Having negotiated 1637 property deals over the past 30 years (leasehold and freehold properties), I would like to share with you three top tips on negotiation and they are:-
- Have a clear objective
- Understand the market sector you are looking to purchase or lease in
- Have a red line and know when to walk away
Having a clear objective will provide focus and give clarity in negotiations. When negotiating a lease, one of the very common objectives is to maximise incentives, however this can sometimes clash with flexibility. Knowing what’s important to you and your business, enables the lease to then be negotiated and then drafted in a way that meets your objectives. I am working with a business at the moment and they are looking to maximise incentives and shift a lot of the upfront cost to later in the lease. This puts the landlord more at risk, however by understanding and agreeing what the main objectives are has enabled us to negotiate a favourable deal for our client.
Having a clear objective also means fully understanding the process, (if it’s a lease), knowing and understanding what all the leasehold terminology means and as importantly what the implications are for your business if agreeing to them. I’ve seen too many business owners, who have not fully appreciated this point and they have subsequently been caught out by their lease, sometimes at significant financial cost.
It is ok, not to understand and have all the answers. If this is the case, then get help from someone (like ourselves), who can help you navigate this part, before the agreed terms are sent off to the solicitor. I can’t stress this enough, this alone could save you thousands, if not tens of thousands of pounds.
Understanding the process is also key in setting your freehold purchase objectives. Outside of purchasing a property at a below market price, timing is often a key objective for business. Sometimes, events and people are outside of your control. Anticipating where these delays might occur and putting things in place to mitigate any delays, is important.
The second tip is knowing an understanding the market. Despite a common belief, not all sectors within the commercial property market act in the same way. Whilst economic conditions are tough for some (and some might say the majority), there are some parts of the commercial market where there is very little supply and strong demand.
There are very dynamics, that operate in the different sectors. In sectors, we generally talk about the retail, industrial, office, leisure, R&D such as the pharma/biotech (life sciences) and investment. There are also plenty of sub-sectors each with their own levels of supply and demand.
So whilst the news often talks about the closure of yet more retail, the industrial sector continues to weather the storm. Speaking with a manufacturing client of mine recently, they have had a very strong 2020 and whilst there are some challenges within their particular industry, they are expecting another strong year this year.
So why is this knowledge important? Because it helps to create realistic objectives. By understanding the different market sectors, this will allow a better understanding what deals have been done, what could be done and where the best opportunities lie.
There is one point, I nearly forgot to mention and it is important and that is part of understanding the market is linked to demand and who you are potentially competing with for property. The larger the supply, allows for more choice, whereas less supply means that the likelihood of other businesses competing for the same property increases. Understanding this is really important, as it allows you to set realistic objectives at the start. For example, maximising lease incentives as an objective might be very difficult to achieve if you are after a property where there is lots of other interest for example.
As with the first point. It is ok, not to have an in depth knowledge of the commercial property market, but being advised by someone you trust, that has this knowledge allows you to make better informed decisions.
The final point and this is a tough one, is knowing when to walk away from a bad deal. The property might be ideal, but if you then get tied into an overly restrictive lease, or overpay for a property, it could have some serious ramifications for you and your business. By being clear on the first two tips, allows you to create your own red line.
I hope that has been useful, if you need any help in setting your property objectives, understanding the property market sectors or around what a bad deal looks like, then please get in contact for your free initial chat.
