Sep 27, 20214 min read

Dealing with Landlords to Minimize Costs and Get Deals Across the Finish Line

Updated: Oct 4, 2021

Optimizing Your Corporate Real Estate Portfolio

While many commercial real estate agents talk about the importance of 'running a process' and employing tough negotiating to get a deal done, they are overlooking a key concept. For those decision-makers responsible for managing their business' real estate portfolio, you may understand the enormous effort and complexity involved in getting to the point of even approaching a landlord with an offer.

Decisions need to go through a chain of command. They are often 'rubber-stamped' by the CFO, COO, or CEO to ensure that the prospective property fits in line with various strategies and financial models. Whether you are growing, consolidating, or entering a new market, getting prepared to pull the trigger is typically the main hurdle in any deal.

So, with that said, once you are ready, getting into the 'negotiating pocket' with a landlord is extremely important. Time kills deals. But so does making a deal difficult to do.

For example, most companies that do not regularly execute transactions employ cumbersome or outdated legal documents. Yet, many private landlords heavily favour simple agreements. And most institutional landlords have airtight, non-negotiable frameworks used by their leasing departments. As a result, many will walk - or balk - if they are approached with an unreasonable demand to jump through hoops.

So far in our leasing series, we have examined:

Using time to create leverage in a negotiation
Knowing landlords' risks to negotiate concessions
Understanding the market to establish fair value
Leveraging a professional to save real estate costs
Employing a blend-and-extend to mitigate rent increases in a hot market

Today, we will take a deeper dive into the simple method you can use to dramatically improve the receptivity of landlords to open more discussions. This technique will allow you to generate more suitable options, giving you more leverage in a negotiation to reduce costs, and increasing the likelihood of deals making it across the finish line.

Greasing the Deal-Making Process

As we alluded to earlier, deal execution is all about speed, especially in a booming market like the Greater Toronto Area. On-market availabilities are typically subject to multiple offers and do – in some instances – disappear within a matter of days.

So, if you come to the table with conditions or demands that a landlord deems unreasonable, then they will simply move on and deal with the other parties.

In the case where there is an off-market opportunity or an asset is slow to lease up, then you will want to take advantage of the situation to quickly secure the space at a discount and with concessions, such as free rent or tenant allowances for build outs. Either way, making the process as frictionless as possible will bring about good faith in the deal and move the focus towards the benefits of having you as a tenant in their portfolio.

One key method to doing so is by using a simplified lease agreement; an agreement which protects both parties and limits the time spent by lawyers combing through clauses.

That’s where an experienced real estate professional comes into play. After decades of experience and hundreds of repetitions, we have put together a refined and streamlined framework that is used by our team week after week. Battle-tested by the market, it will save you the time, stress, and costs associated with recreating one yourself... and you can deploy it starting today.

Summary

Overall, many factors come into play when looking for commercial real estate to buy or lease, especially when taking into account the specific needs of your business’ operations, as well as the constraints placed by your finances and the market’s dynamics.

Each stage in the process can be challenging. Yet, when you are ready to put out offers, you should make negotiating with landlords as simple as possible.

When executed properly, you can gain leverage in a negotiation, secure the perfect facility, and realize significant cost savings, giving your business a boost to its bottom line and future growth potential.

On that note, if you would like guidance on your next renewal, relocation, or renegotiation, or for access to off-market opportunities, please contact our team today.

Corporate Real Estate best practices, local expertise, and market intelligence across North America.

Lee & Associates Corporate Real Estate Services - Portfolio Solutions group provides customers with a full range of commercial real estate services required for corporate investors and occupiers.

Having the right corporate real estate strategy in place – for individual locations as well as across an entire portfolio – is vital to occupiers and investors seeking to efficiently and effectively manage real estate holdings and take advantage of the opportunities being presented at each location.

Our North American network means we have on-the-ground experience of all regional submarkets. From transaction execution and portfolio management to lease administration and relocation coordination, our Portfolio Solutions team is uniquely positioned to assist you.

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