Getting a Deal Done in a Tight Market

​In today’s market with a 1% vacancy rate and high demand, landlords (and sellers) of industrial warehouse property find themselves in a strong negotiating position. How do these market conditions play out in negotiations for tenants and buyers?  Much like the residential market in California, buyers and tenants of industrial property must be prepared to submit strong offers and compete to get the deal.  Here are a few factors to remember when trying to secure a deal. 

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 or in-place capital reserves is a key component.  A landlord considering a tenant will want to see strong financials and stable operating performance history, so have these documents prepared and in order as you get ready to make offers. Furthermore, 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 significant extra security deposit, a line of credit or a personal guarantee.  Similarly, a seller considering a buyer, wants to see who their bank is, where the money is coming from, and how quickly the funds can be delivered to escrow.
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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 a company; 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?  It is very critical for tenants to paint a clear picture of what their long-term business outlook is in this new location. This can be accomplished by explaining customer relationships or contracts for new business.  For Seller’s considering the story of a buyer, questions like “Why are you buying this property?” and  “What experience do you have closing an escrow?” will play a role in selecting the right buyer.

Finally, ‘personality’ of the buyer or tenant is the often-overlooked factor in many negotiations. While “business is business” and contracts govern the rules for any lease or sale agreement, it is important to remember that in a lease you are entering into a long-term relationship with another party. How a tenant or buyer behaves during negotiations is akin to how someone behaves on a first or second 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.  For buyer and sellers, the relationship is usually shorter term, but the same evaluations hold true as many items can come up during the escrow process, and sellers want to know what type of personality they are dealing with when issues need to be resolved.
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If you are a tenant looking for space, contact us today. Our team has completed hundreds of leases and sales; we know how to help you get your deal done, too. We look forward to hearing from you.