Whether you’re negotiating a new lease or a lease renewal, negotiation is a crucial process to ensure tenants and landlords create a legal agreement they’re both comfortable with. For the most part, your ability to succeed in this negotiation and secure the terms, clauses, and costs that matter most to your organization depends on your access to information and how you wield it.
Some organizations have experienced teams of in-house lease negotiators, while others hire external experts through site selection services. Either way, it’s vital that corporations, nonprofits, and government entities with large portfolios have the right processes and infrastructure in place to get the most from lease negotiations.
As a leading provider of lease administration and accounting software, Tango equips enterprises all over the world with the insights they need to negotiate from a position of power instead of settling for poorer terms and higher costs.
In this article, we’ll walk you through six key tips to improve your commercial lease negotiations and secure the factors that matter most to you.
1. Centralize your lease documents
Landlords typically enter lease negotiations with a major advantage: information asymmetry. They have clear visibility into their entire portfolio, and they understand what they’re charging and what they’re asking for in comparable leases. If you don’t have a similar level of visibility, you’ll have a hard time evaluating how their rent structure, CAM expenses, and clauses compare to the market, similar facilities, or even leases with the same landlord.
For most large organizations, the problem is that their portfolio is too distributed. The documents live in separate files and formats, and the information they contain is difficult to extract. It takes too much work to learn what (if any) leverage you have. The solution? A comprehensive document intake system that organizes your lease information into a searchable database.
To some degree, most lease management software supports this crucial function, making it a must-have tool for organizations with multiple locations. How well the software equips you for negotiations largely depends on the types of visibility it provides into your portfolio and how connected and accessible your documents are once they’re in the system—but it all starts with centralization.
2. Examine other leases with the same landlord
Every lease is a little different. But your lessor generally has particular clauses and arrangements that matter more to them. They also have areas where they’re more willing to compromise. When you isolate leases in your portfolio by landlord, you can see where the lease you’re negotiating deviates from provisions and costs they’ve agreed to in the past. And while the current lease may represent their standard terms, you can leverage these previous compromises to work toward more favorable ones faster—especially if the facilities or their circumstances are similar.
As an example, suppose the current lease terms include a tenant improvement allowance which is a low priority for you at this location, but they’re also including a new CAM charge they haven’t previously listed, which could be problematic for CAM reconciliation over the course of the lease. You may be willing to concede the lease incentive to eliminate the CAM charge, but you could start by highlighting that throughout your history as a valued tenant, this represents a deviation from your past agreements.
3. Analyze other landlords in your portfolio
It can be difficult to make direct comparisons between landlords, but when you can conveniently explore your entire portfolio and isolate leases by their common traits, you can identify relevant points of comparison and bring them to the negotiating table. Tango Lease gives you multiple ways to analyze your real estate by landlord, including dynamic visual representations that help you easily compare relative costs and how much of your portfolio is owned by each lessor.
So when your landlord doesn’t want to include a provision on replacement tenants in your co-tenancy clause, and you know the current co-tenants would be important complementary businesses, it would be valuable to argue that you typically get these provisions with:
- Other local landlords
- A larger landlord with property nearby
- Landlords that represent a larger share of your portfolio
- Landlords where you have comparable overall costs
Being able to filter leases by landlord helps you make a counterargument to what terms, provisions, and costs leases should or shouldn’t include based on what’s “normal” in the market. This helps reduce the information asymmetry in lease negotiations.
4. Compare costs and clauses at similar locations
At times, lease negotiations can seem like a constant tug of war. Lessees and lessors each argue what’s “fair” and “normal” based on their experience in the market, but each party has limited visibility into other leases. With your lease portfolio in a centralized, searchable database, you can analyze locations in comparable markets and facilities, reducing a lessor’s ability to leverage what’s “typical” for leasing a facility like theirs. The more comparable locations you have with the terms and costs you want, the stronger your case.
5. Understand your local brand equity
When there’s significant demand for your brand, lessors have more motivation to make you a competitive offer. Your presence in one of their multi-tenant locations could boost the value of their other leases at the same property. Other brands that benefit from your foot traffic and brand equity may be willing to pay more—and less likely to leave. And over time, your success can drive up the value of the property when you move on.
So when you negotiate a lease, it helps to know the value you bring to the lessor. And that’s part of the vision behind Tango’s brand development index: a measure of your local brand equity, as determined by our AI-driven site selection software, Tango Predictive Analytics.
This dashboard helps you understand the impact your locations have on the surrounding area, potentially enabling you to show how your presence would turn the landlord’s property into a fixture of the community.
6. Track negotiator performance
If you want the best outcomes, you have to send your best negotiators to the table and incentivize them to achieve the results you want. This means you need to track whether negotiators are consistently securing the clauses and provisions that matter to your organization, and incorporate this tracking into your performance assessments, and if possible, your negotiators’ compensation structure. This ensures that your negotiators care about the same terms you do.
Leverage your portfolio with Tango Lease
In every negotiation, information is power. The larger your real estate portfolio, the more information you could have at your disposal in lease negotiations. Tango Lease helps you organize your lease documents in meaningful ways, so you can make a greater range of arguments to advance your position.
Want to see what Tango Lease can do for you?