Buying, selling and leasing commercial real estate requires lots of different skills, including knowledge of financing, zoning, supply and demand, income statements, and demographics but the most valuable skill is good negotiating. What makes a good negotiator? It is helping all parties involved, who bring to the table different and opposing objectives, agree on the one objective of buying, selling or leasing a property with terms that they may not like but to which they can agree. A good negotiator embraces conflict and works through it, discovering the motivations of each party and helping them achieve goals they may not have initially thought important.
Negotiating has an ebb and flow, a rhythm that is similar to a tennis match. If you make it too short, both parties didn't give their best, but if you make it too long, both parties tire out and make stupid mistakes. Negotiations always have several terms that both parties have to take into account. There is an offer, then a counter-offer and negotiations should never go past the counter-offer. There has to be some agreement at the 2nd change in terms, even if you have to reduce the number of issues under negotiation. This is where a good negotiator can add value to any transaction, by working with each party to identify issues that are minor and those that are deal-breakers. Negotiators need to understand why certain terms are important to people and help them understand the concept that if they can't get one thing they want, maybe they can get a different thing that will also help them.
Any negotiation eventually has conflict, because there are always various interests involved, called stakeholders, that have their own objectives which can often oppose other stakeholder's interests:
The Buyer or Tenant-the buyer and tenant want the property as cheaply as possible and more. Sometimes the buyer wants a long inspection period or time to arrange financing. The tenant sometimes wants the landlord to build out the space and always wants several months of free rent.
The Seller or Landlord-both want as much money as possible with little initial investment. The seller doesn't want to make any repairs on the property being sold, and the landlord doesn't want to give free rent or spend money building out space that may be unusable should the tenant leave in the middle of the night, skipping on the rent.
The Government-whether the property falls under the jurisdiction of a city planning department, city council, mayor, or just the neighborhood association, each group wants to represent its constituents and get credit for any progress. The mayor wants a press conference, city planning wants all zoning laws complied with, and the neighborhood association wants services for their members even if it doesn't make good financial sense.
The easy thing to do when a conflict of interest arises is to walk away. It is the most comfortable and normal reaction for many. But a good negotiator doesn't take conflict personally, stays calm and utilizes 4 strategies, especially when it involves leasing a commercial real estate property:
For more information on negotiation, read our article The Insanity of Inspection Renegotiation and our reality article on Successfully Negotiating the Largest Class A Office Lease.