Reduce your rent
March 23, 2018
By Dale Willerton and jeff grandfield
Here are some great tips for negotiating a mid-term rent reduction for bakery tenants.
Should you blindly accept the same landlord-imposed terms and conditions as you agreed to initially when you negotiate your lease renewal? No. With proper and effective negotiation, bakery tenants can receive ample benefits – often including a rent reduction! Here are a few points to keep in mind.
Get organized and do your homework: Initiate the lease renewal process nine to 12 months in advance for bakery tenants leasing commercial space. In most cases, you may not need to exercise your Lease Renewal Option Clause provided there has been a dialogue with your landlord and it has been established that the landlord wants you to stay for another term.
Talk to other tenants in your building: Valuable information can be gathered by talking with your neighbouring tenants. The Lease Coach interviews neighbouring tenants to gather information and to determine their future plans. If other tenants are not planning to renew their lease, thereby creating more vacant space in the property, you will have more leverage. If another tenant has renewed his/her lease, the rental rate he/she agreed to pay will likely factor into the rental rate the landlord expects you to pay.
Create competition for your tenancy: So many bakery tenants go straight to their landlord regarding their lease renewal. At The Lease Coach, we like to create competition for your tenancy. Instead of handing your lease renewal to your landlord on a silver platter, we find alternative locations, collect written offers to lease from other landlords, and make your current landlord re-earn your tenancy (even if you don’t want to move).
Approach your landlord and your property manager: Confirm your landlord contact and make sure you are negotiating with the right person. You may have entered into the lease agreement negotiating with a commercial real estate agent for the landlord’s in-house representative; however, most lease renewal agreements are negotiated with a property manager who you may or may not have a good, bad or otherwise relationship with.
Obtain the landlord’s renewal lease proposal: We don’t believe in negotiating on the first date. We prefer to discuss the lease renewal terms with the property manager and invite a proposal. This puts us in a position to counter-offer and negotiate on behalf of the bakery tenant we are working for. Most of the negotiating process will take place verbally – but only after the lease renewal proposal or document has been provided by the landlord.
Submit the counter offer to your landlord: Multiple counter offers from both parties are part of the lease renewal process. If you try to slam-dunk the lease renewal too quickly your attempts for a rent reduction will probably fail. We recently negotiated a lease renewal for a tenant who was pleasantly surprised how effective this “slow-it-down” strategy was. We deliberately slowed down the process and renegotiated every single term in the formal lease agreement that needed to be revisited. With another recent tenant, we not only successfully negotiated a sizable rent reduction, but saw an opportunity for him to purchase the building. Much to this tenant’s delight, we successfully negotiated the selling price to less than half of the listed price and closed the deal.
Negotiate, negotiate, negotiate: Negotiate to win. Most bakery tenants are not negotiating to win at all … they are negotiating not to lose. The landlord and/or the landlord’s representatives are negotiating to win and you must do so as well. Remember, that if you don’t renew, the landlord gets a vacant space. It is extremely expensive for a landlord to replace an existing tenant.
If the landlord is giving lease inducements (e.g. free rent and/or tenant allowances) to attract new tenants moving in, we believe that the landlord should offer those same incentives to you to entice you to stay. You are the repeat customer. You have the track record of paying rent.
Never overlook the importance of counter offering! Some of the best deals we get for commercial tenants take four to six months. When we counter offer, we will often throw in a few red herrings – things that we don’t really care about and can readily give away.
Often, we negotiate lease renewals for tenants up to 24 months in advance and get rent reductions as well.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please email your request to JeffGrandfield@TheLeaseCoach.com. / BJ
Dale Willerton and Jeff Grandfield – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, email DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
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