REAL ESTATE CONCESSIONS
The simplest definition of a real estate concession is an incentive, discount or benefit given or received by a buyer or seller in a sales transaction.
In commercial and healthcare real estate, concessions are negotiable between parties, and one should plan to offer concessions just as much as they hope to receive them. Not offering concession (i.e. being non-negotiable) can create a posture during a lease or purchase transaction that is ineffective and can potentially damage the spirit of the negotiation beyond a point of reconciliation.
Concessions in commercial real estate transactions are realized in many ways. In a purchase transaction, they can include the sales price, length of the due diligence period, responsibility of costs such as title insurance, recording fees, attorney fees and more, inclusion or exclusion of contingencies such as financing, environmental, zoning and more, earnest money and so on. In a lease transaction, concessions can include free rent periods, lease rates, annual escalations, tenant improvement allowances, condition of the premises upon delivery of the space, HVAC units, permitted rights to transfer, early termination provisions and more.