deal presents a higher risk by amortizing the costs over a shorter period of time.
  4. Cash resources
    • The landlord can only offer up capital (s)he has access to. To determine this amount, most times, this will be based on an educated guess. The best way to have success is to research the landlord and understand his/her financial wherewithal.

 

Awareness of these concerns will give you the upper hand and ability to remedy the problematic variables. But, how can this be done?

 

  1. Offer to amortize a portion of the allowance
    • This functions as a structured method to formally repay the allowance, thereby increasing the return of and return on investment. One factor to consider is that, as a tenant, this will increase the occupancy cost. However, it offers a reduction of the cost upfront.
  2. Sign a long-term lease
    • The longer your lease is the more your landlord is likely to offer. A long-term lease offers consistency and more-or-less secures the return of investment.
  3. Evaluate various credit enhancement options
    • Lease guarantee–the more backing you have the more confident the landlord will feel about doling out the upfront cash.
    • Letter of credit–this is a document pledged by the bank or other financial institution, that should the tenant fail to pay they will assume the cost owed. Consider, however, that should you request this backing the financial institution may require you to maintain a minimum balance for the amount they are backing.
  4. Free Rent
    • The tenant can offer to receive TI in the form of free rent. (S)he can ask her/his broker to accept the commission at a later date.
  5. Financial Proof
    • Providing financial information is a definite plus. Additionally, an SBA 7a loan from a bank can assist in subsidizing the tenant improvements.

 

These are just a few items to considering before requesting a tenant improvement allowance. For more information on improvement allowance and securing a lease, check out our blog:The Definitive Guide to Finding Your Perfect Office Lease.

Back-End Loading Your Next Negotiation


 

Negotiation is an integral part of initially securing your lease. Imagine this: Your broker did a great job negotiating your lease. The space comes with all the amenities you could imagine AND you saved a great deal of money a few years prior when you signed. Your company loves this space, but this year has been a little slow and goals weren’t quite reached.

 

Before you uproot your entire company and move everyone to a space you deem sub-par, consider renegotiation in the form of back-end loading.

 

In commercial real estate, this would entail negotiating a reduced rate for a certain period of time. For instance, you could negotiate an elimination of $5 per square foot for a year and then add that $5 back in the lease the following year.

 

More often than not, a landlord will not want downtime on their space. The money the landlord would lose (during this reduced year) would likely be much less than the money he or she would spend searching for a new tenant should the existing tenant vacate or go out of business.

10 Tips to a Successful Lease Negotiation


 

Bill Himmelstein speaks frequently about the importance of negotiation and how to become a successful negotiator. His last seminar honed in on the importance of negotiation when securing your lease. Below are his 10 Tips to a Successful Lease Negotiation.

1. Business terms– Double check that the business terms agreed to in Letter of Intent are the same as in the lease document.
2. Sublease clause– reasonable consent should not be withheld by landlord. Landlord will ask for 100% of profits. A 50/50 split is fair. Seek to minimize notice to landlord and response time from landlord. Consent shall not be necessary for purchase, sale, or merger.
3. Hold-over clause– landlord will ask for 200% of rent, however, 150% is fair and market.
4. Renewal Clause– landlord may ask for automatic renewal if no notice. This is not acceptable. It’s nice to have rights to space. Negotiate rate when possible as it will still be negotiable at that time.
5. Work letter– this should be studied closely to make sure everything matches up to what LL said he was going to deliver. If there is an allowance, base building items should be taken care of by landlord. If landlord constructing, make sure liable if no deliver on time.
6. Right to Terminate– this can be a great source of leverage to restructure lease regardless of how market has changed since execution.
7. Surrender of Premises– space shall be returned in broom clean condition, nothing more. Landlord may ask for space to be returned to white box. That is unacceptable.
8. Taxes & Operating Expenses– it is important to make sure capital improvements are not passed along to tenants through operating expenses. If gross lease, should be a Base Year.
9. Insurance requirement– have a qualified insurance broker review coverage requirements.
10. Damage or Destruction by Casualty– seek to minimize time in which lease can be terminated, and maximize the remedies available to the tenant.

When negotiating the details of a lease it’s important to be familiar with even the most infinitesimal details. An experienced real estate attorney will be able to facilitate this by reviewing the legal terms of the lease. Also, it can be advantageous to have an experienced commercial real estate broker negotiate the business terms of the lease. Both are paid by the landlord through a fee that already exists. This will save you time, money, and hassle!

 

 

For more information on this topic check out our post: The Definitive Guide to Finding Your Perfect Office Lease in Chicago

10 Tips to More Effective Negotiation


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Effective negotiation is key in all aspects of business. Whether it be getting the raise you deserve, landing a deal, or with a lease getting the most “bang for your buck”, if you will.

Earlier this week, Bill Himmelstein presented 10 Tips to More Effective Negotiation. Here is a recapitulation:

  1. Information– information is the key to any successful negotiation. The more you have, the better position you will be in to achieve your goals.
  2. Leverage-gaining leverage allows you easier access to achieve your goals in the negotiation. Often times, leverage can be found by gathering more information.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

 

 

One of the most important things to remember to use facts and leave emotion on the sidelines. Facts get results while emotions will just get you sidetracked.