Do I need a professional lease negotiator…?
I was recently speaking to a potential client about representing him in lease negotiations and the inevitable questions arose as to why he should use my firm’s services and what could we achieve for him. Very fair questions, in fact I think all retailers should be upfront about assessing what results they can expect from their service providers, be it a solicitor, an accountant or perhaps a lease negotiator.
Upon talking further to this particular retailer, it was obvious that he was a very experienced businessman with many years in the retail industry (amongst other industries) and had previously negotiated several leases in the past. It appeared that he had plenty time on his hands and the ability to negotiate his lease renewal with a high level of competence, so I suggested that he probably didn’t require my services and recommended that he negotiate the lease himself.
Whilst I was quite confident that I could probably negotiate better commercial lease terms (I had a close relationship with his landlord), I actually think that he secretly wanted to do the deal himself as a personal challenge.
However not everyone has the experience, time or inclination to negotiate a lease themselves, so there are good reasons to appoint someone who negotiates leases for a living;
- Arms Length – having a professional negotiate for you allows you to be at “arms length” with the landlord, so you can make partial decisions without feeling pressured at any time.
- Market Intelligence – a good lease negotiator will have an understanding of your industry and be abreast of the type of deals being done in the market place.
- Industry Network – this is more relevant if you are located in a shopping centre, however a good lease negotiator should have strong working relationships with most of the large retail landlords and as such, have a better chance of obtaining an optimum result for you.
- Experience – most landlords be it large retail giants such as Scentre Group, Lend Lease, Stockland etc..or smaller landlords have professional leasing executives/leasing agents acting for them. Their sole focus is negotiating leases, day in day out. Many of these leasing executives will negotiate 30, 40, 50 up to 70 deals a year, so they are usually very good at their job. In contrast, most retailers would negotiate a lease once every 5 years, so in many cases these professional lease negotiators have an unfair advantage in terms of experience. Having a professional lease negotiator on your side, evens up the odds a lot more.
- Optimising the deal – many good lease negotiators have worked on the landlord side of the equation at some stage in their careers. As such they should know how to push a deal in terms of rent, what incentives are able to be secured and when to close the deal or walk away. They should be able to drive the deal hard, as they simply have a lot of experience and are focused on a good outcome. This is especially so if the fee arrangement is based on achieving specific outcomes such as negotiating a lower rent and/or securing capital contributions and rent free periods.
- Time (Opportunity Cost) – just like the old 1965 Ned Miller song says, “do what you do well”. Staying focused on your business and leaving lease negotiations to a professional, makes a lot of sense from a time & productivity perspective.
Even though there are plenty of compelling reasons to have a professional lease negotiator represent you, sometimes it is simply not worth it. For example if you are about to renew your lease and your existing rent is very low and not likely to increase significantly, then it may be more prudent to simply negotiate the lease yourself.
If however you are trying to renew your lease or starting a fresh lease and there is a strong likelihood that your rent will increase a great deal or you are going to have to pay for a costly fit-out then it is probably a good idea that you seek help from someone that negotiates leases for a living.