Retail lease negotiations can be challenging and complex, especially in a dynamic and competitive market. As a commercial real estate professional, you want to help your client achieve the best possible terms and conditions for their business. But how can you do that effectively and ethically? Here are some tips and strategies to guide you through the process.
Before you start negotiating, you need to understand your client's business model, target market, budget, and growth plans. What are their priorities and preferences in terms of location, size, layout, amenities, and duration of the lease? How flexible are they on rent, security deposit, maintenance, and other expenses? How do they measure their success and profitability? Having a clear picture of your client's needs and goals will help you identify and communicate their value proposition to the landlord.
Understand your clients needs. Communicate clearly and take time to listen. If you understand their position, theor drivers, their non-negotiables etc early doors that will pay dividends long term
To best represent your client's interests in retail lease negotiations, thoroughly understand their needs, research the market, negotiate favorable terms, protect tenant rights, reduce risks, seek professional advice, and build rapport with the landlord.
To negotiate effectively, you need to have solid data and insights on the market conditions and the property's performance. How is the supply and demand of retail space in the area? What are the average rents, vacancy rates, and tenant incentives? How does the property compare to its competitors in terms of location, visibility, traffic, quality, and reputation? How stable and motivated is the landlord? What are their strengths and weaknesses? By doing your homework, you can assess the opportunities and risks of the deal and prepare a realistic and compelling offer.
What information about the physical property is considered must haves and nice to haves for regional and national tenants? Are there pieces of information that can create an 'oh wow' moment for the prospective or new tenant?
Negotiating a retail lease is not just about numbers and clauses. It is also about relationships and trust. You want to establish a positive and professional rapport with the landlord and their representatives. Show them that you respect their interests and concerns, and that you are willing to collaborate and compromise. Avoid being confrontational, aggressive, or unrealistic. Instead, be courteous, honest, and transparent. Use open-ended questions, active listening, and empathy to understand their perspective and find common ground.
Once you have established a rapport and trust with the landlord, you can focus on the key issues and trade-offs of the negotiation. These may include rent, lease term, rent escalation, rent abatement, tenant improvement allowance, signage rights, exclusivity clauses, sublease options, and termination rights. You want to prioritize the issues that matter most to your client and negotiate them in a logical and sequential order. You also want to be prepared to make trade-offs and concessions on less important issues in exchange for more favorable terms on the critical ones.
Shifting both the client and the landlord's perspective from a zero-sum game is the most important step to take. Often times, either side will see not getting exactly what they want as a loss. Or if they have to negotiate and concede anything they believe that its a losing deal. By shifting the focus to "what happens if you don't find a tenant? What happens if you don't find your next location?" will help business owners realize there is a cost associated with not making a deal. This will allow more fruitful discussions of what is truly important and the timeline pressures on their end.
After you have reached a verbal agreement with the landlord on the main terms and conditions of the lease, you need to review and finalize the lease agreement. This is a crucial step that requires careful attention to detail and legal expertise. You want to make sure that the lease agreement reflects accurately and clearly what was agreed upon verbally, and that there are no hidden fees, clauses, or liabilities that could harm your client's interests. You also want to check for any errors, inconsistencies, or ambiguities that could lead to disputes or litigation in the future. If necessary, you may need to seek advice from a lawyer or a lease consultant to ensure that the lease agreement is fair and compliant.
The negotiation process does not end with the signing of the lease agreement. You still need to follow up and maintain the relationship with the landlord and your client. You want to ensure that the landlord delivers on their promises and obligations, and that your client is satisfied and comfortable with their new retail space. You also want to keep in touch with both parties and provide them with ongoing support and assistance. By doing so, you can foster loyalty and trust, and generate referrals and repeat business.