Moving at the Speed of the Market: Knowing When to Speed Up and When to Slow Down
There is a time to move fast and a time to move deliberately. One of the things I like about this profession is that every commercial deal is a little bit different. And some of this variation has to do with the “Speed of the Market.” Understanding the “Speed” translates into the leverage you have or don’t have in negotiating for a client and if you understand the nuance it determines how fast you need to move with that deal. Let me share some examples.
For instance, you are an office landlord in today’s post-pandemic, work from home environment with vacancy rates rising, concessions to tenant’s increasing and the number of prospect tours coming through your building is infrequent, why on earth would you move slow if any tenant prospect showed interest in your building? Shockingly we see landlords take days or weeks to respond to a tenants RFP, counteroffer or worse yet, send them a lease when you have agreed to terms? Also, in a market like this, why would you issue a Proposal to Lease without some initial offering for rent abatement. You aren’t fooling anyone! Every tenant that has toured a building in the last, let’s say 5+ years expects some “free rent” offer from the owner. This only slows down the negotiating process and signals to smarter tenants and brokers you aren’t as serious about getting a deal done. Really landlord’s, what are you thinking when you do this? It’s not all landlords of course.
Now let’s talk about Tenants. While the demand for office space has waned during the pandemic, what asset class has been on completely on fire across the country? That’s right, industrial and flex. Just like office landlords, tenants in search of warehouse space need to understand they don’t have the leverage because the demand level is so high. So, if you are fortunate enough to find a space in the area you need to be, and it fits your budget you should move quickly because there are likely several other prospects standing behind the For Lease sign waiting. Again, leverage, know when you have it and when you don’t. So, if we recommend that you instruct your attorney not to rewrite the landlord’s lease it’s because we don’t want you to waste money on legal fees for jeopardizing losing the deal. In some cases, we encourage clients to drag their heels in the negotiating process, and play hard to get, in order to get the very best deal, but then again it is only certain situations. Admittedly, the process can be a bit like dating and we will cover that in a future post.
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