How to Find the Right Competitive Negotiation Balance

The Logistics of Leasing

Once you’ve found the right building, it is time to make that building yours. How you do so warrants a thought exercise. There is another concept in Dan Sullivan’s Strategic Coach that is relevant here called Always Be the Buyer. The idea here is that when you are the seller of something, buyers can reject you and your offering. As a seller, you have to change how you offer your goods and services to find and win buyers. When you shift your mindset to becoming a buyer, you realize that it is you who gets to decide what it is that you are buying, when you need it, how you value it, and so on. In this case, it is you who are purchasing a warehouse lease, and you can lease any building that fits your needs. When you approach the process as being a buyer, it helps to ensure that you are framing your negotiation from a place of strength.

There are limits and balance to this idea of course. You will see some tenant rep only firms take an overly aggressive tact in this process and “string along” multiple landlord’s all the way to the point of each landlord spending money on their behalf to create plans, carefully craft legal contract documents, and then to leave them at the alter in order to leverage that negotiation against another landlord. I’m all for maximizing opportunity for executives but not within integrity. There are always ways in which you can be forthright and honest and still do right in a negotiation. This is an important distinction that bears repeating. It is also something you must look for in landlords and their brokers.

Another such balance is between your current landlord and the landlord of the property that is your best alternative. Rarely is it practical, or desirable, to need any more than three options to create the optimal outcome. How you negotiate will depend on the market dynamic when you need to make your move. The market dynamics today, mid COVID19 pandemic, is uncertain. That said the underlying maturation of the demand drivers remains:

  • Further adoption and acceleration of e-commerce to leverage technology over brick and mortar
  • Increased inventory levels better insulate their operations during supply chain disruptions
  • Managing manufacturing risk by shortening the supply chain and manufacturing closer to the customer

The moral of this story is that the demand will continue to outstrip the supply of industrial buildings for the foreseeable future. As such, it will continue to be wise to have multiple alternative sites available.

My first conversation topic when addressing landlord brokers is to gauge their property’s activity levels. Some brokers can be intentionally vague about the activity they have on a given property, thinking that this approach gives them a better chance of bringing the landlord the most amount of opportunities. What I’ve found is that the landlord brokers that are purposefully omitting the fact that they already have multiple interested parties are usually working for landlords that also may be more self-serving. You must clearly ask landlord brokers if they have any current proposals, they are considering. Make them objectively answer this question. This direct question will allow you to finalize how you prioritize that property.

Each company will take a different tact when it comes to negotiating on multiple buildings. The rule here is that you should only negotiate on buildings that you sincerely would sign a lease on if you were able to negotiate favorable terms. This sincerity can sometimes lead executives to negotiate on just one property in good faith. This negotiating monogamy is the norm as there is usually a small window of time, where we can identify the perfect fit, and be able to secure it without competing. That said, there are still several negotiations every year where we put out requests for proposals to multiple landlords on multiple buildings, filter and analyze all the responses, and then decide which landlords to engage further. Think of it like the NCAA March Madness tournament, where there is a bracket of college basketball teams, and each one faces off. We all obsessively watch the bracket results until there are two teams that tensely battle back and forth to the last seconds on the clock until there is an undisputed winner.

Market engagement is the precursor to lease proposal negotiations, lease contract negotiations, construction, and relocation. It is this market engagement that sets the stage for everything that is to materialize in the future. There is a literal translation from what your team sees in the field to what we negotiate in lease proposals. This forms the backbone for any attorney’s work in drafting the final lease document which includes the construction drawings and work letter.

This direct relationship between market engagement and future success of the company is the reason why we will usually tour the same properties with multiple team members, multiple times. We enjoy having every team member evaluating the property with their unique capabilities in order to ensure that all relevant property-related concerns are addressed within the lease proposal and lease contract negotiation.