The Art of Negotiation in Commercial Real Estate Brokerage

Sealing your next real estate deal means mastering the art of negotiation.

When you sit down to buy or sell your CRE, you’ll need to be prepared to negotiate. Talking through your deal and pushing for terms that benefit your venture is crucial to your long-term success, and it will lay the groundwork for expenditures, investments and tenant/landlord relationships moving forward. It can be a difficult process, but it’s one of the most important parts of the real estate game.

Here are seven tips for how to play that game and get the best deal during your commercial real estate negotiations.

Commercial Real Estate Negotiation Tips

Why Knowing How to Negotiate in the Real Estate Industry is Important

Before we dive into the list, here’s a quick rundown of why the following tips are worth remembering and mastering in the first place.

The most obvious factor affected by negotiation is the price. Whether you’re selling or buying a property, the amount of money changing hands will be a major part of the discussions. Time is another factor; if you’re leasing a property, how long will the lease last? Will hitting a moving/renegotiation deadline impede your business operations in any way?

As mentioned above, any negotiating you do will also set expectations and pre-pave future relationships. How you conduct yourself will affect your reputation in the industry, and could either make or break your relationships with buyers, sellers, landlords and other key people involved.

Now, on to the tips.

Research the CRE Market Standards

One of the first things you’ll need to do is acquire good working knowledge of market standards in your area. The significance of this largely comes down to price; the better acquainted you are with these standards, the more confident you’ll be that you’re getting a fair deal. Be sure you’re paying attention to how cost is broken down per square footage, too; if you’re paying for space that can’t be used, you’re losing money.

Get to Know Who You're Negotiating With

Spend some time looking into who you’ll be sitting down at the table with during your negotiations. Knowing how they operate and how they might respond to certain offers and tactics can give you major advantages while speaking with them.

Getting to know the opposite side of your negotiating coin can also shed light on the entire deal. Why are they selling or buying? Have others in the CRE realm had experiences with them? What’s their track record with negotiating? The more you know, the better you can prepare yourself and your offer.

Practice Empathy

Negotiating the perfect commercial real estate deal is about more than the money. It’s also about more than what you specifically want from the deal. Remember that negotiating involves (at least) two parties, and the other side is hoping to get something from the deal, too.

A master negotiator thinks not only of themselves, but of the other person in the room, too. Look for ways that an offer can benefit both parties, even if certain things need to be given up. Stay firm on the terms that matter to you the most, but pay attention to other factors and practice empathy while negotiating.

Don't Accept the First Offer

This is a trap that many unseasoned negotiators fall into. It’s tempting to simply accept the first offer placed on the table and run, but this should always be avoided. Even if the first offer fulfills nearly all your requirements, holding out and countering can make the deal even sweeter. It also eliminates any buyer’s remorse and displays a vested interest in the process to the opposite party, leaving them with a good impression of you.

Completely Analyze the Deal

Before any offers are made or dotted lines signed, be sure you understand every aspect of the deal you’re presenting. Keep an eye on how you will benefit and profit from the deal, know which factors you’re willing to be flexible on, and be firm on the ones that need to stay in place. An analyst from DRK can give the deal a thorough dissection and make sure everything aligns with your expected costs, estimated revenue and more.

Manage Expectations Early

No one gets everything they want during a negotiation. The nature of give-and-take discussion means that some things will need to be sacrificed, and the number of counters offered and hours spent can vary wildly. Staying aware of – and open to – these shifts and sacrifices is a key aspect of mastering CRE negotiation. If your expectations are managed successfully, the better prepared you’ll be to roll with the changes as they come.

Embrace Tension

Negotiation can be a discomforting process, with plenty of friction, disagreement and tension between parties. However, this can be a positive. By using firm speech and leaning into the heavy atmosphere of a negotiation, you can reaffirm your position to the opposite party and perhaps inspire new dialogue that wouldn’t have been explored otherwise. Instead of avoiding or fearing the tension, embrace it and use it to your advantage.

Conclusion

Commercial real estate negotiation is perhaps the most pivotal part of the buying or selling process, but you can master it by being prepared, knowledgeable and firm. Research local market standards and have an expert analyze your deal before presenting it. Get to know the party or parties you’ll be negotiating with, and manage your expectations for how the negotiations will go. Remember that not every aspect of your offer will be accepted, keep the needs of the other party in mind, and don’t be nervous about leaning into the inherent tension of negotiating your terms.

Need a helping hand for your next CRE purchase or sale? The experts at DRK will guide you, answer your questions and help you make the most of your real estate investment.

You can scout commercial real estate available in the Columbus, Ohio, area here.

Until next time,

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