Principles of Negotiation in Commercial Real Estate Leasing

In commercial real estate agency today the issues of negotiation are many and varied, and start when seeking an appointment with a property owner or prospect. The negotiation process continues through many other stages of activity including the following:

  • Listing the property for sale at a realistic price
  • Listing of the property for lease at a realistic rental
  • Negotiating the marketing strategies and costs with the property owner to create the correct level of marketing response and enquiry.
  • Finding buyers or tenants for the chosen property and taking them through the improvements and the buildings as part of a comprehensive inspection process.
  • Negotiating offers to purchase or lease as the case may be
  • Closing on a contract or lease document with realistic terms and conditions that are acceptable to the client.
  • Moving at the final contract or lease document to finality and through all the factors of due diligence or ‘subject to’ conditions.

So the commercial real estate agent today really does need to be an expert when it comes to negotiation. Every part of the listing, marketing, and closing process has elements of agreement and disagreement to be resolved between the parties.

Some of the top agents and sales teams that I have met or worked with regularly practice their skills and dialogues when it comes to conditioning the parties and negotiating. Practice will always improve the skills of the individual. Clients expect us to be experts at the negotiation process and rightly so.

Here are some tips to be used in your contract or lease negotiations for the future:

  • Always understand the property thoroughly and completely. You cannot work through any disagreements or challenges without having the right information. Understanding the property is part of that process.
  • Use third party evidence to bolster any position you require as part of the negotiations. Written evidence from a third parties and other experts will help you substantiate your position and provide logic.
  • Each party to the transaction will have a fallback position in the case of no agreement. Understand what that position may be and how you could leverage through it or around it.
  • Listen to the other party completely and question their position comprehensively. In this way you will usually hear the answer to the problem and then understand how you can resolve the challenge.
  • Levels of compromise are usually achievable and acceptable to the parties providing you can establish the logic and the common ground. Market evidence and details of other properties will help you in this process.
  • Desperation never wins an argument. Sound logic should always be provided through the negotiation. If the parties are realistic, they will understand logic and except its relevance to the case. Third party evidence will again be very useful for this process of logic.
  • To progress matters further always document and note the outcomes of discussions and negotiations. At the end of any meeting make sure that all parties understand the next stage of the transaction, who is involved, or what will be done.

Negotiation in commercial real estate is not something you should take personally; you are a professional and hence you should act that way. The property type is complex and requires some lengthy discussions to get the parties ‘across the line’ when it comes to a contract or a lease. The top agents are experts at providing logic and sensible solutions for all parties concerned.

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