What does a lease negotiator do in commercial real estate?

Un négociateur de bail dans une négociation commerciale peut être comparé à un joueur d'échecs chevronné qui anticipe chaque mouvement de son adversaire pour atteindre ses objectifs. Tout d'abord, il analyse minutieusement les termes du bail proposé, identifiant les avantages et les inconvénients pour son client, tout comme un joueur d'échecs évalue chaque pièce sur l'échiquier. Ensuite, il élabore une stratégie solide, en utilisant des tactiques de négociation pour obtenir des concessions favorables, tout comme un joueur d'échecs planifie ses coups pour contr?ler le jeu.

Lease negotiations can be complex, especially if the lease enjoys the protection of the L&T 1954 Act (UK). This is where commercial surveyors can add real value to the client - landlord and tenant. However, it’s essential surveyors remain open and objective with the commercial imperative of the transaction in mind rather than get attached to one particular point of view.

Taking professional advice is key. Having a professional negotiate terms on your behalf is sensible. Getting your Solicitor involved at an early stage too is also advisable. The Solicitor and Surveyor can then work together to ensure all ley points are covered off in the Heads of Terms to avoid protracted renegotiation down the line

For office, industrial, & retail, often times you’ll have a 3rd-party landlord leasing broker or an in-house leasing rep if the owner is vertically integrated. On tenant rep, tenants may either have a 3rd party tenant rep or an in-house corporate real estate leasing rep (large credit tenants) who leads negotiation. If you’re a leasing broker either for landlord & tenant rep, you could either work under large shop w/ sales license or go on your own if w/ broker’s license. For multifamily, property manager typically wears “both hats”, e.g. property management & leasing duties. Apartment leasing more straightforward vs CRE leasing.

A lease negotiator is someone who can represent the tenant or the lord in commercial real estate deals. A lease negotiator has the ability to convince someone that their proposed solution would be more beneficial than their options.

Hard leasing skills incl. initial net effective rent (NER) analysis to determine favorable or unfavorable variance. Soft skills involve bridging gap w/ tenant / TT rep. Net effective rent (NER) considers starting rent, concessions, tenant improvement allowance (TI), lease term, etc. Your net effective rent (NER) for “deal on the table” is ideally > market leasing assumption (MLA) from acquisition underwriting. If not, asset manager along w/ its landlord leasing rep, needs to counter & negotiate w/ tenant & tenant rep on deal economics. Various ways to pull levers to get deal to pencil if it’s within striking distance—more term, higher face rent, beneficial occupancy vs free rent etc.

The best thing a lease negotiator can do is evaluate the "what ifs" that might happen to the lessee over the lease term and negotiate the language accordingly. Is there a reason the tenant might need to terminate the lease early? To grow or shrink? To add to the Use Clause because it plans to acquire a company that does something different than the tenant's Use Clause permits. This is the real, practical value to negotiating the business points.

Ideal to shadow & work under an experienced leasing rep for “soup-to-nuts” leasing process. Initial LOI, counters, final approved LOI, lease drafting, redlining, & final form to execute. You could start out as an analyst, associate, “runner”, etc. Various titles for entry points, but being able to quarterback a leasing negotiation is a key skill set for this discipline. Besides the CCIM designation & SIOR network (helpful for indust) as mentioned in above article, a Master of Corporate R.E. (MCR) via CoreNet is well respected, esp on tenant rep side. Also, leasing agents have at least a bachelors degree & a sales license unless they decide to go off on their own, in which case they’d need a brokers license, but take on more liability.

A lease negotiator in commercial real estate needs a foundational degree and real estate law knowledge, but their ace is their experience, particularly in understanding negotiation psychology. This practical experience is crucial. For example, a seasoned negotiator might recall a past deal where subtle changes in lease terms won a hesitant client over, applying this insight to current negotiations. They're adept in analyzing market trends and expertly handling negotiations, using psychological strategies to influence outcomes. Their experience enables them to craft compelling proposals, navigate complex negotiations, and ensure legal compliance, all while applying past learnings to secure favorable terms in new deals.

The real challenge of leasing is the subjectivity of finding a good tenant for the landlord. Unlike a sales deal where all parties celebrate at closing, if you close a bad lease, the principals (landlord/tenant) are stuck with each other. While principals are responsible for due diligence, agents may still get the blame because they are on the front line. For that reason many agents don’t do leasing due to its liability vs. reward. Agents aren’t qualified to give tax or legal advice but they may still point out inconsistencies if they can read between the lines. And sometimes even if there are no red flags, landlord/tenant relationships can still go awry because of incompatible personalities.