Negotiating With Landlords: 3 Tactics To Be Aware Of
In any sporting event, the objective is clear – to win. Despite the formalities of shaking hands at center ice, the 50 yard-line or mid-field before the contest officially begins, once the clock starts, the game plan is to score and win. And for games that allow contact, the agenda includes making your presence known both physically and mentally.
While many tenants are unaware of what is actually on the line in each negotiation, landlords make a living off of understanding the game, the strategy, and how to win. This disparity can be even greater for healthcare tenants who are focused on their patients first, their staff and team second, and lastly on the business side of their practice.
When landlords win, they make a significant amount of money. Their annual income and net worth are impacted by each negotiation. This puts landlords in a position to employ strategies to do everything they can to gain an advantage. While every negotiation is different, landlords often approach transactions with one of three strategies to capitalize and win.
INTIMIDATE, MANIPULATE AND EVEN LIE
While nearly every landlord would consider themself a ‘pretty good’ person, many are quick to take off the gloves and do whatever they can to win when it comes to negotiating.
They’ll employ a myriad of statements to intimidate the tenant such as “we never do that for any tenant”, “we can’t lower your lease rate on a renewal”, “we have another tenant who is going to take your space if you don’t sign the deal as-is”, “we don’t work with brokers, you have to negotiate with us yourself”, “we don’t give anyone free rent”… on and on the statements go.
Their objective is very clear – get the tenant to stop pushing for the best possible terms and isolate the tenant in an attempt to handle the negotiation themselves instead of through an expert advisor. Once they accomplish that, a landlord will say whatever they can to get the tenant to ‘believe’ what they are telling them is true, and if they are not careful, they will lose the deal or be kicked out on the street.
For the landlord, the benefit of making these statements is obvious. If the tenant believes any or all of them, the landlord just saved themselves or made tens to hundreds of thousands of dollars. Imagine if you said something that was completely subjective and arbitrary to meet your desires, and if you said it with enough authority or intimidation that the other party would believe it. And if they believed it, you would be rewarded with a check in the amount of a hundred thousand dollars? When you look at it that way, its not hard to understand why landlords do what they do. They are trying to win.
To them, this is no different than a hockey player checking another player against the boards as hard as they can. They want to take that player out of the play. They want to give themselves an advantage and they want to win.
BECOME THE TENANT’S FRIEND
Whether the landlord is your patient, sends you a Christmas card or offers to take you golfing, their friendship must be filtered through the competitive landscape of the game itself and is paused once a negotiation starts.
This is no different than in professional sports. It’s very common for players on opposing teams to have a great relationship off the field both before and after the game, but once the whistle blows, that friendship cannot compromise either side’s strategy or efforts to win.
Imagine how inconceivable it would be for a player to tell their competitor what their game plan was, or what play they were going to run next. This is how crazy it is when a landlord approaches their tenant with the question of “do you want to stay in the property” or “what can I do to keep you” or “why don’t you and I just work out a simple deal between the two of us” and the tenant bites off on this approach and shows the landlord all their cards or tries to negotiate themself.
In the game of commercial real estate, landlords love to become patrons, clients or patients of their tenants. It provides them an obvious reason to frequent and inspect their properties, support their tenant’s success, and most importantly, to blur the lines of whose side they are really on.
The landlord’s primary hope is the tenant being too uncomfortable to bring in an expert advisor who can educate them on their top options by showing them what other landlords and sellers are willing to offer, what it looks like to achieve the most favorable terms, and most importantly, how to avoid being taken advantage of.
TREAT THE TENANT WITH RESPECT AND COMPETE FOR THEIR DEAL
The obvious reaction to this statement is “I’ll choose that landlord!” While every tenant would prefer this response, 99% of landlords won’t start at this place or move into this approach unless they know several things are in place:
- The tenant has professional representation
- The tenant has already been educated on the current market
- The tenant has other viable options that have been fully vetted
- If the tenant walks away from the deal or moves out of the space, the landlord will lose a significant amount of money
- The tenant is not going to be taken advantage of or disrespected
When these key elements are in place, most landlords will drop the ‘manipulation and intimidation’ card, and even the ‘I thought we were friends’ card, and will simply work with the tenant’s agent to complete a deal with fair terms for both sides. While the landlord still wants a ‘win’ of getting the deal finished, they are often willing at this point to forgo the ‘extra money’ they typically try to capture when they feel confident they can play one of the first two cards. The risk of losing a deal is way more costly at this point than trying to capture the extra money. When a landlord comes to this position, the tenant often captures back tens to hundreds of thousands of dollars in their favor.
To achieve a level playing field, the landlord has to believe the above points. Despite ‘good intentions’, healthcare providers and administrators are not going to convince a landlord they are a market expert or have the prior experience needed to create the appropriate posture. Even if a doctor has completed a few deals during their career, a landlord knows they cannot execute at the same level of an expert advisor who operates in this realm for a living.
This is no different than a patient going to a provider or specialist. If a patient is serious about realizing the most favorable outcome, they don’t treat themselves, they go to an expert. Landlords do the same thing and they expect tenants who are serious to do so also. This is the same approach the most successful publicly traded companies in the world employ – engaging a market expert to protect them, educate and advise them, negotiate on their behalf, and help them to capitalize and win.
Whether you like full-contact sports or not, if you lease an office space from a landlord, you are in a full-contact game. The landlord is going to try to hit you hard to give them an advantage. Sometimes their hit is as obvious as the hardest hit in football or hockey and sometimes it mirrors a subtle pick and roll to where you don’t realize what you are about to run into until it is too late. Regardless of their approach, an expert agent can level the playing field, save you a significant amount of time and money, protect your interests and bring you peace of mind. Your agent can take any hits the landlord would otherwise try to throw at you and they can hit back and help position you to win. In a contest where you only get one crack at your opponent every 5, 7 or 10 years, make sure you don’t get knocked on your back.