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The Principles of Commercial Real Estate Lease Negotiations

When you are to negotiate several leases or have a series of vacant tenancies to lease in a high-quality property, it pays to set clear principles to all negotiations that both you and the client can adopt.  That then helps you stay on task and lifts conversions.

The parties to a lease almost always have conflicting positions, and your client is in that ‘equation’ with their opinions and priorities on rents, incentives, and lease terms.  The realities of the property leasing market will also have ‘evidence factors’ that will impact things.   Ask yourself these questions:

  • Do you have all the rental and lease facts?
  • Are you a good lease negotiator?
  • How can you add value to the client’s property challenge and get a tenant or vacancy resolve quickly?
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Property Management Forms and Templates

Making your job easier in managing office, industrial and retail property.

Check out our forms and checklists for commercial and retail property managers right here. They cover many different situations of leasing, tenant occupancy, property performance and building management. Make your job easier. The forms and in Word and PDF so you can apply them to your real estate business and property types.

Simple and Effective Negotiation Rules

Let’s set some rules in commercial and retail property leasing.  These principles of leasing provide a solid negotiation base for most transactions with tenants and landlords:

  1. Get the formal and legal appointment signed – Accurate and legal documentation will help you stay on task and protect your client and leasing commission arrangements that you will ultimately seek. The important foundation of a good real estate leasing business will be the appointment to act that complies with the property type, the state or city of your real estate business, and the client’s instructions.  Know how to create strong and accurate leasing appointments that reflect your business services and leasing skills accurately to the client and ensure that the subject property is described correctly in keeping with local property laws.
  2. Seek to understand the client and the property first – The client will have opinions, challenges, and requirements in looking for a new tenant. Probe the client for property knowledge, facts and decisions. Get to the real facts of rent, leasing strategy, and timing.
  3. Review the prevailing property market and comparable properties – Other rents and properties in the location will have evidence factors that will help you and your lease inspections and negotiations.
  4. Know the alternatives for each party – There will be limits to your client’s movements in rent and lease terms. Get the problems and facts discussed and set before you go to the market seeking tenants.
  5. Remember your client – As you move through leasing enquiries, inspections, negotiations, and documentation keep your client and their instructions at the top of the ‘agenda’. It is all too easy to ‘cloud’ relationships as a lease moves through a negotiation.  Keep plenty of notes from discussions and meetings in all your stages of a lease transaction; notes will help when disagreements occur (and they will).  An informed client will be more receptive to a ‘realistic’ lease negotiation.
  6. Make clear recommendations to the parties based on market evidence – Local property trends in leasing and rents will help you close and negotiate faster. Keep records of all finalised lease negotiations across the area and precinct.  They can then feature in any current transaction.
  7. Take your time and reduce pressure for the client – As part of that, you can provide the best path towards good outcomes for the tenant and the landlord. As a leasing negotiation moves to finality, document the stages and finalise things in the legal and timely way.

From these rules, you can keep most lease negotiations on task and current. That then helps you move to a finalised transaction in a valuable way for your client.

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