Lease Negotiation

Every provision in an office or retail lease is negotiable. Therefore, the standard lease form is only a starting point. Usually, concessions are made by both the tenant and the owner to reach mutually acceptable lease terms for all parties. The owner will rarely participate directly in negotiations, which are the domain of the leasing agent and the prospective tenant, who may be represented by an agent or broker as well.

The Negotiating Triangle
Three major factors affect one another during a deal. Their relationship will vary:

• Power: Who has it, you or the prospect?
• Time: Who has it? When does the prospect need the space? When do you want/need to lease space?
• Money: What will it cost for the prospect to be a tenant in your building? What will it cost for your building to make this deal?

• Fees and commissions
• Tenant improvements
• No rent if a deal is not made
• Do you need this deal to support mortgage requirements?

Preparing for Negotiations

Examine Your Position
The first step in preparing for negotiations is to examine your position:

• Can you find another tenant to fill the space?
• What concessions are acceptable to the owner?
• What are your strengths and weaknesses?
• What is the worst possible outcome that you will accept?

Create a checklist of items for discussion and the extent to which the owner feels comfortable negotiating each point. Then, determine the relative importance of each issue. You will have a confident, comfortable outlook that allows you to think objectively and creatively.

Discover Tenant's Motivations and Needs
Next, learn the motivations and needs of the potential tenant.

• What are their priorities?
• What are they willing to sacrifice?
• What would they do if an agreement is not reached?

Armed with an understanding of the tenant's motivations, you can design lease terms that are advantageous for the owner and also meet the tenant's needs. Information on the potential tenant's needs may be found through research, your own knowledge of the tenant, or tenants in the same industry. Others who have dealt with the same tenant in negotiations would also be a good resource.

In the process of gathering the information you need, you may have to give some away. Self-disclosure can be beneficial—it furthers conversation, but can also better equip the tenant for negotiating with you. Remember that your goal is to give away the minimum quantity of information that still allows the tenant to understand your key requirements. While the intent is information sharing, never disclose what you would do if no agreement is reached. Emphasizing the options you have should your needs go unmet leads the tenant to question the extent of your commitment to a successful negotiation.

Negotiation Tips
There are a number of tactics to keep in mind while undergoing negotiations.

Active Listening
You are best positioned to change someone's mind after you have listened to that person. People tend to close down and stick to their position until they feel heard. The goal of active listening is for you to hear and understand other people, and to let them know you've heard and understood them. When listening, resist the urge to defend yourself or to disprove what the other person is saying. Acknowledge their motivations, feelings, and point of view, even when you do not agree with what they are saying. Your goal is to understand the message, not judge the veracity of what they say.

Matching Communication
Communication is key to forming a connection with the tenant in order to create rapport, build trust, and develop a great agreement. Multiple studies have indicated that when we communicate in person:

• Around 55 percent of what others hear us say is a direct result of what we communicate visually: dress, posture, movements, facial expressions, and eye contact
• The next 38 percent of the message we send comes from the sound of the communication: tone of voice, accent, rate of speech, volume, and timbre
• Only the last 7 percent of your message is derived from the words used, and the way they are put together

Mastering the art of non-verbal communications is an obvious advantage in negotiations.

While in negotiations, you can mirror physical gestures to build rapport. This is called matching. If the person you are talking with has an animated face, put some feeling in your own facial expressions. If their body position is tense, legs are crossed, and arms are folded across the chest, try tightening yourself up a little as well. The goal is to create a uniform state of mind in the room.

Cross-Matching Communication
If matching seems inappropriate, you can try cross-matching another's movements to subtly create physical rapport. Cross-matching involves adopting a physical behavior that is different from that of your counterpart, but matches their sentiment. For instance, if you are negotiating with someone who is tapping a pen on the table, try jiggling your foot in a similar rhythm. You match the underlying sentiment, but not the behavior itself. Matching and cross-matching should be used in the volume and tone of your voice, accent, and rate of speech as well.

Choosing Your Words
Once you are comfortable with nonverbal rapport building, consider the small but important portion of the communication—content. Instinctively, we all speak to different people differently—we do not speak the same way in a legal court as on the basketball court. We can take this natural sensitivity one step further and choose our words so they reflect the style and word choice of those you are negotiating with. First, learn any jargon used in the industry. If dealing with people from another culture, learn and properly use polite or customary phrases from their language. If more formal language is used by the tenant, use more professional language yourself. Mirroring the prospect's style of word choice alerts them that you are speaking a common language.

Pacing and Leading
Once you have matched the prospect's verbal and nonverbal communication style, and hopefully established rapport, you will enjoy a sense of mutual understanding and similarity. This is called pacing. Pacing is where you want to stay until the rapport feels like second nature to all parties involved. You are likely to learn a lot about the prospective tenant while pacing. You can ask questions without triggering their defenses, because they will react to you as someone who understands their underlying personal needs and motivations.

When someone has completely bought into the idea that you share their state of mind, they will have the tendency to follow as you change in order to maintain that likeness. They drop their defenses a little, and open up to you. Then you change your behavior, ever so slightly. Without consciously realizing they are doing it, they will match that behavior. This is called leading. At this point, you can start leading your counterpart to a different state of mind, a different common understanding.