In today’s market with about a 1% vacancy rate and high demand, landlords (and sellers) of industrial warehouse space find themselves in a very desirable position. How do those conditions play out in negotiations? How can a potential tenant or buyer understand these dynamics best to help win them the deal?
Landlords and sellers are looking for three things:
(a) Best price & terms,
(b) Most convenient & timely transaction, and
(c) Confidence in the tenant’s or buyer’s ability to perform.
Therefore, tenants and buyers must be prepared to demonstrate their strength in the following areas:
With price and terms left for another article (see September 2017), one of the most pivotal points of consideration for landlords and sellers is the prospect’s ability to perform on an agreed upon deal – strong credit is key. A landlord considering a tenant will want to see your financials, so have them prepared and in order, and be ready to answer follow-up questions in a timely manner. If you are saying to yourself, “My financials are not the strongest”, don’t worry, but be prepared to put down extra security deposit and/or consider a personal guaranty. One of the best thing a tenant can do is have all their financial information accurate, complete, packaged and accessible.
The next thing landlords want to know is “What is your story?” Why are you moving, and from where? What does your current operation consist of, and how would it look if a landlord came to visit un-announced (clean is appealing)? While landlords understand that tenants move from less desirable to more desirable locations, they are more concerned with understanding where you are going as far as future sales are concerned. Who are your customers and what are the forecasts for the future? Can you demonstrate that the business is moving forward and will continue to do well? Along with having their past financial records in order, it is beneficial for tenants to paint the picture of what their long-term business will look like in this new location. This can be accomplished by explaining customer relationships or contracts for new business.
Personality is the often-overlooked factor in any negotiation. While “business is business” and contracts govern the rules for any lease agreement, it is important to remember that in a lease you are entering into a long-term relationship with another party. How a tenant behaves during negotiations is akin to how someone behaves on a first date (if they are interested in the other person): they are on their best behavior! But, over time, their true colors come out. If landlords are given the option between two equally qualified applicants, personality can become a key factor. How prompt were you with requests? Were you reasonably pleasant to deal with? Do you understand market dynamics? Did you attempt to get the deal done in a timely manner? Tenants can give themselves an edge by being prepared to put their best foot forward and following through on what they say.
If you are a tenant looking for space and getting frustrated with the difficulty you are finding securing that space, contact us today so that we may assess what you have done to date and what can be done differently on the next negotiation. Our team has completed over 165 leases and over 25 sales in the past 10 years; we know how to help you get your deal done too. We look forward to hearing from you.
Christopher J. Destino, SIOR, a Principal at Lee & Associates, is an engaging, responsive professional who enjoys working closely with his clients and helping them succeed.