Negotiating fiercely, with good manners. By approaching the process correctly, negotiating leverage emerges naturally and requires no tough tactics. Negotiating Rationally suggests that the best negotiators result in win/win results.
“I need to be tough or I won’t get the best deal.”
That might be how you feel about negotiating your office lease. It might also be how you feel about negotiating for just about anything.
I respectfully submit that there is a different path by which you can end up with the best possible results. By best possible, I mean the best terms that the market will allow – the best terms that anyone could be expected to achieve under the most favorable negotiating circumstances, given “where the market is now”. I’m referring to the general trend in the market being either landlord-favorable, tenant-favorable, or not particularly either. I am not referring to the situation of the COVID-19 pandemic.
This different path is one that’s informed by maximum information. What they say about information being power is as true in office leasing as it is in most of life. Maybe more true.
If you are armed with information about the best alternatives, you will have the strongest negotiating position that you can possibly have, given the realities of your overall situation.
The art of negotiating an office lease is not to magically be a user of large space with a AAA+ balance sheet, unless you happen to be those two things. Otherwise, the art is about maximizing your negotiating leverage within the confines of what you need and your financial wherewithal.
While there is a “degree of theater” that can inform negotiating for anything, there are things that you can and should do to make theatrical flair less important to your success in office lease negotiations. By theater, I am referring to such things as not saying to the person against whom you are negotiating, “Boy, am I ever in a pickle. If I don’t get this deal done I will be in deep xyz.”
Keep that thought to yourself. Better yet, keep that thought from being a thought that you need to have.
Start the process with more time than you need. Consider the relative merits of working with a broker that specializes in office space transactions. After all, would you really want to use a dentist to treat your broken arm?
Consider the relative merits of using an office tenant-rep, who is your fiduciary agent but whose compensation is not paid by you, and who knows the ins and outs of transactions like the one that you hope to achieve. The alternative might be to rely on a professional in a different field, such as your attorney, who probably bills for her time by the hour and who does not know the ins and outs of negotiating for office space. Negotiating the wording of the actual lease document is within an attorney’s area of expertise, not the process that leads to the written lease.
The idea here is to avail yourself of specialist professional services that are free to you.
Define what your needs are and have some appreciation for what the needs of your negotiating opponent(s) are. Leading you through a controlled and expeditious process of clarifying those things is exactly what an office tenant-rep can do for you, for starters.
Next, identify the best alternatives in the marketplace to satisfy your agenda. Remember that your agenda includes considerations regarding timing, space, and economics. Timing is likely driven by the date of your current “lease expiration”. Space is driven by your “program of requirements”. Economics are driven by cash-flow limitations of your business and, for this discussion, the financial risk of prospective landlords, were you to sign a lease for their space.
Start the process with more time than you would ever think is needed. Please, just be sure to do that.
Define the merits of maintaining the status quo or of modifying it in relatively minor ways. I am referring here to staying in the space that you already lease and negotiating an office lease renewal or extension. Even if you expand or contract your current space and even if you remodel it, that’s a transaction with potentially greater rewards for you than many alternatives that involve moving to a different building.
Identify your best alternatives and then define, let’s say, the top five of them. You really want to know what they mean, what their cost is, and what their relative merits are in ways that are unrelated to dollars and cents.
By doing this you will create the strongest defensive position for your company, by virtue of having multiple potential spaces and leases that you would find more or less equally acceptable. If for any reason your first choice becomes unavailable, your second choice moves into 1st place.
By doing this, you will also maximize your negotiating leverage. It’s not accurate that one can pit landlords against each other limitlessly. But, from a practical perspective, landlords do generally want to fill their vacant space and if they are given the chance to do “one more thing”, they often will. Owners do expect you to shop the market and they will compete against each other. But, going back and forth between the short-listed buildings each time a concession is gained in negotiations with one of them is not exactly the most fruitful approach. There seems to be a limit on the number of times that most owners will be willing to consider sweetening the pot. This is another part of the process where using finesse usually delivers a bigger pay-off for you.
Finally, by negotiating simultaneously with multiple owners you are able to really understand where the market is. That enables you to move your decision-making forward with confidence. It enables you to know when you have arrived, through negotiations, at the deal that’s best for you. And it enables you to stay calm and unbothered.