Art of the Deal
Welcome to the Art of the Deal blog where we’ll share anecdotes of real estate negotiations that could help real estate agents and client portfolio managers in their upcoming transactions.
In some international markets, the landlord and tenant each pay their own commission to their real estate partner. In these situations you have leverage in constructing a commission deal that ensures you achieve the best results and that the agent motivation is properly focused. Just because there is a market norm for the commission structure doesn’t mean you have to abide by it. If you are on the tenant side, consider a commission based on a percentage of lease concessions achieved from the original offer. The more you save, the more the agent makes. Also consider placing a floor and ceiling on the commission – the floor is good incentive for them to put work into your project as they will be paid something for their efforts, even if they don’t achieve a transaction. In return, there should be a ceiling as the amount of work they put in on transacting a 10,000sqf space is the same as a 50,000sqf space. The agency may or may not be flexible in their commission agreements, but that can go a long way in determining which agency you should use. Be creative, but be fair!
Most of us know the three main components of typical real estate leasing transactions – lease rate, free rent, and tenant improvement allowance. However another avenue has been gaining traction that tenants, and landlords for that matter, can take advantage of when constructing a mutually-beneficial lease agreement. Base building improvements within common areas or specific tenant space can often be offered by landlords in addition to the three basics of lease considerations. Landlords can account for base building improvements differently than they do a tenant improvement allowance and may be able to give more as a result. So, if there are specific improvements you would request before deciding where to lease, discuss them with your potential landlord to see if they could be included in base building as opposed to an untargeted tenant improvement allowance. You might be surprised at what you can achieve….
The Art of the Deal blog will provide anectodes of actual real estate negotiations – the good, the bad, and the ugly – that can help you in your next negotiation. Whether to avoid mistakes others have made, or discovering a unique tactic to use to achieve your negotiating goals, this is the place to look. Our first blog submissions are coming soon, so check back often.