In commercial real estate brokerage negotiations, concessions are quite common, although you should not provide a concession in a sale or lease without some form of acceptable trade-off. There will always be situations of movement and opportunity in the other person’s offer. Act in the best interests of your client and seek a positive trade-off for any concessions that need to be considered or accepted.
Understand all the variables of the property market, the property offers, and the client’s situation. Negotiate concessions with a bias towards positive circumstances and outcomes. Market evidence will always help you with ‘client conditioning’ or helping the prospect see the fuller picture.
In commercial real estate brokerage, you will come across many business people, property owners, and investors that have solid experience in business, negotiations, property offerings and activity. They know how to ‘play the game’ of negotiation, and ‘positioning’ is important to them. Don’t be too eager to close on a negotiation if you have not got within reach of the client’s requirements, instructions, and essential financial outcomes. Use time and tactics to control the property offering and situation.
The Lists to Work With
Every party to a property transaction will have a ‘wish list’, and also a ‘must have list’. Those lists will be different, and the negotiation outcomes will be driven from the ‘must have list’. Explore the people and the facts of every transaction before you get too far into discussions. Know the people and understand their position; that will help you in getting a positive outcome. Ask about the ‘must have list’. Clarify it and work with it.
Ask plenty of questions. Remain in control of the discussions and be the ‘channel’ for all property offers, counteroffers, and agreements. Encourage people to talk to you. Conversations will inevitably lead to the essential facts of the moment and the property challenge. Support all discussions in negotiation with emails, documentation, and legal processes. Ensure that all paperwork is timely and accurate.
Here are some ideas to help you with the concept of concession trading in negotiation:
- The timing of an agreement can be extended or delayed, depending on the situations of the parties and the property circumstances.
- An adjustment in price can be offset by the concession of an earlier settlement on the sale or a ‘cash’ contract (or a reduction of subject to provisions).
- An adjustment in low starting rental can be offset by a longer lease term and or staged rent reviews over the lease term.
- Get an ‘offer’ signed and in a legally correct form before you take it to your client. Verbal offers are of little strength or relevance in commercial property.
- Take notes as part of any negotiation and meeting. That process helps you think about matters before you comment and take the next forward step.
- Ask the other party about essential outcomes for them. They will likely have a few things that must be achieved in the property sale or lease. Create the conversation and ask the other party plenty of questions.
- If the offer made is ‘subject to’ the satisfaction of any other circumstances being fulfilled, ensure that the time frames and cut-off dates are achievable in the ‘subject to’ provision.
- Ensure that the wordage of an offer is clear, concise, and factual. Errors in property documentation can create legal claims and disputes at a later stage. A good property lawyer will always be of help in documenting a complex transaction.
- The ‘trade-off’ required by the parties for a sale or lease should be raised early as you work through the elements of the transaction.
- Don’t negotiate across the telephone (unless it is the only way to move a transaction ahead). In a telephone discussion, it is too easy for the other party to decline or not understand an offer or concession.
- All your property information and documentation should be accurate and factual. That information should be evidenced in writing, by email, or by correspondence and investigations.
- Clarify and restate the position of the person that you are talking with. That will help you and them know that all facts are understood.
- An exclusive listing allows you to work with some control through a property negotiation. That’s why we avoid ‘open’ listings.
A commercial real estate transaction is a bargaining process that is usually supported by many meetings and discussions. As the property agent or broker in control, you will have many negotiations happening across listings, marketing, inspections, leases, and contracts. Be prepared for a negotiation and then move through it with mediation, momentum, and professionalism.
Know the Alternatives
There are always three or four ways to achieve an agreement on a property sale or lease; look for them and look for the concessions. Ask plenty of questions and seek information.
Look for the compromise positions of your client and the tenant or buyer. That’s how you get some momentum and finality on things. That’s how you can get closer to an agreement. You are the ‘mediation’ specialist in brokerage; practice your negotiation skills and concession strategies. Act comprehensively for your clients. Move the parties ahead professionally and directly. Help them see the advantages of a final agreement and clear concessions.