When is too much just too much? When negotiating deals on office space, too much negotiating can backfire, leaving
you with no deal at all.
The current commercial real estate climate is a buyer’s and tenant’s market. With that said, they have the upper hand in most of the deals that come their way. Landlords, now more-than-ever, are offering extraordinary deals with low rental rates because the market is so in the dumps. Buyers and tenants can find great deals on office space for a great price. But what happens when buyer/tenant comes across a special deal and they beat-up-the-landlord, beat-up-the-landlord, and beat-up-the-landlord , and then want extra incentives and services on top of it?
This is the problem for many landlords with Tenants today. Some tenants may pull this strategy and “win”, but over-negotiating a deal when an agreement is already in your favor, can put you right back to square one. So, you end up without office space and spending even MORE time looking for another great deal.
Let’s paint a picture: You are a Tenant or tenant looking for available office space and You find space that fits perfectly. The office space is 2,000 square feet. Along with low rental rates, the terms of the agreement include; 2 months of free rent, $2,500 move-in allowance, and two free iPhones. So, you love the deal, but feel like you can squeeze a little more out of landlord. So you ask for the landlord to build you a new private office. Let’s say the cost for this tenant improvement is $5 per square foot; that’s $10,000 more from the landlord, in addition to the special deal they’ve already offered. Since the deal is great as is, and landlords in today’s market are suffering so much, they decide to entertain your new lease terms. But what sometimes happens is that another Tenant who also loves the space, enters the picture. So, they like the space and the deal the landlord is offering so much, that they don’t ask for much more. Guess what the landlord does? That’s right: the landlord now bumps you out of the way and takes the offer from the other tenant who loves the deal the way it is. You end up with NOTHING.
It happens a lot more often than you’d think, and now that we’re seeing leasing activity gain velocity, we are sure it will happen even more. Don’t get me wrong; a tenant who over-negotiates a deal, may “win” and get the terms they want, but when the market turns around in a few years, the landlord will remember the abuse, and they may not be so nice to you when your office lease comes up for renewal. You may end up paying more than all your neighbors. So, be fair, and nice.
So yes, there is such a thing called “over-negotiating” a deal. Take it from me; when you see an offer that is a “great deal”, capitalize on the opportunity, because who knows if you’re going to come across a deal like that again in the future. Since the current market is favoring buyers and tenants, great deals surround you. You have all of the purchasing power due to the lack of commercial real estate activity. But when negotiating office deals remember, a Landlord never forgets.
Good points.
Thanks for the kind words Bridget